##### Table of Contents

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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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(Mark One)

|x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------------



For the Quarterly Period Ended September 25, 2005



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 0-25721.



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BUCA, Inc.

(Exact name of registrant as specified in its Charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Minnesota                                                      |  | 41-1802364                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



1300 Nicollet Mall,
Suite 5003

Minneapolis, Minnesota 55403

(Address of principal executive offices) (Zip Code)



(612) 225-3400

(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 an accelerated filer (as defined in Rule
12b-2).    Yes  x    No ̈



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



Indicate the number of shares outstanding of each of the registrants
classes of common equity, as of the latest practicable date: Common stock, $.01 par value, 20,468,055 shares outstanding as of October 27, 2005.



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##### Table of Contents

INDEX



BUCA, INC. AND SUBSIDIARIES



|           |  |                                                                                                                                             |  |   
|---------- |  | ------------------------------------------------------------------------------------------------------------------------------------------- |  | --
|PART I.    |  | FINANCIAL INFORMATION                                                                                                                       |  | 3 
|           |  |                                                                                                                                            
|Item 1.    |  | Financial Statements                                                                                                                        |  | 3 
|           |  |                                                                                                                                            
|           |  | Condensed Consolidated Balance Sheets  September 25, 2005 and December 26, 2004                                                            |  | 3 
|           |  |                                                                                                                                            
|           |  | Condensed Consolidated Statements of Operations - Thirteen and Thirty-Nine Weeks Ended September 25, 2005 and September 26, 2004 (restated) |  | 4 
|           |  |                                                                                                                                            
|           |  | Condensed Consolidated Statements of Cash Flows - Thirteen and Thirty-Nine Weeks Ended September 25, 2005 and September 26, 2004 (restated) |  | 5 
|           |  |                                                                                                                                            
|           |  | Notes to Condensed Consolidated Financial Statements                                                                                        |  | 6 
|           |  |                                                                                                                                            
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                                       |  | 12
|           |  |                                                                                                                                            
|Item 3.    |  | Quantitative and Qualitative Disclosures about Market Risk                                                                                  |  | 23
|           |  |                                                                                                                                            
|Item 4.    |  | Controls and Procedures                                                                                                                     |  | 23
|           |  |                                                                                                                                            
|PART II.   |  | OTHER INFORMATION                                                                                                                           |  | 24
|           |  |                                                                                                                                            
|Item 1.    |  | Legal Proceedings                                                                                                                           |  | 24
|           |  |                                                                                                                                            
|Item 2.    |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                                 |  | 25
|           |  |                                                                                                                                            
|Item 3.    |  | Defaults upon Senior Securities                                                                                                             |  | 25
|           |  |                                                                                                                                            
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                                                                         |  | 25
|           |  |                                                                                                                                            
|Item 5.    |  | Other Information                                                                                                                           |  | 26
|           |  |                                                                                                                                            
|Item 6.    |  | Exhibits                                                                                                                                    |  | 26
|           | 
|SIGNATURES |  | 28                                                                                                                                         
|           | 
|EXHIBITS   |  |                                                                                                                                            



2



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##### Table of Contents

PART 1.  FINANCIAL INFORMATION



Item 1.
Financial Statements



BUCA, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands, except share data)

(Unaudited)



|                                                                                                                                            |  |                    |         |   |                   |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | ------- | - | ----------------- | - | ------- | -
|                                                                                                                                            |  | September 25, 2005 |         |   | December 26, 2004 |  
|ASSETS                                                                                                                                      |  |                    |         |   |                   |   |         |  
|Current assets:                                                                                                                             |  |                    |         |   |                   |   |         |  
|Cash and cash equivalents                                                                                                                   |  | $                  | 1,554   |   |                   | $ | 4,314   |  
|Accounts receivable                                                                                                                         |  |                    | 3,513   |   |                   |   | 2,796   |  
|Inventories                                                                                                                                 |  |                    | 6,849   |   |                   |   | 7,379   |  
|Prepaid expenses and other                                                                                                                  |  |                    | 3,139   |   |                   |   | 4,486   |  
|                                                                                                                                            |  |                    |         |   |                   |   |         |  
|Total current assets                                                                                                                        |  |                    | 15,055  |   |                   |   | 18,975  |  
|                                                                                                                                            |  |                   
|Property, equipment and leasehold improvements, net                                                                                         |  |                    | 133,270 |   |                   |   | 157,921 |  
|                                                                                                                                            |  |                   
|Other assets                                                                                                                                |  |                    | 5,718   |   |                   |   | 6,349   |  
|                                                                                                                                            |  |                    |         |   |                   |   |         |  
|                                                                                                                                            |  | $                  | 154,043 |   |                   | $ | 183,245 |  
|                                                                                                                                            |  |                    |         |   |                   |   |         |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                        |  |                    |         |   |                   |   |         |  
|Current liabilities:                                                                                                                        |  |                    |         |   |                   |   |         |  
|Accounts payable                                                                                                                            |  | $                  | 11,694  |   |                   | $ | 13,840  |  
|Accrued gift cards and certificates                                                                                                         |  |                    | 1,478   |   |                   |   | 4,747   |  
|Accrued payroll and benefits                                                                                                                |  |                    | 7,919   |   |                   |   | 7,542   |  
|Accrued sales, property and income tax                                                                                                      |  |                    | 3,453   |   |                   |   | 3,590   |  
|Other accrued expenses                                                                                                                      |  |                    | 4,540   |   |                   |   | 6,167   |  
|Line of credit borrowings                                                                                                                   |  |                    | 5,869   |   |                   |   | 1,986   |  
|Current maturities of long-term debt and capitalized leases                                                                                 |  |                    | 1,368   |   |                   |   | 1,368   |  
|                                                                                                                                            |  |                    |         |   |                   |   |         |  
|Total current liabilities                                                                                                                   |  |                    | 36,321  |   |                   |   | 39,240  |  
|                                                                                                                                            |  |                   
|Long-term liabilities:                                                                                                                      |  |                    |         |   |                   |   |         |  
|Long-term debt and capital leases, less current maturities                                                                                  |  |                    | 17,711  |   |                   |   | 19,579  |  
|Deferred rent                                                                                                                               |  |                    | 18,210  |   |                   |   | 18,236  |  
|Other liabilities, net                                                                                                                      |  |                    | 3,680   |   |                   |   | 3,113   |  
|                                                                                                                                            |  |                    |         |   |                   |   |         |  
|Total liabilities                                                                                                                           |  |                    | 75,922  |   |                   |   | 80,168  |  
|                                                                                                                                            |  |                   
|Commitments and contingencies (Note 10)                                                                                                     |  |                    |         |   |                   |   |         |  
|                                                                                                                                            |  |                   
|Shareholders equity:                                                                                                                       |  |                    |         |   |                   |   |         |  
|Undesignated stock, 5,000,000 shares authorized, none issued or outstanding                                                                 |  |                    |         |   |                   |   |         |  
|Common stock, $.01 par value per share, 30,000,000 shares authorized; 20,503,537 and 20,186,059 shares issued and outstanding,
respectively |  |                    | 205     |   |                   |   | 202     |  
|Additional paid-in capital                                                                                                                  |  |                    | 170,746 |   |                   |   | 169,112 |  
|Accumulated deficit                                                                                                                         |  |                    | (90,402 | ) |                   |   | (65,122 | )
|Unearned compensation                                                                                                                       |  |                    | (1,405  | ) |                   |   |        |  
|Notes receivable from employee shareholders                                                                                                 |  |                    | (1,023  | ) |                   |   | (1,115  | )
|                                                                                                                                            |  |                    |         |   |                   |   |         |  
|Total shareholders equity                                                                                                                  |  |                    | 78,121  |   |                   |   | 103,077 |  
|                                                                                                                                            |  |                    |         |   |                   |   |         |  
|                                                                                                                                            |  | $                  | 154,043 |   |                   | $ | 183,245 |  
|                                                                                                                                            |  |                    |         |   |                   |   |         |  



See notes to condensed
consolidated financial statements.



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##### Table of Contents

BUCA, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(Unaudited)



|                                                   |  |                      |            |   |                                             |   |            |                    |  |   |                                            |   |  |   |            |  
|-------------------------------------------------- |  | -------------------- | ---------- | - | ------------------------------------------- | - | ---------- | ------------------ |  | - | ------------------------------------------ | - |  | - | ---------- | -
|                                                   |  | Thirteen Weeks Ended |            |   | Thirty-Nine Weeks Ended                     |  
|                                                   |  | September 25, 2005   |            |   | September 26, 2004 (as restated seeNote 2) |   |            | September 25, 2005 |  |   | September 26, 2004 (as restatedseeNote 2) |  
|Restaurant sales                                   |  | $                    | 63,679     |   |                                             | $ | 60,899     |                    |  | $ | 203,308                                    |   |  | $ | 189,219    |  
|Restaurant costs:                                  |  |                      |            |   |                                             |   |            |                    |  |   |                                            |   |  |   |            |  
|Product                                            |  |                      | 16,262     |   |                                             |   | 15,502     |                    |  |   | 52,304                                     |   |  |   | 48,257     |  
|Labor                                              |  |                      | 22,107     |   |                                             |   | 20,899     |                    |  |   | 68,017                                     |   |  |   | 63,665     |  
|Direct and occupancy                               |  |                      | 20,909     |   |                                             |   | 19,455     |                    |  |   | 61,501                                     |   |  |   | 57,953     |  
|Depreciation and amortization                      |  |                      | 3,560      |   |                                             |   | 3,892      |                    |  |   | 10,869                                     |   |  |   | 11,408     |  
|                                                   |  |                      |            |   |                                             |   |            |                    |  |   |                                            |   |  |   |            |  
|Total restaurant costs                             |  |                      | 62,838     |   |                                             |   | 59,748     |                    |  |   | 192,691                                    |   |  |   | 181,283    |  
|General and administrative expenses                |  |                      | 6,746      |   |                                             |   | 4,430      |                    |  |   | 18,873                                     |   |  |   | 13,094     |  
|Pre-opening costs                                  |  |                      |           |   |                                             |   | 513        |                    |  |   | 244                                        |   |  |   | 988        |  
|Loss on impairment and sale of long-lived assets   |  |                      | 13,278     |   |                                             |   | 10,194     |                    |  |   | 13,718                                     |   |  |   | 10,194     |  
|Lease termination costs                            |  |                      | 160        |   |                                             |   | 4          |                    |  |   | 234                                        |   |  |   | 1,175      |  
|                                                   |  |                      |            |   |                                             |   |            |                    |  |   |                                            |   |  |   |            |  
|Operating loss                                     |  |                      | (19,343    | ) |                                             |   | (13,990    | )                  |  |   | (22,452                                    | ) |  |   | (17,515    | )
|Interest income                                    |  |                      | 40         |   |                                             |   | 4          |                    |  |   | 92                                         |   |  |   | 70         |  
|Interest expense                                   |  |                      | (787       | ) |                                             |   | (472       | )                  |  |   | (2,255                                     | ) |  |   | (1,530     | )
|Loss on early extinguishment of debt               |  |                      | (675       | ) |                                             |   |           |                    |  |   | (675                                       | ) |  |   | (524       | )
|                                                   |  |                      |            |   |                                             |   |            |                    |  |   |                                            |   |  |   |            |  
|Loss before income taxes                           |  |                      | (20,765    | ) |                                             |   | (14,458    | )                  |  |   | (25,290                                    | ) |  |   | (19,499    | )
|Income taxes                                       |  |                      |           |   |                                             |   |           |                    |  |   |                                           |   |  |   |           |  
|                                                   |  |                      |            |   |                                             |   |            |                    |  |   |                                            |   |  |   |            |  
|Net loss                                           |  | $                    | (20,765    | ) |                                             | $ | (14,458    | )                  |  | $ | (25,290                                    | ) |  | $ | (19,499    | )
|                                                   |  |                      |            |   |                                             |   |            |                    |  |   |                                            |   |  |   |            |  
|Net loss per share  basic                         |  | $                    | (1.03      | ) |                                             | $ | (0.72      | )                  |  | $ | (1.25                                      | ) |  | $ | (1.00      | )
|Weighted average common shares outstanding - basic |  |                      | 20,223,749 |   |                                             |   | 20,150,065 |                    |  |   | 20,206,579                                 |   |  |   | 19,419,106 |  
|Net loss per share  diluted                       |  | $                    | (1.03      | ) |                                             | $ | (0.72      | )                  |  | $ | (1.25                                      | ) |  | $ | (1.00      | )
|Weighted average common shares outstanding diluted |  |                      | 20,223,749 |   |                                             |   | 20,150,065 |                    |  |   | 20,206,579                                 |   |  |   | 19,419,106 |  



See notes to condensed
consolidated financial statements.



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BUCA, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)



|                                                                                         |  |                         |         |   |                                             |   |         |  
|---------------------------------------------------------------------------------------- |  | ----------------------- | ------- | - | ------------------------------------------- | - | ------- | -
|                                                                                         |  | Thirty-Nine Weeks Ended |        
|                                                                                         |  | September 25, 2005      |         |   | September 26, 2004 (as restatedsee Note 2) |  
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                    |  |                         |         |   |                                             |   |         |  
|Net loss                                                                                 |  | $                       | (25,290 | ) |                                             | $ | (19,499 | )
|Adjustment to reconcile net loss to net cash (used in) provided by operating activities: |  |                         |         |   |                                             |   |         |  
|Depreciation and amortization                                                            |  |                         | 10,868  |   |                                             |   | 11,408  |  
|Loss on impairment and sale of long-lived assets                                         |  |                         | 13,738  |   |                                             |   | 10,194  |  
|Loss on early extinguishment of debt                                                     |  |                         | 675     |   |                                             |   | 524     |  
|Tenant allowance proceeds                                                                |  |                         | 331     |   |                                             |   | 300     |  
|Other                                                                                    |  |                         | (61     | ) |                                             |   | (828    | )
|Change in assets and liabilities:                                                        |  |                         |         |   |                                             |   |         |  
|Accounts receivable                                                                      |  |                         | (717    | ) |                                             |   | 538     |  
|Inventories                                                                              |  |                         | 530     |   |                                             |   | 83      |  
|Prepaid expenses and other                                                               |  |                         | 1,347   |   |                                             |   | 534     |  
|Accounts payable                                                                         |  |                         | (2,146  | ) |                                             |   | (3,465  | )
|Accrued expenses                                                                         |  |                         | (4,656  | ) |                                             |   | 327     |  
|                                                                                         |  |                         |         |   |                                             |   |         |  
|Net cash (used in) provided by operating activities                                      |  |                         | (5,381  | ) |                                             |   | 116     |  
|                                                                                         |  |                         |         |   |                                             |   |         |  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                    |  |                         |         |   |                                             |   |         |  
|Purchase of property and equipment                                                       |  |                         | (1,177  | ) |                                             |   | (8,309  | )
|Proceeds from sale of property and equipment                                             |  |                         | 349     |   |                                             |   | 143     |  
|Receipts from investments                                                                |  |                         | 620     |   |                                             |   | 1,785   |  
|                                                                                         |  |                         |         |   |                                             |   |         |  
|Net cash used in investing activities                                                    |  |                         | (208    | ) |                                             |   | (6,381  | )
|                                                                                         |  |                         |         |   |                                             |   |         |  
|CASH FLOWS FROM FINANCING ACTIVITIES:                                                    |  |                         |         |   |                                             |   |         |  
|Proceeds from line of credit borrowings                                                  |  |                         | 7,869   |   |                                             |   | 28,500  |  
|Principal payments on line of credit borrowings                                          |  |                         | (3,986  | ) |                                             |   | (27,500 | )
|Proceeds from long-term debt borrowings                                                  |  |                         |        |   |                                             |   | 250     |  
|Principal payments on long-term debt and capital leases                                  |  |                         | (18,014 | ) |                                             |   | (12,792 | )
|Proceeds from sale-leaseback transaction                                                 |  |                         | 17,500  |   |                                             |   |        |  
|Financing costs                                                                          |  |                         | (781    | ) |                                             |   | (439    | )
|Collection on notes receivable from shareholders                                         |  |                         | 92      |   |                                             |   | 114     |  
|Net proceeds from issuance of common stock                                               |  |                         | 149     |   |                                             |   | 17,393  |  
|                                                                                         |  |                         |         |   |                                             |   |         |  
|Net cash provided by financing activities                                                |  |                         | 2,829   |   |                                             |   | 5,526   |  
|                                                                                         |  |                         |         |   |                                             |   |         |  
|NET DECREASE IN CASH AND CASH EQUIVALENTS                                                |  |                         | (2,760  | ) |                                             |   | (739    | )
|                                                                                         |  |                        
|CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                         |  |                         | 4,314   |   |                                             |   | 3,013   |  
|                                                                                         |  |                         |         |   |                                             |   |         |  
|CASH AND CASH EQUIVALENTS AT END OF PERIOD                                               |  | $                       | 1,554   |   |                                             | $ | 2,274   |  
|                                                                                         |  |                         |         |   |                                             |   |         |  



See notes to condensed
consolidated financial statements.



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##### Table of Contents

BUCA, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)



1. NATURE OF BUSINESS AND BASIS OF PRESENTATION



BUCA, Inc. and Subsidiaries (we, us, or our) develop, own and operate Southern Italian restaurants under the names Buca di Beppo and Vinny Ts of
Boston. At September 25, 2005, we had 107 restaurants located in 30 states and the District of Columbia.



The accompanying condensed consolidated financial statements have been prepared by us without audit and reflect all adjustments which are, in the opinion
of management, necessary for a fair statement of financial position and the results of operations for the interim periods. The statements have been prepared in accordance with accounting principles generally accepted in the United States of America
(generally accepted accounting principles) and with the regulations of the Securities and Exchange Commission (SEC). Certain information and footnote disclosures, normally included in financial statements prepared in accordance with generally
accepted accounting principles, have been condensed or omitted pursuant to such SEC rules and regulations. Operating results for the thirteen and thirty-nine weeks ended September 25, 2005 are not necessarily indicative of the results that may be
expected for the year ending December 25, 2005.



The balance
sheet at December 26, 2004 has been derived from the audited financial statements at that date, but does not include all of the information and notes required by generally accepted accounting principles for complete financial statements. For further
information, refer to the consolidated financial statements and notes for the fiscal year ended December 26, 2004 included in our Annual Report on Form 10-K.



The financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and satisfaction of liabilities in the
normal course of business. We have sustained net losses of $25.3 million for the thirty-nine weeks ended September 25, 2005, $37.6 million in fiscal 2004 and $23.5 million in fiscal 2003 and we have an accumulated deficit of $90.4 million. We have
utilized $5.4 million of cash for operating activities through the thirty-nine weeks ended September 25, 2005. As of October 25, 2005, we had outstanding borrowings of approximately $7.4 million under our revolving credit facility, $2.2 million
under the term loan A facility and our availability under the revolving credit facility was approximately $3.6 million. Our credit agreement contains restrictive covenants and requirements that we comply with certain financial ratios. These
covenants limit our ability to take various actions without the consent of our lenders, including the incurrence of additional debt, the guaranteeing of certain indebtedness and engaging in various types of transactions, including mergers and sales
of assets, paying dividends and making distributions or other restricted payments, including investments. These covenants could have an adverse effect on our business by limiting our ability to take advantage of business opportunities.



In addition, failure to maintain the covenants required by our credit
agreement could result in acceleration of our indebtedness. Earlier in fiscal 2005, we were in violation of certain covenants under the credit agreement, which were subsequently amended and waived by the lenders. Our inability in the future to
comply with the covenant requirements under the credit agreement and to obtain a waiver of such violations could impair our liquidity and limit our ability to operate.



Based on available funds, current plans and business conditions, management believes that our available cash, amounts
available under our credit agreement and amounts expected to be generated from future operations will be sufficient to meet our cash requirements for the next 12 months. This belief is based on a number of assumptions including that there will be no
material adverse developments in our business or the general economy. There can be, however, no assurances regarding these assumptions. If our plans are not achieved, there may be further negative effects on the results of operations and cash flows,
which could have a material adverse effect on us.



2. RESTATEMENT OF
FINANCIAL STATEMENTS



Subsequent to the issuance of our
condensed consolidated financial statements for the thirteen and thirty-nine weeks ended September 26, 2004, we identified errors in our accounting for leases, which included errors in the accounting for leasehold improvements, rent commencement
dates, lease incentives and certain other leasing matters, and other accounting errors that affected our historical financial statements. These errors are discussed in the following paragraphs.



Accounting for Real Estate LeasesHistorically, when accounting
for leases with renewal options, we have depreciated our buildings, leasehold improvements and other long-lived assets on those properties over a period that included



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##### Table of Contents

both the initial lease term and all option periods for renewal of the lease which, when combined, generally ranged from 20 to 30 years (or over the useful
life of the asset, if shorter). At the same time, we had recognized rent expense on a straight-line basis only over the initial term of the lease. We subsequently determined that we should have recognized rent expense on a straight-line basis over
the initial lease term and those cancelable option periods where failure to exercise such options would result in an economic penalty. We also determined that the lease term should commence on the date when we become entitled to the use of the
leased property, which precedes the opening date of the restaurant. In addition, we have historically netted tenant improvement allowances against the capitalized cost of leasehold improvements. We have now determined that tenant improvement
allowances should have been recorded as a deferred rent credit and amortized over the life of the lease as a reduction in rent expense and that allowances received should be included in cash flows from operating activities.



Accounting for certain property, equipment and leasehold improvement
transactionsWe determined that our policies and practices regarding the capitalization of certain expenditures had not been properly applied. The resulting adjustments recorded to property, equipment and leasehold improvements in prior
periods decreased depreciation expense from that previously reported. In addition, we had improperly applied our policies and practices regarding the capitalization of expenditures in the following areas:



| |  |  | Pre-opening Expenses. Historically, we had capitalized as leasehold improvements certain expenditures, such as utility costs, property tax payments and consulting fees,
incurred prior to the restaurant opening. We have now determined that we should have recognized these expenditures as pre-opening expenses during the period incurred.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Insufficient Documentation to Support Fixed Asset Additions and Dispositions. Historically, we had capitalized the cost of certain technology services, equipment and
maintenance services provided to us. We have now determined that there was insufficient documentation to support the capitalization of consulting labor and maintenance and that these costs should have been recognized as consulting expenses or
repairs and maintenance expenses when incurred.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Accounting for Employee MealsWe have provided meals at no charge for our restaurant and corporate office employees and in certain other cases for promotional purposes. Historically, these amounts have been included in
restaurant sales, with an offsetting charge to either labor costs, direct and occupancy costs, or general and administrative expenses. We have now determined that these amounts should have been eliminated in the preparation of our consolidated
financial statements. We had been properly accounting for the costs of the product and labor required to provide the meals in our restaurant costs. This error in accounting for employee and promotional meals had no impact on our net loss.



As a result, the accompanying condensed consolidated financial
statements for the thirteen and thirty-nine weeks ended September 26, 2004 have been restated from the amounts previously reported.



The following table reconciles the change in net loss due to the restatement (in thousands):



|                                                           |  |                                              |         |   |                                                  |   |         |  
|---------------------------------------------------------- |  | -------------------------------------------- | ------- | - | ------------------------------------------------ | - | ------- | -
|                                                           |  | For theThirteen WeeksEndedSeptember 26, 2004 |         |   | For theThirty-Nine WeeksEnded September 26, 2004 |  
|Net loss as previously reported                            |  | $                                            | (14,574 | ) |                                                  | $ | (19,984 | )
|Net impact of employee meals adjustment                    |  |                                              | 0       |   |                                                  |   | 0       |  
|Lease accounting                                           |  |                                              | (113    | ) |                                                  |   | (339    | )
|Property, equipment and leasehold improvement transactions |  |                                              | 221     |   |                                                  |   | 800     |  
|Other                                                      |  |                                              | 8       |   |                                                  |   | 24      |  
|                                                           |  |                                              |         |   |                                                  |   |         |  
|Total pretax loss decrease                                 |  |                                              | 116     |   |                                                  |   | 485     |  
|                                                           |  |                                              |         |   |                                                  |   |         |  
|Income taxes                                               |  |                                              |        |   |                                                  |   |        |  
|                                                           |  |                                              |         |   |                                                  |   |         |  
|Total net loss decrease                                    |  | $                                            | 116     |   |                                                  | $ | 485     |  
|                                                           |  |                                              |         |   |                                                  |   |         |  
|Net loss, as restated                                      |  | $                                            | (14,458 | ) |                                                  | $ | (19,499 | )
|                                                           |  |                                              |         |   |                                                  |   |         |  



7



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A summary of the significant effects of the restatement on the consolidated statements of operations (in
thousands, except share and per share data) for the thirteen and thirty-nine weeks ended September 26, 2004 is as follows:



|                                  |  |                                                |         |   |                                                   |   |         |                         |  |   |               |   |  |   |         |  
|--------------------------------- |  | ---------------------------------------------- | ------- | - | ------------------------------------------------- | - | ------- | ----------------------- |  | - | ------------- | - |  | - | ------- | -
|                                  |  | For the Thirteen WeeksEnded September 26, 2004 |         |   | For the Thirty-Nine WeeksEnded September 26, 2004 |  
|                                  |  | (as previouslyreported)                        |         |   | (as restated)                                     |   |         | (as previouslyreported) |  |   | (as restated) |  
|Restaurant sales                  |  | $                                              | 62,531  |   |                                                   | $ | 60,899  |                         |  | $ | 194,259       |   |  | $ | 189,219 |  
|Costs and expenses                |  |                                                | 77,105  |   |                                                   |   | 75,357  |                         |  |   | 214,243       |   |  |   | 208,718 |  
|                                  |  |                                                |         |   |                                                   |   |         |                         |  |   |               |   |  |   |         |  
|Loss before income taxes          |  |                                                | (14,574 | ) |                                                   |   | (14,458 | )                       |  |   | (19,984       | ) |  |   | (19,499 | )
|Income taxes                      |  |                                                |        |   |                                                   |   |        |                         |  |   |              |   |  |   |        |  
|                                  |  |                                                |         |   |                                                   |   |         |                         |  |   |               |   |  |   |         |  
|Net loss                          |  |                                                | (14,574 | ) |                                                   |   | (14,458 | )                       |  |   | (19,984       | ) |  |   | (19,499 | )
|                                  |  |                                                |         |   |                                                   |   |         |                         |  |   |               |   |  |   |         |  
|Net loss per common sharebasic   |  | $                                              | (0.72   | ) |                                                   | $ | (0.72   | )                       |  | $ | (1.03         | ) |  | $ | (1.00   | )
|Net loss per common sharediluted |  | $                                              | (0.72   | ) |                                                   | $ | (0.72   | )                       |  | $ | (1.03         | ) |  | $ | (1.00   | )



The restatement also
resulted in a change in the classification of cash flows related to tenant allowance proceeds received from landlords and purchases of property and equipment, which resulted in a decrease in cash provided by operating activities and a decrease in
cash used in investing activities of $0.6 million for the thirty-nine weeks ended September 26, 2004. The restatement had no effect on historical cash balances or total cash flows for the thirty-nine weeks ended September 26, 2004.



3. LOSS ON IMPAIRMENT AND SALE OF LONG-LIVED ASSETS



We review our long-lived assets for impairment whenever events or changes in
circumstances indicate the carrying value of an asset or group of assets may not be recoverable. We consider a history of consistent and significant operating losses to be a primary indicator of potential asset impairment. Assets are grouped and
evaluated for impairment at the lowest level for which there are identifiable cash flows, primarily the individual restaurants. A restaurant is deemed to be impaired if a forecast of future operating cash flows directly related to the restaurant is
less than its carrying amount. If a restaurant is determined to be impaired, the loss is measured as the amount by which the carrying amount of the restaurant exceeds its fair value. Fair value is an estimate based on the best information available,
including prices for similar assets or the results of valuation techniques such as discounted estimated future cash flows, as if the decision to continue to use the impaired restaurant was a new investment decision.



During the thirteen weeks ended September 25, 2005 we recorded an approximate
$13.3 million loss on the impairment and sale of long-lived assets. Impairment expenses in the third quarter of fiscal 2004 were approximately $10.2 million. The 2005 loss is primarily related to a $10.4 million write-down of six Buca di Beppo and
three Vinny Ts restaurants currently in operation and a $2.9 million loss on a sale-leaseback transaction. We recorded an impairment charge on three of these nine restaurants because our estimate of future cash flows, based upon a range of
scenarios, over the remaining lease term plus option periods for each restaurant did not generate sufficient positive cash flow to support the carrying value of their associated long-lived assets. We determined that it was more likely than not that
six of these restaurants would either be sold or otherwise disposed of significantly before the end of their previously estimated useful life. Our estimate of future cash flows over the remaining lives of these six restaurants, net of sale proceeds
or disposal fees, did not support the carrying value. As a result of the carrying value not deemed to be recoverable, we estimated the fair value of these assets using discounted future cash flows and recorded an impairment loss for the amount the
carrying value exceeded estimated fair value.



During the
thirty-nine weeks ended September 25, 2005, we recorded an approximate $13.7 million loss on the impairment and sale of long-lived assets primarily related to a $10.4 million write-down of six Buca di Beppo and three Vinny Ts restaurants
currently in operation, a $2.9 million loss on a sale-leaseback transaction and a $0.4 million loss on capitalized lease development costs for one restaurant not expected to open due to a reduction in our development plans. We recorded an
approximate $10.2 million loss during the thirty-nine weeks ended September 26, 2004 primarily related to the write-down of equipment and leasehold improvements at eight restaurants in operation and the capitalized development costs for restaurants
we did not expect to open due to a reduction in our development plans.



We will continue to review our restaurants for potential asset impairment. We believe that all of our remaining restaurants currently have sufficient estimated future cash flows to support the carrying value of their long-lived assets.
However, if an individual restaurants estimated future cash flows decline below its carrying value of long-lived assets, it could result in additional impairment charges.



8



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On September 9, 2005, we entered into a sale and leaseback transaction in which we sold eight of our
restaurants to a third party for proceeds of $17.5 million. We simultaneously entered into long-term capital leases for those restaurants with aggregate initial annual rent of approximately $1.2 million. In connection with this sale and leaseback,
we recorded a loss of $2.9 million primarily to reflect the impairment on some of the properties for which the net proceeds were less than the book value of the assets.



4. STOCK-BASED COMPENSATION



We have chosen to continue to account for stock-based compensation using the intrinsic value based method prescribed by Accounting Principles Board Option
No. 25, Accounting for Issued to Employees, and related interpretations. No compensation cost has been recognized for options issued to employees under the plans as the exercise price of the options granted is at least equal to the fair value
of the common stock on the date of grant. Had compensation costs for our Employee Stock Purchase Plan, 1996 Stock Incentive Plan and 2000 Stock Incentive Plan been determined using a fair value based method as described in SFAS No. 123,
Accounting for Stock-Based Compensation, our net loss would have been increased to the following pro-forma amounts (in thousands, except for per share data):



|                                                                                                             |  |                      |         |   |                         |   |         |                    |  |   |                    |   |  |   |         |  
|------------------------------------------------------------------------------------------------------------ |  | -------------------- | ------- | - | ----------------------- | - | ------- | ------------------ |  | - | ------------------ | - |  | - | ------- | -
|                                                                                                             |  | Thirteen Weeks Ended |         |   | Thirty-Nine Weeks Ended |  
|                                                                                                             |  | September 25, 2005   |         |   | September 26, 2004      |   |         | September 25, 2005 |  |   | September 26, 2004 |  
|Net loss as reported                                                                                         |  | $                    | (20,765 | ) |                         | $ | (14,458 | )                  |  | $ | (25,290            | ) |  | $ | (19,499 | )
|Plus: Stock-based employee compensation expense included in reported net loss, net of related tax effects    |  |                      |        |   |                         |   |        |                    |  |   |                   |   |  |   |        |  
|Less: Total stock-based employee compensation awards determined under fair value based method for all awards |  |                      | (505    | ) |                         |   | (330    | )                  |  |   | (1,355             | ) |  |   | (993    | )
|                                                                                                             |  |                      |         |   |                         |   |         |                    |  |   |                    |   |  |   |         |  
|Pro forma net loss                                                                                           |  | $                    | (21,270 | ) |                         | $ | (14,788 | )                  |  | $ | (26,645            | ) |  | $ | (20,492 | )
|                                                                                                             |  |                      |         |   |                         |   |         |                    |  |   |                    |   |  |   |         |  
|Net loss per common share, basic and diluted                                                                 |  |                      |         |   |                         |   |         |                    |  |   |                    |   |  |   |         |  
|As reported                                                                                                  |  | $                    | (1.03   | ) |                         | $ | (0.72   | )                  |  | $ | (1.25              | ) |  | $ | (1.00   | )
|                                                                                                             |  |                      |         |   |                         |   |         |                    |  |   |                    |   |  |   |         |  
|Pro forma                                                                                                    |  | $                    | (1.05   | ) |                         | $ | (0.73   | )                  |  | $ | (1.32              | ) |  | $ | (1.06   | )
|                                                                                                             |  |                      |         |   |                         |   |         |                    |  |   |                    |   |  |   |         |  



Restricted
Stock -On July 21, 2005, the compensation committee of our board of directors granted to certain of our executives an aggregate of 152,000 shares of restricted stock under the 1996 Stock Incentive Plan of BUCA, Inc. and Affiliated Companies, as
amended. All such shares of restricted common stock vest and the related restrictions expire on July 21, 2008. However, each executives restricted shares will vest immediately upon the earliest to occur of the executives death or
disability or a Fundamental Change (as defined in the related agreement) of the company. If the executives employment is terminated for any reason (other than death, disability or a Fundamental Change) prior to vesting, the restricted shares
will be forfeited. We are accounting for these restricted stock grants in accordance with APB 25 and, therefore, have recorded the awards as unearned compensation and are amortizing the expense over the remaining vesting term.



5. LEASE TERMINATION COSTS



For the thirteen and thirty-nine weeks ended September 25, 2005, we recorded
additional lease termination costs of $160,000 related to a previous store closure. For certain restaurant locations, we have previously recognized lease termination costs in accordance with Statement of Financial Accounting Standards (SFAS) No,
146, Accounting for Costs Associated with Exit or Disposal Activities. The following table summarizes activity related to this liability:



|                                                  |  |   |          |  
|------------------------------------------------- |  | - | -------- | -
|Accrued lease termination costs December 26, 2004 |  | $ | 589,000  |  
|Expenses accrued                                  |  |   | 160,000  |  
|Payments                                          |  |   | (300,000 | )
|                                                  |  |   |          |  
|Balance September 25, 2005                        |  | $ | 449,000  |  
|                                                  |  |   |          |  



We expect to pay the
entire balance in fiscal 2005.



6. NET LOSS PER SHARE



Net loss per share is computed in accordance with SFAS No. 128, Earnings
per Share. Basic loss per share is computed by dividing net loss by the weighted average number of common shares outstanding. Diluted net loss per share assumes the exercise of stock options using the treasury stock method, if dilutive. Diluted
net loss per share for the thirteen



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and thirty-nine week periods ended September 25, 2005 and September 26, 2004 equals basic net loss per share because the effect of stock options to the
weighted average shares assumed outstanding would be anti-dilutive. The following table sets forth the calculation of basic and diluted net loss per common share (in thousands, except share and per share data):



|                                                        |  |                      |            |   |                         |   |            |                    |  |   |                    |   |  |   |            |  
|------------------------------------------------------- |  | -------------------- | ---------- | - | ----------------------- | - | ---------- | ------------------ |  | - | ------------------ | - |  | - | ---------- | -
|                                                        |  | Thirteen Weeks Ended |            |   | Thirty-Nine Weeks Ended |  
|                                                        |  | September 25, 2005   |            |   | September 26, 2004      |   |            | September 25, 2005 |  |   | September 26, 2004 |  
|Numerator:                                              |  |                      |            |   |                         |   |            |                    |  |   |                    |   |  |   |            |  
|Basic and diluted net loss                              |  | $                    | (20,765    | ) |                         | $ | (14,458    | )                  |  | $ | (25,290            | ) |  | $ | (19,499    | )
|                                                        |  |                      |            |  
|Denominator:                                            |  |                      |            |   |                         |   |            |                    |  |   |                    |   |  |   |            |  
|Weighted average shares outstanding  basic and diluted |  |                      | 20,223,749 |   |                         |   | 20,150,065 |                    |  |   | 20,206,579         |   |  |   | 19,419,106 |  
|                                                        |  |                      |            |  
|Basic and diluted net loss per common share             |  | $                    | (1.03      | ) |                         | $ | (0.72      | )                  |  | $ | (1.25              | ) |  | $ | (1.00      | )



Diluted loss per
common share excludes 1,950,501 stock options at a weighted average price of $8.15 in the thirteen weeks ended September 25, 2005, 1,412,210 stock options at a weighted average price of $13.59 in the thirteen weeks ended September 26, 2004,
1,883,318 stock options at a weighted average price of $9.04 in the thirty-nine weeks ended September 25, 2005 and 1,574,961 stock options at a weighted average price of $14.11 in the thirty-nine weeks ended September 26, 2004 due to their
anti-dilutive effect.



7. CREDIT FACILITY



On September 9, 2005, we completed the sale and simultaneous leaseback of
eight restaurant locations with affiliates of CRIC Capital at a sale price of $17.5 million (the Sale Leaseback Transaction). The net proceeds of the Sale Leaseback Transaction were used to prepay, in its entirety, the outstanding term B
loan facility with Ableco and to prepay a portion of the outstanding term A loan facility with Wells Fargo. A premium equal to four percent of the outstanding principal amount of the term B loan was paid in connection with the prepayment of the term
B loan facility. Concurrently with the closing of the Sale Leaseback Transaction, we entered into an agreement (the Amendment and Consent) with the members of the Lender Group. Pursuant to the Amendment and Consent, the lender group
consented to the Sale Leaseback Transaction (subject to the prepayment of the term B loan facility and term A loan facility as provided above), agreed to reduce the minimum EBITDA coverage required for relevant testing periods in fiscal year 2007,
and agreed to amend the Credit Agreement in certain other respects. In consideration for the Amendment and Consent, we agreed to increase the interest rate on each of the remaining term loan A facility and the revolving credit facility by 2.25% per
annum. Our financial ratio covenant requirements increase over time. We expect to be in compliance with the financial covenants of the credit facility for the next twelve months. In the event that we are unable to comply with the financial ratio
covenants, our inability to obtain a waiver of such violations could impair our liquidity and limit our ability to operate.



8. RECENT ACCOUNTING PRONOUNCEMENTS



In December 2004, the Financial Accounting Standards Board (FASB) issued its final statement SFAS No. 123R, Share Based Payment. SFAS No. 123R
establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. This statement focuses primarily on accounting for transactions in which an entity obtains employee services in
share-based payment transactions. SFAS No. 123R requires that the fair value of such equity instruments be recognized as expense in the historical financial statements as services are performed. Prior to SFAS No. 123R, only certain pro forma
disclosures of fair value were required. SFAS No. 123R is effective for the Company at the beginning of fiscal 2006. The effect of adopting this statement is expected to be comparable to that disclosed on a pro forma basis in Note 4, subject to the
level of options granted.



In December 2004, the FASB issued
SFAS No. 153, Exchanges of Nonmonetary Assets (SFAS 153) which eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets and replaces it with a general exception from fair value measurement
for exchanges of nonmonetary assets that do not have commercial substance. We are required to adopt SFAS 153 for nonmonetary asset exchanges occurring in the second quarter of fiscal 2006 and its adoption is not expected to have a significant impact
on our consolidated financial statements.



In March 2005, the
FASB issued FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations  an Interpretation of FASB Statement No. 143 (FIN 47). This Interpretation clarifies that the term conditional asset retirement obligation,
as used in SFAS No.143, refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. Thus, the timing
and/or method of settlement may be conditional on a future event. Accordingly, an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value of the liability



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can be reasonably estimated. The fair value of a liability for the conditional asset retirement obligation should be recognized when incurred 
generally upon acquisition, construction, or development and/or through the normal operation of the asset. Uncertainty about the timing and/or method of settlement of a conditional asset retirement obligation should be factored into the measurement
of the liability when sufficient information exists. SFAS No. 143 acknowledges that in some cases, sufficient information may not be available to reasonably estimate the liability. We are currently reviewing and analyzing the impact that adopting
FIN 47 will have on our consolidated financial statements. We plan to adopt FIN 47 during the fourth quarter of fiscal 2005.



9. SUPPLEMENTAL CASH FLOW INFORMATION



The following is supplemental cash flow information for the thirty-nine weeks ended September 25, 2005 and September 26, 2004 (in thousands):



|                                        |  |                    |        |   |                    |   |        |  
|--------------------------------------- |  | ------------------ | ------ | - | ------------------ | - | ------ | -
|                                        |  | September 25, 2005 |        |   | September 26, 2004 |  
|Cash (paid) received during period for: |  |                    |        |   |                    |   |        |  
|Interest                                |  | $                  | (2,255 | ) |                    | $ | (1,336 | )
|Income taxes                            |  |                    | (49    | ) |                    |   | 1,920  |  



10. COMMITMENTS AND CONTINGENCIES



Litigation - In March 2004, two of our former
hourly employees filed a purported class action suit against us in the Orange County Superior Court, State of California. The action was later transferred to the Los Angeles Superior Court, State of California, where it is currently pending. The
complaint alleges causes of action for failure to pay wages/overtime, failure to allow meal breaks, failure to allow rest breaks, failure to pay reporting time pay, violation of California Business & Professions Code Section 17200, and certain
statutory damages and penalties. Mediation occurred in February 2005, at which time the parties reached a tentative settlement. The court issued its order preliminarily approving the settlement on September 20, 2005. The final fairness hearing is
scheduled for January 11, 2006. The proposed settlement structure is expected to result in an estimated liability between $1.5 and $2.0 million. The actual amount under the proposed settlement structure will be dependent on how many members of the
putative class file timely claims, assuming judicial approval. During the fourth quarter of 2004, based on estimates received from external legal counsel, we recorded an estimated settlement expense of $1.8 million associated with this legal action.



In February 2005, the SEC informed us that it had issued a
formal order of investigation to determine whether there have been violations of the federal securities laws. We understand that the order of investigation relates to, among other things, our internal controls and compliance with rules governing
filings and reports, including public disclosures, required to be filed with the SEC, and the 2002 purchase of an old farmhouse in Italy known as Villa Sermenino. We are cooperating and assisting with the SECs investigation in
order to bring the inquiry to a conclusion as promptly as possible. Any unfavorable finding from the SEC as a result of the investigation could have a material adverse effect on our company.



Our company, as nominal defendant, five of our directors, and three of our
former officers have been named as defendants in purported derivative actions that were filed in April 2005 in the Hennepin County District Court, State of Minnesota. The actions have been consolidated under the titleIn re Buca, Inc. Shareholder
Derivative Litigation. A consolidated complaint has been filed by two shareholders who allege that the individual defendants breached their fiduciary duties by ignoring, and failing to correct, problems with the companys financial
accounting and internal controls. The plaintiffs seek compensatory damages from the individual defendants for losses allegedly sustained by the company, which include the costs of internal investigations and an SEC investigation. The plaintiffs also
seek unspecified equitable relief and an award of attorneys fees and costs of litigation. The director defendants and the Company have moved to dismiss the action on several grounds. Defendant Greg Gadel also has moved to dismiss the action
or, in the alternative, to stay the action pending the conclusion of a criminal investigation that his motion indicates is now being conducted by the U.S. Attorneys Office in Minnesota in which Gadel is a target. All of the motions were heard
in the Hennepin County District Court on October 24, 2005, although no ruling on the motions has been issued. We are not able to predict the ultimate outcome of this litigation, but it may be costly and disruptive. The total costs cannot be
reasonably estimated at this time. Derivative litigation can result in substantial costs and divert our managements attention and resources, which may have a material adverse effect on our business and results of operations, including cash
flows.



Three virtually identical civil actions under the
federal securities laws were filed against our company and three former officers in the United States District Court for the District of Minnesota, on August 10, 2005, September 1, 2005, and September 7, 2005, respectively. On October 31, 2005, the
Court ordered that the three actions be consolidated and that five investors be appointed as lead plaintiffs. The investors purport to bring the consolidated action on behalf of a class consisting of all persons who purchased our common stock in the
market during the time period from February 6, 2001 through March



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11, 2005 (the class period). The investors allege that in press releases and SEC filings issued during the class period, defendants made
materially false and misleading statements about our companys income, revenues, and internal controls, which allegedly had the result of artificially inflating the market price for our stock. The investors assert claims under Sections 10(b)
and 20(a) of the Securities Exchange Act of 1934, and seek compensatory damages in an unspecified amount, plus an award of attorneys fees and costs of litigation. The investors have advised us that they intend to file a consolidated complaint
in early 2006. The defendants have not yet responded and will not respond until after the consolidated complaint is filed. We are not able to predict the ultimate outcome of this litigation, but it may be costly and disruptive. The total costs
cannot be reasonably estimated at this time. Federal securities litigation can result in substantial costs and divert our managements attention and resources, which may have a material adverse effect on our business and results of operations,
including cash flows.



We are subject to certain other legal
actions arising in the normal course of business, none of which is expected to have a material adverse effect on our results of operations, financial condition or cash flows.



11. SUBSEQUENT EVENT



On November 4, 2005, our Board of Directors authorized the Company to explore strategic alternatives for Vinny Ts of Boston, including the potential
sale of some or all of our 11 Vinny Ts of Boston restaurants or the conversion of some or all of the restaurants to Buca di Beppo restaurants. We expect that upon completion of any resulting transactions we will no longer operate restaurants
under the Vinny Ts of Boston brand. Therefore, we will be able to focus on our Buca di Beppo concept, which we believe provides the best platform for growth in the future. We also expect that by having just one restaurant concept, we will be
better able to provide consistency in our marketing and operations execution. The board also authorized us to exit three of our lower performing Buca di Beppo restaurants. We have closed these Buca di Beppo restaurants and expect to seek to
negotiate subleases or terminations of the leases for these locations. The decision to close the three Buca di Beppo restaurants was part of our on-going process of evaluating the performance of our restaurant locations. Each of the closed
restaurants is in a leased location. We expect to incur lease termination expenses in the fourth quarter of fiscal 2005 related to these locations. We are continuing to evaluate our other restaurants for possible additional closures.



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations



Investigations



In February 2005, we announced that the SEC had informed us that it had issued a formal order of investigation to determine whether there have been
violations of the federal securities laws. We believe that the investigation may have been initiated by the resignation of Joseph P. Micatrotto, our former chairman and chief executive officer, and we understand that the order of investigation
relates to our internal controls and compliance with rules governing filings and reports, including public disclosures, required to be filed with the SEC, and the 2002 purchase of an old farmhouse in Italy known as Villa Sermenino.



In March 2005, we announced that we had terminated the
employment of our Vice President, Controller, and Interim Chief Financial Officer, Daniel J. Skrypek, and our Senior Vice President and Chief Information Officer, John J. Motschenbacher. Acting through our audit committee with the assistance of
independent counsel, we then commenced an internal investigation of matters relating to the termination of these two executive officers. As part of its investigation, independent counsel to the audit committee, with the assistance of forensic
accountants, examined, among other things, manual journal entries in our accounting records, capitalization of fixed assets in connection with new restaurants being developed in prior years, and potential related party transactions with certain
vendors.



The results of the internal investigation led to the
need to make further corrections to our financial statements, including corrections related to the classification of certain consulting fees, certain contributions by vendors to our annual Paisano Partner Conference and certain management expenses,
as detailed in the section entitled Restatement of Prior Financial Information below. The officers and employees about whom the investigation had concerns are no longer with the company. See Part II. Other Information. Item 1.
Legal Proceedings for a summary of legal proceedings we have commenced against certain of our former executive officers. We are also cooperating with the SEC and other governmental authorities regarding the matters relating to our internal
investigations and our legal proceedings against these former executive officers. See our Annual Report on Form 10-K for the fiscal year ended December 26, 2004 for more information on both of the investigations referred to above.



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Restatement of Prior Financial Information



The following discussion should be read in conjunction with our financial statements and the notes related to those
condensed consolidated financial statements contained in Part I. Financial Information, Item 1. Financial Statements of this Quarterly Report on Form 10-Q.



In February 2005, we announced that we were conducting a review of our accounting policies related to leases, leasehold
improvements, rent commencement, deferred rent and other items and that we would be restating our historical financial statements for the fiscal years ended 2000 through 2003 and for the first three quarters of fiscal 2004. Since that time, we have
completed a comprehensive review of the application of our accounting policies in connection with our implementation of procedures in compliance with Section 404 of the Sarbanes-Oxley Act of 2002, the SEC rules promulgated thereunder and our
recently completed internal investigation described above. As a result, we determined that it was necessary to restate additional financial statement items for the fiscal years ended 2000 through 2003 and the first three quarters of fiscal 2004. For
further information on the impact of the restatement on fiscal years ended 2000 through 2003, see Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations and Note 2. Restatement of
Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended December 26, 2004. Not all of the restatement adjustments addressed in the Annual Report on Form 10-K for the fiscal year ended December 26, 2004
resulted in restatement adjustments for the thirteen and thirty-nine weeks ended September 26, 2004.



For the thirteen and thirty-nine weeks ended September 26, the restatement:



| |  |  | corrected the accounting for real estate leases for our restaurants,
| | - |  | --------------------------------------------------------------------



| |  |  | corrected errors in the capitalization of certain property, equipment and leasehold improvement transactions which decreased depreciation expense from that previously reported, and
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | removed the value of employee meals from our sales.
| | - |  | ---------------------------------------------------



The restatement decreased our loss before income taxes for the thirteen weeks ended September 26, 2004 by $0.1 million, primarily as a result of a $0.1
million increase in expense related to the accounting for real estate leases offset by a $0.2 million decrease in expense related to reduction of depreciation and amortization of capitalized leasehold improvements that had been adjusted in prior
fiscal years in connection with the restatement. For the thirty-nine weeks ended September 26, 2004, the restatement decreased our loss before income taxes by $0.5 million primarily due to a $0.3 million increase in expense related to the accounting
for real estate leases offset by a $0.8 million decrease in expense related to reduction of depreciation and amortization of capitalized leasehold improvements that had been adjusted in prior fiscal years in connection with the restatement. By
eliminating the value of our employee meals from our sales, we also created an offsetting expense entry, and as a result, there was no net impact on our loss before incomes taxes. The impact of the restatement on the consolidated statement of
operations for the quarter and nine months ended September 26, 2004 is further discussed in Note 2. Restatement of Prior Financial Information appearing in Part I. Financial Information, Item 1. Financial Statements.



Earnings Adjustments Related to the Restatement

(in thousands)



|                                                           |  |                                           |        |   |                                              |   |        |  
|---------------------------------------------------------- |  | ----------------------------------------- | ------ | - | -------------------------------------------- | - | ------ | -
|                                                           |  | For ThirteenWeeks EndedSeptember 26, 2004 |        |   | For Thirty-NineWeeks EndedSeptember 26, 2004 |  
|Employee meals removed from revenue                        |  | $                                         | (1,632 | ) |                                              | $ | (5,040 | )
|                                                           |  |                                           |        |   |                                              |   |        |  
|Lease accounting                                           |  |                                           | 113    |   |                                              |   | 339    |  
|Property, equipment and leasehold improvement transactions |  |                                           | (221   | ) |                                              |   | (800   | )
|Employee meals removed from expense                        |  |                                           | (1,632 | ) |                                              |   | (5,040 | )
|Accrual of costs                                           |  |                                           | (8     | ) |                                              |   | (24    | )
|                                                           |  |                                           |        |   |                                              |   |        |  
|Costs and expenses decrease                                |  | $                                         | (1,748 | ) |                                              | $ | (5,525 | )
|                                                           |  |                                           |        |   |                                              |   |        |  
|Total pretax loss decrease                                 |  |                                           | 116    |   |                                              |   | 485    |  
|Income taxes                                               |  |                                           |       |   |                                              |   |       |  
|                                                           |  |                                           |        |   |                                              |   |        |  
|Total net loss decrease                                    |  | $                                         | 116    |   |                                              | $ | 485    |  
|                                                           |  |                                           |        |   |                                              |   |        |  



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The restatement also resulted in a change in the classification of cash flows related to tenant allowance
proceeds received from landlords and purchases of property and equipment, which resulted in a decrease in cash provided by operating activities and a decrease in cash used in investing activities of $0.3 million for the thirty-nine weeks ended
September 26, 2004. The restatement had no effect on historical cash balances or total cash flows for the nine months ended September 26, 2004.



The discussion that follows gives effect to the restatement discussed above.



General



At September 25, 2005, we owned and operated 96 Buca di Beppo and 11 Vinny Ts of Boston restaurants. Our Buca di Beppo restaurants are full service,
primarily dinner-only restaurants that offer high quality, Southern Italian cuisine served family-style in small and large family-sized portions in a fun and energetic atmosphere that parodies the decor and ambiance of post-World War II
Italian/American restaurants. Our Vinny Ts of Boston restaurants serve individual and family-style portions for both lunch and dinner. The Vinny Ts of Boston restaurants are based upon re-creations of the neighborhood Italian eateries
prominent in the neighborhoods of lower Manhattan, Brooklyn, South Philadelphia and the North End of Boston in the 1940s.



In January 2005, we opened one new Buca di Beppo restaurant in Carlsbad (San Diego), California. During fiscal 2004, we also closed two restaurants. From
fiscal 2000 to 2003, we had pursued a rapid expansion strategy, opening 17 restaurants in each of fiscal 2000 and 2001 and 14 in each of fiscal 2002 and 2003. In addition to these new store openings, in January 2002, we purchased the assets of nine
Vinny Ts of Boston restaurants. Our recent restaurant development activity has slowed considerably. We are currently focused on the development and implementation of appropriate strategies to improve our operations and improve comparable
restaurant sales.



On November 4, 2005, our Board of Directors
authorized the Company to explore strategic alternatives for Vinny Ts of Boston, including the potential sale of some or all of our 11 Vinny Ts of Boston restaurants or the conversion of some or all of the restaurants to Buca di Beppo
restaurants. We expect that upon completion of any resulting transactions we will no longer operate restaurants under the Vinny Ts of Boston brand. Therefore, we will be able to focus on our Buca di Beppo concept, which we believe provides the
best platform for growth in the future. We also expect that by having just one restaurant concept, we will be better able to provide consistency in our marketing and operations execution. The board also authorized us to exit three of our lower
performing Buca di Beppo restaurants. We have closed these Buca di Beppo restaurants and expect to seek to negotiate subleases or terminations of the leases for these locations. The decision to close the three Buca di Beppo restaurants was part of
our on-going process of evaluating the performance of our restaurant locations. Each of the closed restaurants is in a leased location. We expect to incur lease termination expenses in the fourth quarter of fiscal 2005 related to these locations. We
are continuing to evaluate our other restaurants for possible additional closures.



Results of Operations



Our operating results
for the thirteen and thirty-nine weeks ended September 25, 2005 and September 26, 2004 expressed as a percentage of restaurant sales were as follows:



|                                                 |  |                      |        |     |                         |   |        |                   |  |   |                   |    |  |   |         |    
|------------------------------------------------ |  | -------------------- | ------ | --- | ----------------------- | - | ------ | ----------------- |  | - | ----------------- | -- |  | - | ------- | ---
|                                                 |  | Thirteen Weeks Ended |        |     | Thirty-Nine Weeks Ended |  
|                                                 |  | September 25,2005    |        |     | September 26,2004       |   |        | September 25,2005 |  |   | September 26,2004 |   
|Restaurant sales (in thousands)                  |  | $                    | 63,679 |     |                         | $ | 60,899 |                   |  | $ | 203,308           |    |  | $ | 189,219 |    
|Restaurant costs:                                |  |                      |        |     |                         |   |        |                   |  |   |                   |    |  |   |         |    
|Product                                          |  |                      | 25.5   | %   |                         |   | 25.5   | %                 |  |   | 25.7              | %  |  |   | 25.5    | %  
|Labor                                            |  |                      | 34.7   | %   |                         |   | 34.3   | %                 |  |   | 33.5              | %  |  |   | 33.6    | %  
|Direct and occupancy                             |  |                      | 32.8   | %   |                         |   | 32.0   | %                 |  |   | 30.3              | %  |  |   | 30.6    | %  
|Depreciation and amortization                    |  |                      | 5.6    | %   |                         |   | 6.4    | %                 |  |   | 5.3               | %  |  |   | 6.0     | %  
|                                                 |  |                      |        |     |                         |   |        |                   |  |   |                   |    |  |   |         |    
|Total restaurant costs                           |  |                      | 98.7   | %   |                         |   | 98.2   | %                 |  |   | 94.8              | %  |  |   | 95.7    | %  
|General and administrative expenses              |  |                      | 10.6   | %   |                         |   | 7.3    | %                 |  |   | 9.3               | %  |  |   | 6.9     | %  
|Pre-opening costs                                |  |                      | 0.0    | %   |                         |   | 0.8    | %                 |  |   | 0.1               | %  |  |   | 0.5     | %  
|Loss on impairment and sale of long-lived assets |  |                      | 20.9   | %   |                         |   | 16.7   | %                 |  |   | 6.7               | %  |  |   | 5.4     | %  
|Lease termination costs                          |  |                      | 0.3    | %   |                         |   | 0.0    | %                 |  |   | 0.1               | %  |  |   | 0.6     | %  
|                                                 |  |                      |        |     |                         |   |        |                   |  |   |                   |    |  |   |         |    
|Operating loss                                   |  |                      | (30.4  | )%  |                         |   | (23.0  | )%                |  |   | (11.0             | )% |  |   | (9.1    | )% 
|Interest income                                  |  |                      | 0.1    | %   |                         |   | 0.0    | %                 |  |   | 0.0               | %  |  |   | 0.0     | %  
|Interest expense                                 |  |                      | (1.2   | )%  |                         |   | (0.8   | )%                |  |   | (1.1              | )% |  |   | (0.8    | )% 
|Loss on early extinguishment of debt             |  |                      | (1.1   | ) % |                         |   | 0.0    | %                 |  |   | (0.3              | )% |  |   | (0.3    | ) %
|                                                 |  |                      |        |     |                         |   |        |                   |  |   |                   |    |  |   |         |    
|Loss before income taxes                         |  |                      | (32.6  | )%  |                         |   | (23.8  | )%                |  |   | (12.4             | )% |  |   | (10.2   | )% 
|Income taxes                                     |  |                      | 0.0    | %   |                         |   | 0.0    | %                 |  |   | 0.0               | %  |  |   | 0.0     | %  
|                                                 |  |                      |        |     |                         |   |        |                   |  |   |                   |    |  |   |         |    
|Net loss                                         |  |                      | (32.6  | )%  |                         |   | (23.8  | )%                |  |   | (12.4             | )% |  |   | (10.2   | )% 
|                                                 |  |                      |        |     |                         |   |        |                   |  |   |                   |    |  |   |         |    



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Thirteen Weeks Ended September 25, 2005 Compared to the Thirteen Weeks Ended September 26, 2004



Restaurant Sales. Our restaurant sales are primarily comprised of
food and beverages. Restaurant sales increased by approximately $2.8 million, or 4.6%, to $63.7 million in the third quarter of fiscal 2005 from $60.9 million in the third quarter of fiscal 2004. For the third quarter of fiscal 2005, comparable
restaurant sales increased 3.5% at Buca di Beppo restaurants, increased 0.8% at Vinny Ts of Boston restaurants and increased 3.2% for the Company overall. Buca di Beppos restaurant sales increased approximately 4.4% in the third quarter
of fiscal 2005 primarily due to an approximate 1% price increase in the first quarter of fiscal 2005, a 2.5% increase in guest count and the opening of a new restaurant in the first quarter of fiscal 2005. Vinny Ts of Bostons
restaurant sales increased approximately 5.5% in the third quarter of fiscal 2005 primarily due to an approximate 3.1% increase in guest count and the opening of a new restaurant in the second half of fiscal 2004. We expect that our Buca di Beppo
comparable restaurant sales will be positive during the fourth quarter of fiscal 2005. We expect our Vinny Ts of Boston comparable restaurant sales to be slightly negative for the fourth quarter of fiscal 2005.



Product. Product costs increased by approximately $0.8 million, or
4.9%, to $16.3 million in the third quarter of fiscal 2005 from $15.5 million in the third quarter of fiscal 2004. Product costs as a percentage of restaurant sales remained steady at 25.5% in the third quarter of fiscal 2005. The increase in
product costs was primarily related to increased costs in produce, poultry, and pasta. We expect product costs as a percentage of restaurant sales to increase slightly in the fourth quarter of fiscal 2005 as compared to the same quarter in fiscal
2004.



Labor. Labor costs include direct hourly labor
and management wages, bonuses, taxes and benefits for restaurant employees. Labor costs increased by approximately $1.2 million, or 5.8%, to $22.1 million in the third quarter of fiscal 2005 from $20.9 million in the third quarter of fiscal 2004.
Labor cost as a percentage of restaurant sales increased by approximately 0.4 percentage points to 34.7% in the third quarter of fiscal 2005 from 34.3% in the third quarter of fiscal 2004. The increase in labor dollars and costs as a percentage of
sales was primarily related to increased non-exempt personnel. We expect labor costs in the fourth quarter of fiscal 2005 to decrease slightly as a percentage of sales from the fourth quarter of fiscal 2004.



Direct and Occupancy. Direct and occupancy expenses include supplies,
marketing, rent, utilities, real estate taxes, repairs and maintenance, and other related restaurant costs. Direct and occupancy costs increased by approximately $1.5 million, or 7.5 %, to $20.9 million in the third quarter of fiscal 2005 from $19.5
million in the third quarter of fiscal 2004. Direct and occupancy costs as a percentage of restaurant sales increased by approximately 0.8 percentage points to 32.8% in the third quarter of fiscal 2005 from 32.0% in the third quarter of fiscal 2004.
The increase in direct and occupancy dollars and costs as a percentage of sales were primarily related to insurance, equipment maintenance and utility expenses. We expect operating expenses in the fourth quarter of fiscal 2005 to increase as a
percentage of sales from the fourth quarter of fiscal 2004.



Depreciation and Amortization. Depreciation and amortization includes depreciation on capital expenditures for restaurants and corporate support. Depreciation and amortization decreased by approximately $0.3 million, or 8.5%, to $3.6
million in the third quarter of fiscal 2005 from $3.9 million in the third quarter of fiscal 2004. Depreciation and amortization as a percentage of restaurant sales decreased by approximately 0.8 percentage points to 5.6% in the third quarter of
fiscal 2005 from 6.4% in the third quarter of fiscal 2004. The primary reason for the decrease in dollars and costs as a percentage of restaurant sales was the decrease in capitalized asset purchases and increases in building asset write-offs taken
as a result of impairments since the fourth quarter of fiscal 2005. We expect depreciation and amortization to decrease as a percentage of sales in the fourth quarter of fiscal 2005 as compared to the same quarter in fiscal 2004.



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General and Administrative. General and administrative expenses are comprised of expenses
associated with all corporate and administrative functions that support existing operations, including management and staff salaries, employee benefits, travel, information systems and training and market research. General and administrative
expenses increased by approximately $2.3 million, or 52.3%, to $6.7 million in the third quarter of fiscal 2005 from $4.4 million in the third quarter of fiscal 2004. General and administrative expenses as a percentage of restaurant sales increased
by approximately 3.3 percentage points to 10.6% in the third quarter of fiscal 2005 from 7.3% in the third quarter of fiscal 2004. The increase in general and administrative expenses in whole dollars and as a percentage of restaurant sales was
primarily due to the hiring of additional Paisano Support Center Staff and related labor expenses and the result of accounting, legal and consulting fees related to the investigation of events that transpired under prior management. We anticipate
general and administrative expenses in the fourth quarter of fiscal 2005 to decrease as a percentage of sales as compared to the fourth quarter of fiscal 2004.



Pre-opening Costs. Pre-opening costs consist of direct costs related to hiring and training the initial restaurant workforce and certain other
direct costs associated with opening new restaurants. There were no pre-opening costs in the third quarter of fiscal 2005 compared to $0.5 million from the third quarter of fiscal 2004. The decline was due to no new restaurant openings in third
quarter fiscal 2005 versus two during the same period of fiscal 2004. We do not expect to open any restaurants in the remaining period of fiscal 2005.



Loss on Impairment and Sale of Long-Lived Assets.Loss on impairment of long-lived assets relates to fixed and other long-term asset impairment
charges on both open and unopened restaurants. We recorded a $10.4 million loss in the third quarter of 2005 on the impairment of long-lived assets related to nine open restaurants in various markets. Impairment expenses in the third quarter of
fiscal 2004 of approximately $10.2 million were primarily related to the write-down of equipment and leasehold improvements at eight restaurants in operation and the capitalized development costs for restaurants we did not expect to open due to a
reduction in our development plans. We will continue to review our restaurants for potential asset impairment. We currently believe that all of our restaurants have sufficient estimated future cash flows to support the carrying value of their
long-lived assets. However, if an individual restaurants estimated future cash flows decline below its carrying value of long-lived assets, it could result in additional impairment charges. Loss on sale of long-lived assets relates to the $2.9
million loss recognized as a result of the sale and simultaneous leaseback of eight restaurant locations on September 9, 2005.



Lease Termination Costs. We recorded $0.2 million in lease termination costs in the third quarter of fiscal 2005 related to the lease for our
previously closed restaurant in Jenkintown, Pennsylvania.



Interest Income. Interest income is primarily received on the loans granted to our Paisano Partners for participation in our Paisano Partner Program. Interest income increased $0.04 million from the third quarter of fiscal 2004 to
the third quarter of fiscal 2005. This change is primarily related to the recording of the previous two quarters of interest income in the third quarter.



Interest Expense. Interest expense includes the cost of interest on debt. Interest expense increased by approximately $0.3 million, or 66.7%, to
$0.8 million in the third quarter of fiscal 2005 from approximately $0.5 million in the third quarter of fiscal 2004. The increase in interest expense primarily resulted from higher interest rates on our credit facility in the third quarter as
compared to same period in fiscal 2004 and the recording of the first months interest on our capital leases.



Income Taxes. We did not record a benefit from or provision for income taxes in the third quarter of fiscal 2005 and 2004. We recorded a tax
valuation allowance because we concluded that we remained in a position that would not allow realization of the asset. We will continue to record a tax valuation allowance until it becomes more likely than not that we will be able to recover the
value of our deferred tax assets.



Thirty-Nine Weeks Ended September 25,
2005 Compared to the Thirty-Nine Weeks Ended September 26, 2004



Restaurant Sales. Restaurant sales increased by approximately $14.1 million, or 7.4%, to $203.3 million in the first three quarters of fiscal 2005 from $189.2 million in the first three quarters of fiscal 2004. For fiscal 2005,
comparable restaurant sales increased 5.3% at Buca di Beppo restaurants, decreased 0.4% at Vinny Ts of Boston restaurants and increased 4.6% for the Company overall. Buca di Beppos restaurant sales increased approximately 7.4% in the
first three quarters of fiscal 2005 primarily due to an approximate 1% price increase in the first quarter of fiscal 2005, a 4.3% increase in guest count and the opening of a new restaurant in the first quarter of fiscal 2005. Vinny Ts of
Bostons restaurant sales increased approximately 8.1% in the first three quarters of fiscal 2005 primarily due to the opening of a new restaurant in the second half of fiscal 2004.



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Product. Product costs increased by approximately $4.0 million, or 8.4%, to $52.3 million in the
first three quarters of fiscal 2005 from $48.3 million in the first three quarters of fiscal 2004. Product costs as a percentage of restaurant sales increased by approximately 0.2 percentage points to 25.7% in the first three quarters of fiscal 2005
from 25.5% in the first three quarters of fiscal 2004. The increase in product costs and product costs as a percentage of sales was primarily related to increased costs in produce, poultry, seafood and wine.



Labor. Labor costs increased by approximately $4.4 million, or 6.8%,
to $68.0 million in the first three quarters of fiscal 2005 from $63.7 million in the first three quarters of fiscal 2004. Labor costs as a percentage of restaurant sales decreased by approximately 0.1 percentage points to 33.5% in the first three
quarters of fiscal 2005 from 33.6% in the first three quarters of fiscal 2004. The decrease in labor and benefit costs as a percentage of sales was primarily related to restaurant staffing efficiencies and the increased volume of sales. The increase
in labor dollars was a result of increases in exempt and non-exempt labor but at a slower rate than the increase in sales volumes.



Direct and Occupancy. Direct and occupancy costs increased by approximately $3.5 million, or 6.1%, to $61.5 million in the first three quarters of
fiscal 2005 from $58.0 million in the first three quarters of fiscal 2004. Direct and occupancy costs as a percentage of restaurant sales decreased 0.3 percentage points to 30.3% in the first three quarters of fiscal 2005 from 30.6% in the same
period of fiscal 2004. The increase in direct and occupancy costs in dollars was primarily related to increases in utilities, insurance and building and equipment repairs, as well as a sales tax credit received in the first quarter of fiscal 2004.
The decline in direct and occupancy costs as a percentage of sales in the first three quarters of fiscal 2005 as compared to the same period in fiscal 2004 is due primarily to the higher level of sales in fiscal 2005.



Depreciation and Amortization. Depreciation and amortization decreased
by approximately $0.5 million, or 4.7%, to $10.9 million in the first three quarters of fiscal 2005 from $11.4 million in the same period of fiscal 2004. Depreciation and amortization as a percentage of restaurant sales decreased by approximately
0.7 percentage points to 5.3% in the first three quarters of fiscal 2005 from 6.0% in the same period of fiscal 2004. The dollar decrease was primarily related to the decrease in capitalized asset purchases and increases in building asset write-offs
taken as a result of impairments since fourth quarter of fiscal 2005.



General and Administrative. General and administrative expenses increased by approximately $5.8 million, or 44.1%, to $18.9 million in the first three quarters of fiscal 2005 from $13.1 million in the first three quarters of fiscal
2004. General and administrative expenses as a percentage of restaurant sales increased by approximately 2.4 percentage points to 9.3% in the first three quarters of fiscal 2005 from 6.9% in the first three quarters of fiscal 2004. The increase in
general and administrative dollars and costs as a percentage of restaurant sales was primarily due to accounting, legal and consulting fees related to the investigation of events that transpired under prior management as well as hiring additional
Paisano Support Center staff.



Pre-opening Costs.
Pre-opening costs decreased approximately $0.8 million, or 75.3%, to $0.2 million in the first three quarters of fiscal 2005 from $1.0 million in the first three quarters of fiscal 2004. Pre-opening costs as a percentage of restaurant sales
decreased to 0.1% in the first three quarters of fiscal 2005 as compared to 0.5% during the same period of fiscal 2004. We opened one Buca di Beppo restaurant during the first three quarters of fiscal 2005.



Loss on Impairment and Sale of Long-Lived Assets. We recorded a $10.8
million loss on the impairment of long-lived assets. The $0.4 million loss on impairment of long-lived assets in the first three quarters of fiscal 2005 primarily related to capitalized lease development costs for a proposed Buca di Beppo restaurant
in Long Beach, California, that was not expected to open due to a reduction in our development plans. The $10.4 million loss in the third quarter of 2005 on the impairment of long-lived assets related to nine open restaurants in various markets. We
will continue to review our restaurants for potential asset impairment. Loss on sale of long-lived assets relates to the $2.9 million loss recognized as a result of the sale and simultaneous leaseback of eight restaurant locations on September 9,
2005.



Lease Termination Costs. We recorded $0.2 million
in lease termination costs in the first three quarters of fiscal 2005 related to one restaurant closing in Jenkintown, Pennsylvania. We incurred lease termination costs of approximately $1.2 million during the same period of fiscal 2004, which
primarily comprised costs related to the closure of our Lenexa, Kansas Buca di Beppo restaurant and termination of our leases related to undeveloped restaurant properties in Lexington, Kentucky and Springfield, Virginia.



Interest Income. Interest income is primarily received on the loans
granted to our Paisano Partners for participation in our Paisano Partner Program. Interest income increased $0.02 million, or 31.4%, to $0.09 million in the first three quarters of fiscal 2005 from $0.07 million in the first three quarters of fiscal
2004. This change is primarily related to an increase in the average outstanding balance of Paisano Partner loans.



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Interest Expense. Interest expense increased approximately $0.8 million, or 47.4%, to $2.3 million
in the first three quarters of fiscal 2005 from $1.5 million in the first three quarters of fiscal 2004. The increase in interest expense primarily resulted from higher interest rates on our credit facility in fiscal 2005 as compared to the same
period in fiscal 2004.



Income Taxes. We did not record
a benefit from or provision for income taxes in the first three quarters of fiscal 2005 and 2004. We recorded a tax valuation allowance because we concluded that we remained in a position that would not allow realization of the asset. We will
continue to record a tax valuation allowance until it becomes more likely than not that we will be able to recover the value of our deferred tax assets.



Liquidity and Capital Resources



As of September 25, 2005, our balance of cash and cash equivalents was approximately $1.6 million, a decrease of approximately $2.7 million from the
fiscal 2004 year-end balance of approximately $4.3 million. The reduction in our cash balance was due primarily to an increased use of cash in our operations primarily driven by increased general and administrative expenses largely related to
accounting, legal and consulting fees related to the investigation of events that transpired under prior management.



Net cash used by operating activities was approximately $5.4 million for the thirty-nine weeks ended September 25, 2005 as compared to net cash generated
of $0.1 million for the same period in fiscal 2004. This represents a decrease of $5.5 million in the use of cash for operating activities primarily driven by increased general and administrative expenses related to accounting, legal and consulting
fees related to the investigation of events that transpired under prior management, decreases in cash from store operations and increases in other general and administrative accruals.



Net cash used in investing activities was approximately $0.2 million for the thirty-nine weeks ended September 25, 2005, as
compared to a use of $6.4 million in the same period of fiscal 2004. We use cash primarily to fund the development and construction of new restaurants and capital additions of existing restaurants. Capital expenditures were $1.2 million in the
thirty-nine weeks of fiscal 2005 as compared to $8.3 million in the same period of fiscal 2004. The decrease in capital expenditures in the first three quarters of fiscal 2005 as compared to the first three quarters of fiscal 2004 was related to the
reduction in the number of new restaurants we opened this year. We opened one Buca di Beppo in the first quarter of fiscal 2005; however, the majority of the capital expenditures related to that store opening occurred in fiscal 2004. We do not
expect to open any additional restaurants during fiscal 2005.



Net cash provided by financing activities decreased by approximately $2.7 million to $2.8 million in the first three quarters of fiscal 2005 as compared to $5.5 million in the same period of fiscal 2004. Our primary financing activity in
the first three quarters of 2005 was related to $17.5 million of proceeds from the sale and simultaneous leaseback of eight restaurants offset by payments of $17.0 million on our long term debt. The net proceeds of the transaction were used to
prepay outstanding indebtedness. On February 26, 2004, we completed the sale in a private placement of 3.3 million shares of our common stock at a price of $5.50 per share for total gross proceeds of approximately $18.2 million. After deducting
transaction costs of approximately $1.0 million, we received net proceeds from the sale of approximately $17.0 million, $8.5 million of which was used to prepay our term loan facility, $7.5 million of which was used to pay down our line of credit
borrowings and the remainder was used for general corporate purposes.



In November 2004, we entered into a new credit agreement with Wells Fargo Foothill, Inc. and Ableco Finance LLC, as lenders, and with Wells Fargo Foothill, Inc., as the arranger and administrative agent for the lenders. The credit agreement
as amended to date provides for (a) a revolving credit facility in an aggregate amount equal to the lesser of a borrowing base determined in accordance with the terms of the credit agreement and $15 million (including a letter of credit subfacility
of up to an aggregate of $5 million); (b) a term loan A facility of up to an aggregate of $5 million; and (c) a term loan B facility of up to an aggregate of $15 million. The credit agreement expires on November 15, 2008. We are also required under
the loan documents to pay certain of our lenders an annual fee, an unused line of credit fee and a prepayment fee in the event of early termination of the agreement. Under the term loan A facility, we paid principal of $312,500 on January 1, 2005
and we are required to make a similar payment on the first day of each of July, October, January and April of each year thereafter, through and including October 1, 2008.



The credit agreement includes various affirmative and negative covenants, including certain financial covenants such as
minimum EBITDA, minimum fixed charge coverage ratio and maximum limits on capital expenditures and the acquisition or construction of new restaurants in any fiscal year. Payments under the credit agreement may be accelerated upon the occurrence of
an event of default, as defined in the credit agreement that is not otherwise waived or cured. As of March 27, 2005, we were in default of the financial covenants regarding minimum EBITDA and fixed charge coverage ratio. As a result, an amendment
and waiver was negotiated and received in April 2005. In exchange for the waiver, we paid our new lenders waiver fees totaling $400,000 and the interest rate on the term loan B portion of the credit facility was increased.



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On September 9, 2005, we completed the sale and simultaneous leaseback of eight restaurant locations with
affiliates of CRIC Capital at a sale price of $17.5 million (the Sale Leaseback Transaction). The net proceeds of the Sale Leaseback Transaction were used to prepay, in its entirety, the outstanding term B loan facility with Ableco and
to prepay a portion of the outstanding term A loan facility with Wells Fargo. A premium equal to four percent of the outstanding principal amount of the term B loan was paid in connection with the prepayment of the term B loan facility. Concurrently
with the closing of the Sale Leaseback Transaction, we entered into an agreement (the Amendment and Consent) with the members of the Lender Group. Pursuant to the Amendment and Consent, the lender group consented to the Sale Leaseback
Transaction (subject to the prepayment of the term B loan facility and term A loan facility as provided above), agreed to ease the minimum EBITDA coverage required for relevant testing periods in fiscal year 2007, and agreed to amend the Credit
Agreement in certain other respects. In consideration the Amendment and Consent, we agreed to increase the interest rate on each of the remaining term loan A facility and the revolving credit facility by 2.25% per annum.



Under the credit facility, our annual capital expenditures are limited to $13
million and the agreement includes covenants that place restrictions on sales of properties, transactions with affiliates, creation of additional debt, limitations on our ability to sign leases for new restaurants, maintenance of certain financial
covenants and other customary covenants. We expect to be in compliance with the financial covenants of the credit facility for the next twelve months.



Amounts borrowed under the credit facility are secured by substantially all of our tangible and intangible assets. As of October 25, 2005, we had
outstanding borrowings of approximately $7.4 million under our revolving credit facility, $2.2 million under the term loan A facility and our availability under the revolving credit facility was approximately $3.6 million. We initially used such
borrowings, together with available cash, to repay the outstanding indebtedness owed under our prior credit facility and to pay certain expenses of the transaction.



The events leading to our internal investigation and our subsequent failure to timely file our periodic reports with the SEC
necessitated that we suspend trading under our Registration Statement on Form S-3. This suspension and subsequent ineligibility to use Form S-3 subjected us to monthly penalties that must be paid to certain of our investors under the terms of our
Securities Purchase Agreement, dated as of February 24, 2004. The payments amounted to approximately $127,000 per month and continued until October 5, 2005, the date that our resale registration statement relating to the securities was declared
effective by the SEC.



Our capital requirements, including
development costs related to the opening of additional restaurants, have been significant. We have reduced our development for fiscal 2005 and 2006 until we have executed proven strategies to consistently improve our comparable restaurant sales. We
may need substantial capital to finance our expansion plans, which require funds for capital expenditures, pre-opening costs and initial operating losses related to new restaurant openings. The adequacy of available funds and our future capital
requirements will depend on many factors, including the pace of expansion, the costs and capital expenditures for new restaurant development and the nature of contributions, loans and other arrangements negotiated with landlords. Although we can
make no assurance, we believe that our available cash, cash flows from operations, and our available borrowings will be sufficient to fund our capital requirements through at least the next twelve months. To fund future operations, we may need to
raise additional capital through public or private equity or debt financing to continue our growth. In addition, we have and may continue to consider acquiring the operations of other companies. The sale of additional equity or debt securities could
result in additional dilution to our shareholders. We cannot predict whether additional capital will be available on favorable terms, if at all.



Off-Balance Sheet Arrangements



We do not have off-balance sheet arrangements.



Application of Critical Accounting Policies and Estimates



Our consolidated financial statements include accounts of BUCA, Inc, and all of our wholly owned subsidiaries. The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of America requires management to make judgments, assumptions and estimates that affect amounts reported in the consolidated financial statements and accompanying notes.



Critical accounting policies are those we believe are both
most important to the portrayal of our financial condition and operating 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. Judgments and uncertainties affecting the application of those policies may result in materially different amounts being reported under different conditions or using different assumptions. We consider the following policies to be most
critical in understanding the judgments that are involved in preparing our consolidated financial statements.



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Land, Buildings, Leasehold Improvements and Equipment



Land, buildings, leasehold improvements, tenant improvements and equipment
are recorded at original cost less accumulated depreciation and amortization. These assets are depreciated on a straight-line basis over the lesser of their estimated useful lives or associated lease term, ranging from three to 25 years. Land is not
depreciated because we believe that it retains its historical value. Our estimate of the useful life of equipment (three to seven years) and buildings (25 years) is based upon the historical life of similar assets in our industry. Leasehold
improvements are generally depreciated over the term of the lease, including option periods, because we believe a majority of these assets will exist as long as we are tenants of the various properties. Our judgments and estimates regarding the
estimated useful lives and fair market value of these assets may produce materially different amounts of depreciation and amortization expense if different assumptions were used. As discussed below, these judgments may also impact the need and
amount to recognize as an impairment charge on the carrying amount of these assets.



Impairment of Long-Lived Assets



We review our
long-lived assets, such as fixed assets and intangible assets, for impairment whenever events or changes in circumstances indicate the carrying value amount of an asset or group of assets may not be recoverable. We consider a history of consistent
and significant operating losses to be a primary indicator of potential asset impairment. Assets are grouped and evaluated for impairment at the individual restaurant level. A restaurant is deemed to be impaired if a forecast of its estimated future
operating cash flows is less than its carrying amount. If a restaurant is determined to be impaired, the loss is measured as the amount by which the carrying amount of the restaurant exceeds its fair value. Fair value is an estimate based on the
best information available including the restaurants discounted estimated future cash flows, expected growth rate of comparable restaurant sales, remaining lease term and other factors.



Self-Insurance



We are self-insured for a significant portion of our current medical, dental, workers compensation and general
liability insurance programs. In estimating our self-insurance reserves, we utilize estimates of future losses, based upon our historical loss trends and historical industry data and actuarial estimates of settlement costs for incurred claims. These
reserves are monitored and adjusted when warranted by changing circumstances. Any increases or decreases in insurance reserves would be offset by a corresponding increase or decrease in insurance expense.



Accounting for Leases



In accordance with SFAS No. 13 Accounting for Leases,we recognize lease expense for our operating leases over the
entire lease term including lease renewal options and build-out periods where the renewal is expected and the build-out period takes place prior to the restaurant opening or lease commencement date. We account for construction allowances by
recording a receivable when its collectibility is considered certain, depreciating the leasehold improvements over the lesser of their useful lives or the full term of the lease, including renewal options and build-out periods, amortizing the
construction allowance as a credit to rent expense over the full term of the lease, including renewal options and build-out periods, and relieving the receivable once the cash is obtained from the landlord for the construction allowance.



Income Taxes



We estimate certain components of our provision for income taxes. The estimates include effective state and local income tax
rates, allowable tax credits for items such as FICA taxes paid on reported tip income and the work opportunity tax credit, the tax rate in which deferred taxes are recognized, and the likelihood that we will be able to utilize our deferred tax
assets. Our estimates are based on the best available information at the time that we prepare the provision. All tax returns are subject to audit by federal and state governments, usually years after the tax returns are filed, and could be subject
to different interpretations of the tax laws. The ultimate amount of income taxes that we pay may be higher or lower than our estimates. We record a tax valuation allowance when it is more likely than not that we will not be able to recover the
value of our deferred tax assets. We have recorded a full valuation allowance against the deferred tax assets due to continued uncertainty regarding whether we will be able to recover our deferred tax assets due to our recent operating losses.



Estimated Liability for Closing Restaurants



We make decisions to close restaurants based on prospects for estimated
future profitability. We evaluate each restaurants performance every quarter. When restaurants continue to perform poorly, we consider the demographics of the location, as well as the likelihood of being able to improve an unprofitable
restaurant. If we determine that the restaurant will not, within a reasonable period of time, operate at break-even cash flow or be profitable, we may close the restaurant.



20



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The estimated liability for closing restaurants on properties vacated is generally based on the term of
the lease and the lease termination fee we expect to pay, as well as estimated maintenance costs until the lease has been abated. The amount of the estimated liability established is generally the present value of these estimated future payments
upon exiting the property. The interest rate used to calculate the present value of these liabilities is based on our incremental borrowing rate at the time the liability is established.



A significant assumption used in determining the amount of the estimated liability for closing restaurants is the amount of
the estimated liability for future lease payments on vacant restaurants, which we determine based on our assessment of our ability to successfully negotiate early terminations of our lease agreements with our landlords or sublease the property.
Additionally, we estimate the cost to maintain leased and owned vacant properties until the lease has been abated. If the costs to maintain properties increase, or it takes longer than anticipated to sell properties or sublease or terminate leases,
we may need to record additional estimated liabilities. If the leases on the vacant restaurants are not terminated or subleased on the terms we used to estimate the liabilities, we may be required to record losses in future periods. Conversely, if
the leases on the vacant restaurants are terminated or subleased on more favorable terms than we used to estimate the liabilities, we reverse previously established estimated liabilities, resulting in an increase in operating income.



Loss Contingencies



We maintain accrued liabilities and reserves relating to the resolution of certain contingent obligations. Significant
contingencies include those related to litigation. We account for contingent obligations in accordance with Statement of Financial Accounting Standards (SFAS) No. 5, Accounting for Contingencies, as interpreted by FASB
Interpretation No. 14 which requires that we assess each contingency to determine estimates of the degree of probability and range of possible settlement. Contingencies that are deemed to be probable and where the amount of such settlement is
reasonably estimable are accrued in our financial statements. If only a range of loss can be determined, we accrue to the best estimate within that range; if none of the estimates within that range is better than another, we accrue to the low end of
the range.



The assessment of loss contingencies is a highly
subjective process that requires judgments about future events. Contingencies are reviewed at least quarterly to determine the adequacy of the accruals and related financial statement disclosure. The ultimate settlement of loss contingencies may
differ significantly from amounts we have accrued in our financial statements.



Recent Accounting Pronouncements



In December
2004, the FASB issued its final statement SFAS No. 123R, Share Based Payment. SFAS No. 123R establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. This statement
focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123R requires that the fair value of such equity instruments be recognized as expense in the historical
financial statements as services are performed. Prior to SFAS No. 123R, only certain pro forma disclosures of fair value were required. SFAS No. 123R is effective as of the beginning of the first annual reporting period that begins after June 15,
2005. The effect of adopting this statement is expected to be comparable to that disclosed on a pro forma basis in Note 4 to the condensed consolidated financial statements included as Part I, Item 1, subject to the level of options granted.



In December 2004, the FASB issued SFAS No. 153, Exchanges
of Nonmonetary Assets (SFAS 153) which eliminates the exception from fair value measurement for nonmonetary exchanges of similar productive assets and replaces it with a general exception from fair value measurement for exchanges of nonmonetary
assets that do not have commercial substance. We are required to adopt SFAS 153 for nonmonetary asset exchanges occurring in the second quarter of fiscal 2006 and its adoption is not expected to have a significant impact on our consolidated
financial statements.



In March 2005, the FASB issued FASB
Interpretation No. 47 (FIN 47), Accounting for Conditional Asset Retirement Obligations  an Interpretation of FASB Statement No. 143. This Interpretation clarifies that the term conditional asset retirement obligation, as used in SFAS
No. 143, refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity. Thus, the timing and/or method
of settlement may be conditional on a future event. Accordingly, an entity is required to recognize a liability for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. The fair
value of a liability for the conditional asset retirement obligation should be recognized when incurred  generally upon acquisition, construction, or development and/or through the normal operation of the asset. Uncertainty about the timing
and/or method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when sufficient information exists. SFAS No. 143 acknowledges that in some cases, sufficient information may not be
available to reasonably estimate the liability. We are currently reviewing and analyzing the impact of FIN 47 on our consolidated financial statements. We plan to adopt FIN 47 during the fourth quarter of fiscal 2005.



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Inflation



The primary inflationary factors affecting our operations are food and labor costs. A large number of our restaurant personnel are paid at rates based on
the applicable minimum wage, and increases in the minimum wage directly affect our labor costs. To date, inflation has not had a material impact on our operating results.



Disclosure Regarding Forward-Looking Statements



This Form 10-Q for the thirty-nine weeks ended September 25, 2005 contains forward-looking statements within the meaning of
the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934. These forward-looking statements are based on the beliefs of our management as well as on assumptions made by and information currently available to us at the time the
statements were made. When used in this Form 10-Q, the words anticipate, believe, estimate, expect, intend and similar expressions, as they relate to us, are intended to identify the
forward-looking statements. Although we believe that these statements are reasonable, you should be aware that actual results could differ materially from those projected by the forward-looking statements. Because actual results may differ, readers
are cautioned not to place undue reliance on forward-looking statements.



| |  | Our comparable restaurant sales percentage and average weekly sales could fluctuate as a result of the success of our menu initiatives, to go efforts, general economic
conditions, consumer confidence in the economy, changes in consumer preferences, competitive factors, weather conditions, or changes in our historical sales growth pattern.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The alternatives we take for Vinny Ts of Boston will be dependent upon a variety of factors, including market conditions and the price and other terms potential buyers are
willing to accept.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Product costs could be adversely affected by increased distribution prices by SYSCO Corporation, our principal food supplier, or a failure to perform by SYSCO, as well as the
availability of food and supplies from other sources, changes in our menu items, adverse weather conditions, governmental regulation, inflation and general economic conditions.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Labor costs could increase due to increases in the minimum wage as well as competition for qualified employees and the need to pay higher wages to attract a sufficient number of
employees.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Direct and occupancy costs could be adversely affected by an inability to negotiate favorable lease terms, an inability to negotiate favorable lease termination terms, increasing
supply costs, marketing expenses, property taxes, common area maintenance expenses, utility costs, repairs and maintenance expenses, or general economic conditions.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | General and administrative expenses could increase due to competition for qualified employees, the need to pay higher wages to attract sufficient employees, legal and accounting
costs, Sarbanes-Oxley compliance costs as well as general economic conditions.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Pre-opening expenses could increase due to additional restaurant openings, acceleration or delays in new restaurant openings or increased expenses in opening new restaurants.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Interest expense could be adversely affected by our need for additional borrowings on our credit facilities and an increase in interest rates.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------



| |  | Our ability to generate cash from operating activities could be adversely affected by increases in expenses as well as decreases in our average check and guest counts.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Our actual cash investment for building each restaurant could be higher or lower based upon the success of locating suitable sites, the restaurant location and construction costs.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The covenants and restrictions under our current line of credit and term loan facility could have a significant impact on us based upon our ability to meet and maintain the
covenants, our capital requirements, our financial performance, our business plan and general economic conditions.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The borrowing availability under our current credit facility could be higher or lower due to increases or decreases in our financial performance, ability to maintain debt covenants,
and other debt-related issues.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Our capital requirements could be higher or lower due to increases or decreases in the amount of new restaurants we build or acquire and general economic conditions.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  | The actual impact of our Buca Small initiative could be affected by changes in consumer preferences, the effectiveness of our Buca Small marketing campaigns, competitive factors and
weather conditions.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Additional factors that could cause actual results to differ include: an adverse outcome of the SEC investigation; failure in remediating internal control deficiencies; an adverse
outcome of pending legal proceedings; risks associated with restaurants not generating sufficient cash flows to support the carrying value of the restaurants assets; risks of incurring additional lease termination expenses; risks associated
with terrorism and our countrys war on terrorism; risks associated with actual or alleged food-borne illness; risks associated with future growth; inability to achieve and manage planned expansion; fluctuations in operating results; the need
for additional capital; risks associated with discretionary consumer spending; inability to compete with larger, more established competitors; potential labor shortages; our dependence on governmental licenses; weather and natural disasters; and
legal actions arising in the normal course of business, including complaints or litigation from guests.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Our restaurants feature Southern Italian cuisine served both in individual and family-style portions. Our continued success depends, in part, upon the
popularity of this type of Italian cuisine and this style of informal dining. Shifts in consumer preferences away from our cuisine or dining style could materially adversely affect our future profitability. Also, our success 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 materially adversely affect our business, financial condition, operating results or cash flows.



Certain of these risk factors are more fully discussed in our Annual Report on Form 10-K for the period ended December 26, 2004. We caution you, however,
that the list of factors above may not be exhaustive and that those or other factors, many of which are outside of our control, could have a material adverse effect on us and our results of operations. All forward-looking statements attributable to
persons acting on our behalf or us are expressly qualified in their entirety by the cautionary statements set forth here. We assume no obligation to publicly release the results of any revision or updates to these forward-looking statements to
reflect future events or unanticipated occurrences.



Item 3. Quantitative and Qualitative Disclosures about Market Risk



We are exposed to market risk from changes in interest rates on borrowings under our credit agreement. The credit agreement provides for (a) a revolving
credit facility in an aggregate amount equal to the lesser of a borrowing base determined in accordance with the terms of the credit agreement and $15 million (including a letter of credit sub-facility of up to an aggregate of $5 million); and (b) a
term loan A facility of up to an aggregate of $5 million. The interest rate on the term loan A facility is Wells Fargos reference rate plus 2.50 percentage points. As of October 25, 2005, we had approximately $9.6 million outstanding in debt
borrowings under our credit facility. Thus, a 1% change in interest rates would cause annual interest expense to increase by $96,000.



We have no derivative financial instruments or derivative commodity instruments.



Many of the food products purchased by us are affected by commodity pricing and are, therefore, subject to price volatility
caused by weather, production problems, delivery difficulties and other factors that are outside our control. To control this risk in part, we have fixed price purchase commitments for food and supplies from vendors who supply our national food
distributor. In addition, we believe that substantially all of our food and supplies are available from several sources, which helps to control food commodity risks. We believe we have the ability to increase menu prices, or vary the menu items
offered, if needed in response to a food product price increases. To compensate for a hypothetical price increase of 10% for food and supplies, we would need to increase menu prices by an average of 2.5%, which is only slightly more than our average
price increase of approximately 2% in fiscal 2004, 2% in fiscal 2003 and 1% in fiscal 2002. Accordingly, we believe that a hypothetical 10% increase in food product costs would not have a material effect on our operating results.



Item 4. Controls and Procedures



Conclusions
Regarding the Effectiveness of Disclosure Controls and Procedures



As of the end of the period covered by this report, we conducted an evaluation, under the supervision and with the participation of the principal executive officer and principal financial officer, of our disclosure controls and procedures
(as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 (the Exchange Act)). Based upon this evaluation, our principal executive officer and principal financial officer concluded that as of September 25,
2005, our disclosure controls and procedures were ineffective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods
specified in the Securities and Exchange Commission rules and forms due to the material weaknesses in internal control over financial



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reporting as described in Item 9A of our Annual Report on Form 10-K for the fiscal year ended December 26, 2004 that have not been remediated. In fiscal
2004, we began to remediate identified deficiencies and material weaknesses in our internal control over financial reporting. See Item 9A. Controls and Procedures of our Annual Report on Form 10-K for the fiscal year ended December 26,
2004 for more information about the deficiencies we have identified and the remediation we have taken and expect to take.



As previously reported, subsequent to the filing of our Quarterly Reports on 10-Q for the quarters ended March 27, 2005 and June 26, 2005, we discovered
additional deficiencies related to the design and operation of accounting procedures and application of GAAP. We identified errors in our accounting for depreciation of fixed assets, interest expense, lease payments, medical benefits and other
prepaid expenses. These matters represented material weaknesses in internal control over financial reporting and resulted in the restatement of our condensed consolidated financial statements for the quarters ended March 27, 2005 and June 26, 2005.



Changes in Internal Control Over Financial Reporting



There have been no changes to our internal control over financial reporting
during the third quarter of fiscal 2005 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



In
March 2004, two of our former hourly employees filed a purported class action suit against us in the Orange County Superior Court, State of California. The action was later transferred to the Los Angeles Superior Court, State of California, where it
is currently pending. The complaint alleges causes of action for failure to pay wages/overtime, failure to allow meal breaks, failure to allow rest breaks, failure to pay reporting time pay, violation of California Business & Professions Code
Section 17200, and certain statutory damages and penalties. Mediation occurred in February 2005, at which time the parties reached a tentative settlement. The court issued its order preliminarily approving the settlement on September 20, 2005. The
final fairness hearing is scheduled for January 11, 2006. The proposed settlement structure is expected to result in an estimated liability between $1.5 and $2.0 million. The actual amount under the proposed settlement structure will be dependent on
how many members of the putative class file timely claims, assuming judicial approval. During the fourth quarter of 2004, based on estimates received from external legal counsel, we recorded an estimated settlement expense of $1.8 million associated
with this legal action.



In February 2005, the SEC informed us
that it had issued a formal order of investigation to determine whether there have been violations of the federal securities laws. We understand that the order of investigation relates to, among other things, our internal controls and compliance
with rules governing filings and reports, including public disclosures, required to be filed with the SEC, and the 2002 purchase of an old farmhouse in Italy known as Villa Sermenino. We are cooperating and assisting with the SECs
investigation in order to bring the inquiry to a conclusion as promptly as possible. Any unfavorable finding from the SEC as a result of the investigation could have a material adverse effect on our company.



Our company, as nominal defendant, five of our directors, and three of our
former officers have been named as defendants in purported derivative actions that were filed in April 2005 in the Hennepin County District Court, State of Minnesota. The actions have been consolidated under the titleIn re Buca, Inc. Shareholder
Derivative Litigation. A consolidated complaint has been filed by two shareholders who allege that the individual defendants breached their fiduciary duties by ignoring, and failing to correct, problems with the companys financial
accounting and internal controls. The plaintiffs seek compensatory damages from the individual defendants for losses allegedly sustained by the company, which include the costs of internal investigations and an SEC investigation. The plaintiffs also
seek unspecified equitable relief and an award of attorneys fees and costs of litigation. The director defendants and the Company have moved to dismiss the action on several grounds. Defendant Greg Gadel also has moved to dismiss the action
or, in the alternative, to stay the action pending the conclusion of a criminal investigation that his motion indicates is now being conducted by the U.S. Attorneys Office in Minnesota in which Gadel is a target. All of the motions were heard
in the Hennepin County District Court on October 24, 2005, although no ruling on the motions has been issued. We are not able to predict the ultimate outcome of this litigation, but it may be costly and disruptive. The total costs cannot be
reasonably estimated at this time. Derivative litigation can result in substantial costs and divert our managements attention and resources, which may have a material adverse effect on our business and results of operations, including cash
flows.



On July 25, 2005, we filed a civil action against two
of our former officers, Greg Gadel and John Motschenbacher, in the Hennepin County District Court, Minneapolis, Minnesota. Gadel was our Chief Financial Officer until February 2005. Motschenbacher was an officer since 1999, and our Senior Vice
President and Chief Information Officer from February 2004 until March 15, 2005. In the complaint, we allege that Gadel and Motschenbacher breached the fiduciary duties of loyalty, good faith, and due care that they owed to us during their tenure as
officers, and unjustly enriched themselves, by (1) causing us to enter into unfavorable transactions with companies in which Gadel and Motschenbacher had undisclosed, material financial interests, (2) causing us to overpay for goods and services
provided by vendors in which Gadel and Motschenbacher had undisclosed, material financial interests, (3) soliciting and receiving undisclosed kickbacks from a vendor, and (4) seeking and receiving improper reimbursement from us for business expenses
that were, in fact, personal in nature, such as family vacations. We seek damages against each of Gadel and Motschenbacher in an amount in excess of $50,000, disgorgement of the compensation that we paid to Gadel and Motschenbacher during the period
that they were faithless



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##### Table of Contents

fiduciaries, reimbursement of our costs of investigation, and an award of interest, attorneys fees, and costs of litigation. Gadel and Motschenbacher
separately moved to stay the action. The court has denied the motions. The case has been set for trial in August 2006.



Three virtually identical civil actions under the federal securities laws were filed against our company and three former officers in the United States
District Court for the District of Minnesota, on August 10, 2005, September 1, 2005, and September 7, 2005, respectively. On October 31, 2005, the Court ordered that the three actions be consolidated and that five investors be appointed as lead
plaintiffs. The investors purport to bring the consolidated action on behalf of a class consisting of all persons who purchased our common stock in the market during the time period from February 6, 2001 through March 11, 2005 (the class
period). The investors allege that in press releases and SEC filings issued during the class period, defendants made materially false and misleading statements about our companys income, revenues, and internal controls, which allegedly
had the result of artificially inflating the market price for our stock. The investors assert claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, and seek compensatory damages in an unspecified amount, plus an award of
attorneys fees and costs of litigation. The investors have advised us that they intend to file a consolidated complaint in early 2006. The defendants have not yet responded and will not respond until after the consolidated complaint is filed.
We are not able to predict the ultimate outcome of this litigation, but it may be costly and disruptive. The total costs cannot be reasonably estimated at this time. Federal securities litigation can result in substantial costs and divert our
managements attention and resources, which may have a material adverse effect on our business and results of operations, including cash flows.



From time to time, we are involved in various legal actions arising in the ordinary course of business. In the opinion of our management, the ultimate
dispositions of these matters will not have a material adverse effect on our consolidated financial position and results from operations.



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds



Our Paisano Partner program requires our restaurant general managers, known as Paisano Partners, to purchase between $10,000 and $20,000 of our common
stock. We provide the Paisano Partners the option to finance the purchase of the common stock with a full recourse loan payable over five years at a fixed interest rate of 8%. We have the option, but not the obligation, to buy out a Paisano
Partners entire equity interest purchased under the Paisano Partner program at the purchase price of the equity interest paid by the Paisano Partner either (1) upon the initiation of bankruptcy proceedings by or against the Paisano Partner
within five years after the purchase date of the equity interest or (2) if the Paisano Partners employment with us is terminated for any reason within five years after the purchase date of the equity interest. The following table represents
the repurchase of Paisano Partner equity shares issued in accordance with this program during the third quarter of fiscal 2005.



|                                          |  |                                               |  |                                           |      |                                                                                             |   |                                                                                                                          |   |           |  
|----------------------------------------- |  | --------------------------------------------- |  | ----------------------------------------- | ---- | ------------------------------------------------------------------------------------------- | - | ------------------------------------------------------------------------------------------------------------------------ | - | --------- | -
|Period                                    |  | (a) Total Number ofShares (or Units)Purchased |  | (b) Average Price Paidper Share (or Unit) |      | (c) Total Number ofShares (or Units)Purchased as Part ofPublicly AnnouncedPlans or Programs |   | (d) Maximum Number (orApproximate Dollar Value) ofShares (or Units) that May YetBe Purchased
Under the Plansor Programs) |  
|Four-week period ended July 24, 2005      |  | 6,703                                         |  | $                                         | 5.97 |                                                                                             |  |                                                                                                                          | $ | 1,840,094 | *
|Four-week period ended August 21, 2005    |  |                                              |  |                                           |     |                                                                                             |  |                                                                                                                          |   | 1,860,089 | *
|Five-week period ended September 25, 2005 |  | 3,846                                         |  |                                           | 5.20 |                                                                                             |  |                                                                                                                          |   | 1,860,089 | *
|                                          |  |                                               |  |                                           |      |                                                                                             |   |                                                                                                                          |   |           |  
|Total                                     |  | 10,549                                        |  | $                                         | 5.69 |                                                                                             |  |                                                                                                                          |   |           |  

---

|* | The dollar figure indicates the total amount of shares that we have the option, but not the obligation, to purchase under the program.
|- | --------------------------------------------------------------------------------------------------------------------------------------



Item 3. Defaults upon Senior Securities



None.



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



None



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Item 5. Other Information



Material
Impairments.



In connection with the preparation of the
financial statements to be included in our Quarterly Report on Form 10-Q for the thirteen weeks ended September 25, 2005, our audit committee determined that we must incur an approximate $13.3 million loss on the impairment and sale of long-lived
assets. The loss is primarily related to a $10.4 million write-down of six Buca di Beppo and three Vinny Ts restaurants currently in operation and a $2.9 million loss on a sale-leaseback transaction. We recorded an impairment charge on three
of these nine restaurants because our estimate of future cash flows, based upon a range of scenarios, over the remaining lease term plus option periods for each restaurant did not generate sufficient positive cash flow to support the carrying value
of their associated long-lived assets. We determined that it was more likely than not that six of these restaurants would either be sold or otherwise disposed of significantly before the end of their previously estimated useful life. Our estimate of
future cash flows over the remaining lives of these six restaurants, net of sale proceeds or disposal fees, did not support the carrying value. As a result of the carrying value not deemed to be recoverable, we estimated the fair value of these
assets using discounted future cash flows and recorded an impairment loss for the amount the carrying value exceeded estimated fair value.



On September 9, 2005, we entered into a sale and leaseback transaction in which we sold eight of our restaurants to a third party for proceeds of $17.5
million. We simultaneously entered into long-term capital leases for those restaurants with aggregate initial annual rent of approximately $1.2 million. In connection with this sale and leaseback, we recorded a loss of $2.9 million primarily to
reflect the impairment on some of the properties for which the net proceeds were less than the book value of the assets.



Non-Reliance on Previously Issued Financial Statements.



In connection with the preparation of our interim financial statements for the period ended September 25, 2005, we determined that errors had occurred in
the interim financial statements included in our previously filed Reports on Form 10-Q for the periods ended March 27, 2005 and June 26, 2005. The errors related to the depreciation of fixed assets, interest expense and other items. As a result of
this determination, our board of directors and audit committee concluded on November 4, 2005 that we should restate our previously filed financial statements for the fiscal periods ended March 27, 2005 and June 26, 2005 to correct for these errors.
The previously filed financial statements for the affected periods should no longer be relied upon. We have subsequently filed amended financial statements for the affected periods. Our authorized officers have discussed these matters with our
independent registered public accounting firm, Deloitte & Touche, LLP.



Item 6. Exhibits



Exhibits



|            |  |                                                                                                                                                                                                                                                                                                         |  |                          
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                             |  | Method of Filing         
|3.1         |  | Amended and Restated Articles of Incorporation of the Registrant (1)                                                                                                                                                                                                                                    |  | Incorporated By Reference
|            |  |                                                                                                                                                                                                                                                                                                        
|3.2         |  | Amended and Restated Bylaws of the Registrant (2)                                                                                                                                                                                                                                                       |  | Incorporated By Reference
|            |  |                                                                                                                                                                                                                                                                                                        
|3.3         |  | Articles of Amendment of Amended and Restated Articles of Incorporation of the Registrant (3)                                                                                                                                                                                                           |  | Incorporated By Reference
|            |  |                                                                                                                                                                                                                                                                                                        
|4.1         |  | Specimen of Common Stock Certificate (4)                                                                                                                                                                                                                                                                |  | Incorporated By Reference
|            |  |                                                                                                                                                                                                                                                                                                        
|4.2         |  | Securities Purchase Agreement dated as of February 24, 2004 by and among the Registrant and the Investors named therein (5)                                                                                                                                                                             |  | Incorporated By Reference
|            |  |                                                                                                                                                                                                                                                                                                        
|4.3         |  | Schedule of Investors who have executed the Securities Purchase Agreement, dated as of February 24, 2004, by and among the Registrant and the Investors named therein (6)                                                                                                                               |  | Incorporated By Reference
|            |  |                                                                                                                                                                                                                                                                                                        
|10.1        |  | Amendment Number Two to Credit Agreement and Consent, dated as of September 9, 2005, by and among the Registrant and each of its Subsidiaries that are signatories thereto, the Lenders that
are signatories thereto, and Wells Fargo Foothill, Inc., as the Arranger and the Administrative Agent. (7) |  | Incorporated By Reference
|            |  |                                                                                                                                                                                                                                                                                                        
|10.2        |  | Form of Restricted Stock Agreement for the 1996 Stock Incentive Plan of BUCA, Inc. and Affiliated Companies, as amended (8)                                                                                                                                                                             |  | Incorporated By Reference



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##### Table of Contents

|     |  |                                                                                                                                                                                                                                                                                        |  |                     
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------
|10.3 |  | Amendment Number Three to Credit Agreement and Consent, dated as of November 4, 2005, by and among the Registrant and each of its Subsidiaries that are signatories thereto, the Lender that is
signatory thereto, and Wells Fargo Foothill, as the Arranger and Administrative Agent. |  | Filed Electronically
|     |  |                                                                                                                                                                                                                                                                                       
|31.1 |  | Certification by Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                 |  | Filed Electronically
|     |  |                                                                                                                                                                                                                                                                                       
|31.2 |  | Certification by Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                  |  | Filed Electronically
|     |  |                                                                                                                                                                                                                                                                                       
|32.1 |  | Certification by Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                          |  | Filed Electronically

---

|(1) | Incorporated by reference to Exhibit 3.4 to Amendment No. 1 to the Registrants Registration Statement on Form S-1 (Registration No. 333-72593), filed with the Commission on
March 24, 1999.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Incorporated by reference to Exhibit 3.5 to Amendment No. 1 to the Registrants Registration Statement on Form S-1 (Registration No. 333-72593), filed with the Commission on
March 24, 1999.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Incorporated by reference to Exhibit 4.3 to the Registrants Registration Statement on Form S-3 (Registration No. 113737), filed with the Commission on March 19, 2004.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Incorporated by reference to Exhibit 4.1 to Amendment No. 1 to the Registrants Registration Statement on Form S-1 (Registration No. 333-72593), filed with the Commission on
March 24, 1999.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Incorporated by reference to Exhibit 4.1 to the Registrants Current Report on Form 8-K, filed with the Commission on February 26, 2004.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------

|(6) | Incorporated by reference to Exhibit 4.6 to the Registrants Registration Statement on Form S-3 (Registration No. 113737), filed with the Commission on March 19, 2004.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Incorporated by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K, filed with the Commission on September 19, 2005.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Incorporated by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K, filed with the Commission on July 25, 2005.
|--- | -------------------------------------------------------------------------------------------------------------------------------------



27



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##### Table of Contents

SIGNATURES



Pursuant to the
requirements 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.



|                       |  |  |  |              |  |                                                
|---------------------- |  |  |  | ------------ |  | -----------------------------------------------
|                       |  |  |  | BUCA, Inc.  
|                       |  |  |  | (Registrant)
|                       |  |  | 
|Date: November 9, 2005 |  |  |  | by:          |  | /s/ Wallace B. Doolin                          
|                       |  |  |  |              |  | Wallace B. Doolin                              
|                       |  |  |  |              |  | Chairman, President and Chief Executive Officer
|                       |  |  |  |              |  | (Principal Executive Officer)                  
|                       |  |  | 
|Date: November 9, 2005 |  |  |  | by:          |  | /s/ Kaye R. OLeary                            
|                       |  |  |  |              |  | Kaye R. OLeary                                
|                       |  |  |  |              |  | Chief Financial Officer                        
|                       |  |  |  |              |  | (Principal Financial and Accounting Officer)   



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##### Table of Contents

EXHIBIT INDEX



|            |  |                                                                                                                                                                                                                                                                                                         |  |                          
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------
|Exhibit No. |  | Description                                                                                                                                                                                                                                                                                             |  | Method of Filing         
|3.1         |  | Amended and Restated Articles of Incorporation of the Registrant (1)                                                                                                                                                                                                                                    |  | Incorporated By Reference
|            |  |                                                                                                                                                                                                                                                                                                        
|3.2         |  | Amended and Restated Bylaws of the Registrant (2)                                                                                                                                                                                                                                                       |  | Incorporated By Reference
|            |  |                                                                                                                                                                                                                                                                                                        
|3.3         |  | Articles of Amendment of Amended and Restated Articles of Incorporation of the Registrant (3)                                                                                                                                                                                                           |  | Incorporated By Reference
|            |  |                                                                                                                                                                                                                                                                                                        
|4.1         |  | Specimen of Common Stock Certificate (4)                                                                                                                                                                                                                                                                |  | Incorporated By Reference
|            |  |                                                                                                                                                                                                                                                                                                        
|4.2         |  | Securities Purchase Agreement dated as of February 24, 2004 by and among the Registrant and the Investors named therein (5)                                                                                                                                                                             |  | Incorporated By Reference
|            |  |                                                                                                                                                                                                                                                                                                        
|4.3         |  | Schedule of Investors who have executed the Securities Purchase Agreement, dated as of February 24, 2004, by and among the Registrant and the Investors named therein (6)                                                                                                                               |  | Incorporated By Reference
|            |  |                                                                                                                                                                                                                                                                                                        
|10.1        |  | Amendment Number Two to Credit Agreement and Consent, dated as of September 9, 2005, by and among the Registrant and each of its Subsidiaries that are signatories thereto, the Lenders that
are signatories thereto, and Wells Fargo Foothill, Inc., as the Arranger and the Administrative Agent. (7) |  | Incorporated By Reference
|            |  |                                                                                                                                                                                                                                                                                                        
|10.2        |  | Form of Restricted Stock Agreement for the 1996 Stock Incentive Plan of BUCA, Inc. and Affiliated Companies, as amended (8)                                                                                                                                                                             |  | Incorporated By Reference
|            |  |                                                                                                                                                                                                                                                                                                        
|10.3        |  | Amendment Number Three to Credit Agreement and Consent, dated as of November 4, 2005, by and among the Registrant and each of its Subsidiaries that are signatories thereto, the Lender that is
signatory thereto, and Wells Fargo Foothill, as the Arranger and Administrative Agent.                  |  | Filed Electronically     
|            |  |                                                                                                                                                                                                                                                                                                        
|31.1        |  | Certification by Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                  |  | Filed Electronically     
|            |  |                                                                                                                                                                                                                                                                                                        
|31.2        |  | Certification by Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                   |  | Filed Electronically     
|            |  |                                                                                                                                                                                                                                                                                                        
|32.1        |  | Certification by Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                           |  | Filed Electronically     

---

|(1) | Incorporated by reference to Exhibit 3.4 to Amendment No. 1 to the Registrants Registration Statement on Form S-1 (Registration No. 333-72593), filed with the Commission on
March 24, 1999.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Incorporated by reference to Exhibit 3.5 to Amendment No. 1 to the Registrants Registration Statement on Form S-1 (Registration No. 333-72593), filed with the Commission on
March 24, 1999.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Incorporated by reference to Exhibit 4.3 to the Registrants Registration Statement on Form S-3 (Registration No. 113737), filed with the Commission on March 19, 2004.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Incorporated by reference to Exhibit 4.1 to Amendment No. 1 to the Registrants Registration Statement on Form S-1 (Registration No. 333-72593), filed with the Commission on
March 24, 1999.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Incorporated by reference to Exhibit 4.1 to the Registrants Current Report on Form 8-K, filed with the Commission on February 26, 2004.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------

|(6) | Incorporated by reference to Exhibit 4.6 to the Registrants Registration Statement on Form S-3 (Registration No. 113737), filed with the Commission on March 19, 2004.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(7) | Incorporated by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K, filed with the Commission on September 19, 2005.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------

|(8) | Incorporated by reference to Exhibit 10.1 to the Registrants Current Report on Form 8-K, filed with the Commission on July 25, 2005.
|--- | -------------------------------------------------------------------------------------------------------------------------------------





29