----

----

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

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

| Maryland                                                       |   | 52-2081138                           |
|----------------------------------------------------------------|--------|--------------------------------------|
| (State or other jurisdiction of incorporation or organization) |   | (I.R.S. Employer Identification No.) |

|                                      | Class            |   |   | Outstanding at March 15, 2010 |   |
|-------------------------------------------|------------------|--------|--------|-------------------------------|--------|
| Common Stock, par value $0.0001 per share | 7,954,928 shares |

----

----

----

I N D E X

|                               |   |                                                                                        |   |     |   |
|------------------------------------|--------|---------------------------------------------------------------------------------------------|--------|----------|--------|
|                               |   |                                                                                        |   | Page No. |
| PART I—FINANCIAL INFORMATION |   |                                                                                        |   |
|                               |   |                                                                                        |   |     |   |
| Item 1.                            |   | Interim Consolidated Financial Statements (Unaudited):                                      |   |     |   |
|                               |   |                                                                                        |   |     |   |
|                               |   | Consolidated Statements of Financial Condition                                              |   | 3        |   |
|                               |   |                                                                                        |   |     |   |
|                               |   | Consolidated Statements of Operations                                                       |   | 4        |   |
|                               |   |                                                                                        |   |     |   |
|                               |   | Consolidated Statement of Stockholders’ Equity (Deficit)                              |   | 5        |   |
|                               |   |                                                                                        |   |     |   |
|                               |   | Consolidated Statements of Cash Flows                                                       |   | 6        |   |
|                               |   |                                                                                        |   |     |   |
|                               |   | Notes to Consolidated Financial Statements                                                  |   | 7        |   |
|                               |   |                                                                                        |   |     |   |
| Item 2.                            |   | Management’s Discussion and Analysis of Financial Condition and Results of Operations |   | 14       |   |
|                               |   |                                                                                        |   |     |   |
| Item 3.                            |   | Quantitative and Qualitative Disclosures about Market Risk                                  |   | 22       |   |
|                               |   |                                                                                        |   |     |   |
| Item 4T.                           |   | Controls and Procedures                                                                     |   | 22       |   |
|                               |   |                                                                                        |   |     |   |
| PART II—OTHER INFORMATION    |   |                                                                                        |   |
|                               |   |                                                                                        |   |     |   |
| Item 1.                            |   | Legal Proceedings                                                                           |   | 23       |   |
|                               |   |                                                                                        |   |     |   |
| Item 1A.                           |   | Risk Factors                                                                                |   | 23       |   |
|                               |   |                                                                                        |   |     |   |
| Item 3.                            |   | Defaults Upon Senior Securities                                                             |   | 23       |   |
|                               |   |                                                                                        |   |     |   |
| Item 6.                            |   | Exhibits                                                                                    |   | 24       |   |
|                               |   |                                                                                        |   |     |   |
| Signatures                         |   | 25                                                                                          |   |

----

Index

PART I

ITEM 1

CONSOLIDATED

|                                                                                                                                                                                                                 |   |                          |     |   |                  |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------|----------|--------|-----------------------|--------|
|                                                                                                                                                                                                                 |   | June 30, 2009(unaudited) |     |   | December 31,2008 |   |
| Assets                                                                                                                                                                                                               |   |                          |     |   |                  |   |
| Current Assets:                                                                                                                                                                                                      |   |                          |     |   |                  |   |
| Cash and cash equivalents                                                                                                                                                                                            |   | $                             | 206      |   |                  | $      | 390 |   |
| Accounts receivable                                                                                                                                                                                                  |   |                          | 1,759    |   |                  |   | 2,712 |   |
| Notes receivable, current portion                                                                                                                                                                                    |   |                          | 37       |   |                  |   | 18 |   |
| Inventories                                                                                                                                                                                                          |   |                          | 1,996    |   |                  |   | 2,964 |   |
| Other current assets                                                                                                                                                                                                 |   |                          | 144      |   |                  |   | 294 |   |
| Total current assets                                                                                                                                                                                                 |   |                          | 4,142    |   |                  |   | 6,378 |   |
|                                                                                                                                                                                                                 |   |                          |     |   |                  |   |   |   |
| Notes receivable                                                                                                                                                                                                     |   |                          | -        |   |                  |   | 34 |   |
| Property, plant and equipment, net                                                                                                                                                                                   |   |                          | 3,131    |   |                  |   | 8,253 |   |
| Intangible assets, net                                                                                                                                                                                               |   |                          | 2,629    |   |                  |   | 4,068 |   |
| Goodwill                                                                                                                                                                                                             |   |                          | 8,028    |   |                  |   | 8,028 |   |
| Investment in Debtor in Possession Subsidiaries                                                                                                                                                                      |   |                          | 3,969    |   |                  |   | - |   |
| Other assets                                                                                                                                                                                                         |   |                          | 385      |   |                  |   | 812 |   |
| Total assets                                                                                                                                                                                                         |   | $                             | 22,284   |   |                  | $      | 27,573 |   |
|                                                                                                                                                                                                                 |   |                          |     |   |                  |   |   |   |
| Liabilities and Stockholders’ Equity (Deficit)                                                                                                                                                                 |   |                          |     |   |                  |   |   |   |
| Liabilities:                                                                                                                                                                                                         |   |                          |     |   |                  |   |   |   |
| Accounts payable and accrued liabilities                                                                                                                                                                             |   | $                             | 14,027   |   |                  | $      | 17,486 |   |
| Borrowings and notes payable, current portion                                                                                                                                                                        |   |                          | 15,876   |   |                  |   | 14,330 |   |
| Obligations under capital leases, current portion                                                                                                                                                                    |   |                          | 1,710    |   |                  |   | 1,927 |   |
| Total current liabilities                                                                                                                                                                                            |   |                          | 31,613   |   |                  |   | 33,743 |   |
|                                                                                                                                                                                                                 |   |                          |     |   |                  |   |   |   |
| Deferred income                                                                                                                                                                                                      |   |                          | 3,393    |   |                  |   | 2,572 |   |
| Total liabilities                                                                                                                                                                                                    |   |                          | 35,006   |   |                  |   | 36,315 |   |
|                                                                                                                                                                                                                 |   |                          |     |   |                  |   |   |   |
| Commitments and contingencies                                                                                                                                                                                        |   |                          |     |   |                  |   |   |   |
| Minority interests in consolidated subsidiaries                                                                                                                                                                      |   |                          | 177      |   |                  |   | 365 |   |
|                                                                                                                                                                                                                 |   |                          |     |   |                  |   |   |   |
| Stockholders’ Equity (Deficit):                                                                                                                                                                                |   |                          |     |   |                  |   |   |   |
| Preferred stock, $.0001 par value; 25,000,000 shares authorized; no shares issued and outstanding                                                                                                                    |   |                          | -        |   |                  |   | - |   |
| Common stock, $.0001 par value; 200,000,000 shares authorized; 11,757,073 shares issued as of June 30, 2009 and December 31, 2008;  7,954,928 shares outstanding as of June 30, 2009 and December 31, 2008 |   |                          | 172,367  |   |                  |   | 172,102 |   |
| Accumulated deficit                                                                                                                                                                                                  |   |                          | (173,255 | )      |                  |   | (169,198 | ) |
| Treasury stock, 3,802,145 common shares as of June 30, 2009 and December 31, 2008, at cost                                                                                                                           |   |                          | (12,011  | )      |                  |   | (12,011 | ) |
| Total stockholders’ equity (deficit)                                                                                                                                                                      |   |                          | (12,899  | )      |                  |   | (9,107 | ) |
| Total liabilities and stockholders’ equity (deficit)                                                                                                                                                      |   | $                             | 22,284   |   |                  | $      | 27,573 |   |

----

Index

CONSOLIDATED

|                                                                                   |   | Quarter Ended |      |   | Six Months Ended |   |
|----------------------------------------------------------------------------------------|--------|---------------|-----------|--------|------------------|--------|
|                                                                                   |   | June 30, |      |   | June 30,    |   |
|                                                                                   |   | 2009          |      |   | 2008             |   |   | 2009 |   |   | 2008 |   |
| Revenue:                                                                               |   |          |      |   |             |   |   |   |   |   |   |   |
| Restaurant and manufacturing sales                                                     |   | $             | 3,380     |   |             | $      | 11,015 |   |   | $ | 12,178 |   |   | $ | 21,181 |   |
| Restaurant franchise and royalty fees                                                  |   |          | 721       |   |             |   | 659 |   |   |   | 1,302 |   |   |   | 1,304 |   |
| Total revenue                                                                          |   |          | 4,101     |   |             |   | 11,674 |   |   |   | 13,480 |   |   |   | 22,485 |   |
|                                                                                   |   |          |      |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Operating costs and expenses:                                                          |   |          |      |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Restaurant and manufacturing cost of sales                                             |   |          | 2,133     |   |             |   | 6,530 |   |   |   | 7,265 |   |   |   | 12,544 |   |
| Engineering and development                                                            |   |          | 241       |   |             |   | 299 |   |   |   | 535 |   |   |   | 580 |   |
| Depreciation and amortization                                                          |   |          | 140       |   |             |   | 509 |   |   |   | 567 |   |   |   | 1,006 |   |
| Total operating costs and expenses                                                     |   |          | 2,514     |   |             |   | 7,338 |   |   |   | 8,367 |   |   |   | 14,130 |   |
|                                                                                   |   |          |      |   |             |   |   |   |   |   |   |   |   |   |   |   |
| General and administrative expenses:                                                   |   |          |      |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Compensation and employee benefits                                                     |   |          | 1,163     |   |             |   | 2,493 |   |   |   | 2,967 |   |   |   | 6,547 |   |
| Professional fees                                                                      |   |          | 537       |   |             |   | 851 |   |   |   | 825 |   |   |   | 1,710 |   |
| Other                                                                                  |   |          | 1,220     |   |             |   | 4,236 |   |   |   | 4,403 |   |   |   | 8,055 |   |
| Total general and administrative expenses                                              |   |          | 2,920     |   |             |   | 7,580 |   |   |   | 8,195 |   |   |   | 16,312 |   |
|                                                                                   |   |          |      |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Non-operating income (expense):                                                        |   |          |      |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Interest income                                                                        |   |          | 4         |   |             |   | 34 |   |   |   | 16 |   |   |   | 71 |   |
| Interest expense                                                                       |   |          | (596      | )      |             |   | (419 | ) |   |   | (1,272 | ) |   |   | (859 | ) |
| Other income (expense), net                                                            |   |          | 27        |   |             |   | (468 | ) |   |   | 110 |   |   |   | (21 | ) |
| Total non-operating  income (expense)                                        |   |          | (565      | )      |             |   | (853 | ) |   |   | (1,146 | ) |   |   | (809 | ) |
|                                                                                   |   |          |      |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Loss before income taxes, minority interests, and equity in income of equity investees |   |          | (1,898    | )      |             |   | (4,097 | ) |   |   | (4,228 | ) |   |   | (8,766 | ) |
|                                                                                   |   |          |      |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Minority interest in earnings                                                          |   |          | 112       |   |             |   | 120 |   |   |   | 187 |   |   |   | 204 |   |
| Equity in income of equity investees                                                   |   |          | -         |   |             |   | 17 |   |   |   | - |   |   |   | 217 |   |
| Income tax benefit (expense)                                                           |   |          | -         |   |             |   | 1 |   |   |   | (3 | ) |   |   | 52 |   |
| Loss from continuing operations                                                        |   |          | (1,786    | )      |             |   | (3,959 | ) |   |   | (4,044 | ) |   |   | (8,293 | ) |
|                                                                                   |   |          |      |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) from discontinued operations (including gain on sale of $4,217 in 2008)  |   |          | -         |   |             |   | (424 | ) |   |   | (13 | ) |   |   | 3,473 |   |
| Net loss                                                                               |   | $             | (1,786    | )      |             | $      | (4,383 | ) |   | $ | (4,057 | ) |   | $ | (4,820 | ) |
|                                                                                   |   |          |      |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Basic loss per share from continuing operations                                        |   | $             | (0.22     | )      |             | $      | (0.50 | ) |   | $ | (0.51 | ) |   | $ | (1.04 | ) |
| Basic earnings (loss) per share from discontinued operations                           |   | $             | -         |   |             | $      | (0.05 | ) |   | $ | - |   |   | $ | 0.44 |   |
| Basic loss per share                                                                   |   | $             | (0.22     | )      |             | $      | (0.55 | ) |   | $ | (0.51 | ) |   | $ | (0.60 | ) |
| Basic weighted average shares outstanding                                              |   |          | 7,954,928 |   |             |   | 7,954,928 |   |   |   | 7,954,928 |   |   |   | 7,954,928 |   |
|                                                                                   |   |          |      |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Dividends declared per share                                                           |   | $             | -         |   |             | $      | - |   |   | $ | - |   |   | $ | - |   |

----

Index

CONSOLIDATED

|                               |   |         |      |   |           |   |    |        |   |   |      |   |   |    |    |   |   |   |     |   |   |   |    |   |
|------------------------------------|--------|--------------|-----------|--------|----------------|--------|---------|-------------|--------|--------|-----------|--------|--------|---------|---------|--------|--------|--------|----------|--------|--------|--------|---------|--------|
|                               |   | Common Stock |      |   | Treasury Stock |   |    | Accumulated |   |   |      |   |
|                               |   | Shares (1)   |      |   | Amount         |   |    | Shares      |   |   | Amount    |   |   | Deficit |    |   | Total  |   |
| Balance at January 1, 2009    |   |         | 7,954,928 |   |           | $      | 172,102 |        |   |   | 3,802,145 |   |   | $       | (12,011 | )      |   | $      | (169,198 | )      |   | $      | (9,107  | )      |
| Comprehensive income (loss):       |   |         |      |   |           |   |    |        |   |   |      |   |   |    |    |   |   |   |     |   |   |   |    |   |
| Net loss                      |   |         | -         |   |           |   | -       |        |   |   | -         |   |   |    | -       |   |   |   | (4,057   | )      |   |   | (4,057  | )      |
| Stock options expensed in net loss |   |         | -         |   |           |   | 265     |        |   |   | -         |   |   |    | -       |   |   |   | -        |   |   |   | 265     |   |
| Balance at June 30, 2009           |   |         | 7,954,928 |   |           | $      | 172,367 |        |   |   | 3,802,145 |   |   | $       | (12,011 | )      |   | $      | (173,255 | )      |   | $      | (12,899 | )      |

----

| (1)     Issued and outstanding |
|---------------------------------------------------------|

----

Index

CONSOLIDATED

|                                                                                             |   | Quarter Ended |   |   | Six Months Ended |   |
|--------------------------------------------------------------------------------------------------|--------|---------------|--------|--------|------------------|--------|
|                                                                                             |   | June 30, |   |   | June 30,    |   |
|                                                                                             |   | 2009          |   |   | 2008             |   |   | 2009 |   |   | 2008 |   |
| Cash flows from operating activities:                                                            |   |          |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                                                                         |   | $             | (1,786 | )      |             | $      | (4,383 | ) |   | $ | (4,057 | ) |   | $ | (4,820 | ) |
| Loss (income) from discontinued operations                                                       |   |          | -      |   |             |   | 424 |   |   |   | 13 |   |   |   | (3,473 | ) |
| Loss from continuing operations                                                                  |   |          | (1,786 | )      |             |   | (3,959 | ) |   |   | (4,044 | ) |   |   | (8,293 | ) |
|   Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |   |          |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Equity in income of equity investees                                                             |   |          | -      |   |             |   | (17 | ) |   |   | - |   |   |   | (217 | ) |
| Depreciation and amortization                                                                    |   |          | 202    |   |             |   | 622 |   |   |   | 727 |   |   |   | 1,228 |   |
| Foreign currency (gain) loss                                                                     |   |          | -      |   |             |   | 44 |   |   |   | - |   |   |   | (536 | ) |
| Share based compensation                                                                         |   |          | 124    |   |             |   | 296 |   |   |   | 265 |   |   |   | 626 |   |
| Market value impairment reserve                                                                  |   |          | -      |   |             |   | 446 |   |   |   | - |   |   |   | 599 |   |
| Other                                                                                            |   |          | 357    |   |             |   | (81 | ) |   |   | 419 |   |   |   | (129 | ) |
| Change in:                                                                                       |   |          |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Other assets                                                                                     |   |          | 691    |   |             |   | (1,159 | ) |   |   | 1,635 |   |   |   | (1,308 | ) |
| Deferred income                                                                                  |   |          | 166    |   |             |   | 35 |   |   |   | 821 |   |   |   | 20 |   |
| Accounts payable and accrued liabilities                                                         |   |          | 246    |   |             |   | 1,955 |   |   |   | 779 |   |   |   | 1,981 |   |
| Net cash provided by (used in) operating activities                                              |   |          | -      |   |             |   | (1,818 | ) |   |   | 602 |   |   |   | (6,029 | ) |
|                                                                                             |   |          |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Cash flows from investing activities:                                                            |   |          |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Principal repayments on notes receivable, including loans to senior executives                   |   |          | 4      |   |             |   | 55 |   |   |   | 14 |   |   |   | 1,204 |   |
| Investment in Debtor In Possession Subsidiaries                                                  |   |          | (1,219 | )      |             |   | - |   |   |   | (1,219 | ) |   |   | - |   |
| Investments in property, plant, and equipment                                                    |   |          | (177   | )      |             |   | (618 | ) |   |   | (219 | ) |   |   | (1,014 | ) |
| Other                                                                                            |   |          | (178   | )      |             |   | 191 |   |   |   | (178 | ) |   |   | 192 |   |
| Net cash provided by (used in) investing activities                                              |   |          | (1,570 | )      |             |   | (372 | ) |   |   | (1,602 | ) |   |   | 382 |   |
|                                                                                             |   |          |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Cash flows from financing activities:                                                            |   |          |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Proceeds from borrowings                                                                         |   |          | 1,400  |   |             |   | 2,250 |   |   |   | 1,400 |   |   |   | 2,750 |   |
| Repayments on borrowings                                                                         |   |          | (31    | )      |             |   | (254 | ) |   |   | (354 | ) |   |   | (4,908 | ) |
| Repayments under capital leases                                                                  |   |          | (108   | )      |             |   | (18 | ) |   |   | (217 | ) |   |   | (50 | ) |
| Investments by minority interests, net                                                           |   |          | -      |   |             |   | - |   |   |   | - |   |   |   | 350 |   |
| Other, net                                                                                       |   |          | -      |   |             |   | 19 |   |   |   | - |   |   |   | 38 |   |
| Net cash provided by (used in) financing activities                                              |   |          | 1,261  |   |             |   | 1,997 |   |   |   | 829 |   |   |   | (1,820 | ) |
|                                                                                             |   |          |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Effect of exchange rate change on cash                                                           |   |          | -      |   |             |   | (22 | ) |   |   | - |   |   |   | (22 | ) |
| Net change in cash and cash equivalents from continuing operations                               |   |          | (309   | )      |             |   | (215 | ) |   |   | (171 | ) |   |   | (7,489 | ) |
|                                                                                             |   |          |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Net change in cash and cash equivalents from discontinued operations:                            |   |          |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Net cash used in operating activities                                                            |   |          | -      |   |             |   | (251 | ) |   |   | (13 | ) |   |   | (954 | ) |
| Net cash provided by investing activities                                                        |   |          | -      |   |             |   | - |   |   |   | - |   |   |   | 7,879 |   |
| Net cash used in financing activities                                                            |   |          | -      |   |             |   | - |   |   |   | - |   |   |   | (79 | ) |
| Net change in cash and cash equivalents                                                          |   |          | (309   | )      |             |   | (466 | ) |   |   | (184 | ) |   |   | (643 | ) |
| Cash and cash equivalents at beginning of period                                                 |   |          | 515    |   |             |   | 954 |   |   |   | 390 |   |   |   | 1,131 |   |
| Cash and cash equivalents at end of period                                                       |   | $             | 206    |   |             | $      | 488 |   |   | $ | 206 |   |   | $ | 488 |   |
|                                                                                             |   |          |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Supplemental disclosures of cash flow information:                                               |   |          |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Cash paid for interest                                                                           |   | $             | 38     |   |             | $      | 520 |   |   | $ | 256 |   |   | $ | 1,423 |   |
|                                                                                             |   |          |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Non-cash financing and investing activities:                                                     |   |          |   |   |             |   |   |   |   |   |   |   |   |   |   |   |
| Net assets capitalized to Investment in Debtor In Possession Subsidiaries                        |   | $             | 2,750  |   |             | $      | - |   |   | $ | 2,750 |   |   | $ | - |   |

----

Index

NOTES TO 

----

Index

----

Index

|                           |   | Shares |      |   | Weighted AverageExercisePrice |   |
|--------------------------------|--------|--------|-----------|--------|-------------------------------|--------|
| Outstanding at January 1, 2009 |   |   | 2,980,833 |   |                          | $      | 1.51 |   |
| Granted                        |   |   | 9,000     |   |                          | $      | 0.20 |   |
| Exercised                      |   |   | -         |   |                          | $      | - |   |
| Cancelled/forfeited            |   |   | -         |   |                          | $      | - |   |
| Outstanding at June 30, 2009   |   |   | 2,989,833 |   |                          | $      | 1.51 |   |

----

Index

| Range ofExercise Prices |   | Shares |      |   | Weighted AverageRemainingLife |   |   | Weighted AverageExercisePrice |   |
|-------------------------|--------|--------|-----------|--------|-------------------------------|--------|--------|-------------------------------|--------|
| $0.01 – 2.00      |   |   | 2,489,000 |   |                          |   | 7.5    |                          |   | $ | 1.32 |   |
| $2.01 – 4.00      |   |   | 500,833   |   |                          |   | 8.0    |                          |   | $ | 2.47 |   |
| Total                   |   |   | 2,989,833 |   |                          |   | 7.6    |                          |   | $ | 1.51 |   |

|              |   | June 30, 2009     |   |   | December 31, 2008 |   |
|-------------------|--------|------------------------|--------|--------|------------------------|--------|
|              |   | (dollars in thousands) |   |
|              |   |                   |   |   |                   |   |
| Raw materials     |   | $                      | 1,140  |   |                   | $      | 2,097 |   |
| Work in progress  |   |                   | 552    |   |                   |   | 366 |   |
| Finished goods    |   |                   | 304    |   |                   |   | 501 |   |
| Total inventories |   | $                      | 1,996  |   |                   | $      | 2,964 |   |

|                                           |   | June 30, 2009     |   |   | December 31, 2008 |   |
|------------------------------------------------|--------|------------------------|--------|--------|------------------------|--------|
|                                           |   | (dollars in thousands) |   |
| Accounts payable                               |   | $                      | 5,066  |   |                   | $      | 8,439 |   |
| Sales deposits                                 |   |                   | 835    |   |                   |   | 1,228 |   |
| Accrued wages, bonus and commissions           |   |                   | 370    |   |                   |   | 693 |   |
| Other                                          |   |                   | 7,756  |   |                   |   | 7,126 |   |
| Total accounts payable and accrued liabilities |   | $                      | 14,027 |   |                   | $      | 17,486 |   |

----

Index

|                                     |   | Three months ended June 30, |   |   | Six months ended June 30, |   |
|------------------------------------------|--------|-----------------------------|--------|--------|---------------------------|--------|
|                                     |   | 2009                        |   |   | 2008                      |   |   | 2009 |   |   | 2008 |   |
|                                     |   | (dollars in thousands)      |   |
|                                     |   |                        |   |   |                      |   |   |   |   |   |   |   |
| Company-owned restaurant sales           |   | $                           | 991    |   |                      | $      | 7,954 |   |   | $ | 8,145 |   |   | $ | 15,887 |   |
| Royalty revenue                          |   |                        | 575    |   |                      |   | 595 |   |   |   | 1,103 |   |   |   | 1,136 |   |
| Franchise fee revenue                    |   |                        | 145    |   |                      |   | 64 |   |   |   | 199 |   |   |   | 168 |   |
| Total revenue                            |   |                        | 1,711  |   |                      |   | 8,613 |   |   |   | 9,447 |   |   |   | 17,191 |   |
|                                     |   |                        |   |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Cost of sales                            |   |                        | (561   | )      |                      |   | (4,795 | ) |   |   | (4,619 | ) |   |   | (9,482 | ) |
| Depreciation and amortization            |   |                        | (123   | )      |                      |   | (538 | ) |   |   | (564 | ) |   |   | (1,074 | ) |
| Other general & administrative costs |   |                        | (1,301 | )      |                      |   | (4,281 | ) |   |   | (4,705 | ) |   |   | (8,273 | ) |
| Interest expense                         |   |                        | (54    | )      |                      |   | (162 | ) |   |   | (263 | ) |   |   | (358 | ) |
| Management allocation                    |   |                        | (295   | )      |                      |   | (526 | ) |   |   | (822 | ) |   |   | (1,053 | ) |
| Minority interest in losses              |   |                        | 112    |   |                      |   | 120 |   |   |   | 187 |   |   |   | 204 |   |
| Segment loss                             |   | $                           | (511   | )      |                      | $      | (1,569 | ) |   | $ | (1,339 | ) |   | $ | (2,845 | ) |
|                                     |   |                        |   |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Capital expenditures                     |   | $                           | -      |   |                      | $      | 123 |   |   | $ | 84 |   |   | $ | 268 |   |
| Segment assets                           |   |                        |   |   |                      |   |   |   |   | $ | 15,301 |   |   | $ | 22,065 |   |
| Minority interests                       |   |                        |   |   |                      |   |   |   |   | $ | 177 |   |   | $ | 446 |   |

|                                     |   | Three months ended June 30, |   |   | Six months ended June 30, |   |
|------------------------------------------|--------|-----------------------------|--------|--------|---------------------------|--------|
|                                     |   | 2009                        |   |   | 2008                      |   |   | 2009 |   |   | 2008 |   |
|                                     |   | (dollars in thousands)      |   |
|                                     |   |                        |   |   |                      |   |   |   |   |   |   |   |
| Manufacturing sales                      |   | $                           | 2,390  |   |                      | $      | 3,061 |   |   | $ | 4,033 |   |   | $ | 5,294 |   |
| Cost of sales                            |   |                        | (1,573 | )      |                      |   | (1,735 | ) |   |   | (2,646 | ) |   |   | (3,062 | ) |
| Engineering and development              |   |                        | (241   | )      |                      |   | (299 | ) |   |   | (535 | ) |   |   | (580 | ) |
| Depreciation and amortization            |   |                        | (32    | )      |                      |   | (36 | ) |   |   | (67 | ) |   |   | (58 | ) |
| Other general & administrative costs |   |                        | (555   | )      |                      |   | (799 | ) |   |   | (1,263 | ) |   |   | (1,585 | ) |
| Interest expense                         |   |                        | (22    | )      |                      |   | (12 | ) |   |   | (32 | ) |   |   | (21 | ) |
| Other non-operating income               |   |                        | 1      |   |                      |   | 8 |   |   |   | 5 |   |   |   | 26 |   |
| Segment income (loss)                    |   | $                           | (32    | )      |                      | $      | 188 |   |   | $ | (505 | ) |   | $ | 14 |   |
|                                     |   |                        |   |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Capital expenditures                     |   | $                           | 164    |   |                      | $      | 228 |   |   | $ | 166 |   |   | $ | 421 |   |
| Segment assets                           |   |                        |   |   |                      |   |   |   |   | $ | 5,326 |   |   | $ | 6,879 |   |

----

Index

|                                     |   | Three months ended June 30, |   |   | Six months ended June 30, |   |
|------------------------------------------|--------|-----------------------------|--------|--------|---------------------------|--------|
|                                     |   | 2009                        |   |   | 2008                      |   |   | 2009 |   |   | 2008 |   |
|                                     |   | (dollars in thousands)      |   |
|                                     |   |                        |   |   |                      |   |   |   |   |   |   |   |
| Rental income                            |   | $                           | -      |   |                      | $      | - |   |   | $ | - |   |   | $ | - |   |
| Operating expenses                       |   |                        | -      |   |                      |   | - |   |   |   | - |   |   |   | - |   |
| Depreciation and amortization            |   |                        | -      |   |                      |   | - |   |   |   | - |   |   |   | - |   |
| Other general & administrative costs |   |                        | -      |   |                      |   | (13 | ) |   |   | - |   |   |   | (13 | ) |
| Interest income                          |   |                        | 1      |   |                      |   | 31 |   |   |   | 3 |   |   |   | 63 |   |
| Interest expense                         |   |                        | -      |   |                      |   | (452 | ) |   |   | - |   |   |   | (979 | ) |
| Other non-operating income (loss)        |   |                        | -      |   |                      |   | (28 | ) |   |   | - |   |   |   | 560 |   |
| Market value impairment reserves         |   |                        | -      |   |                      |   | (446 | ) |   |   | - |   |   |   | (599 | ) |
| Equity in income of equity investees     |   |                        | -      |   |                      |   | 17 |   |   |   | - |   |   |   | 217 |   |
| Segment income (loss)                    |   | $                           | 1      |   |                      | $      | (891 | ) |   | $ | 3 |   |   | $ | (751 | ) |
|                                     |   |                        |   |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Capital expenditures                     |   | $                           | -      |   |                      | $      | 26 |   |   | $ | - |   |   | $ | 26 |   |
| Segment assets                           |   |                        |   |   |                      |   |   |   |   | $ | 37 |   |   | $ | 11,823 |   |
| Minority interests                       |   |                        |   |   |                      |   |   |   |   | $ | - |   |   | $ | 434 |   |

|                                       |   | Three months ended June 30, |   |   | Six months ended June 30, |   |
|--------------------------------------------|--------|-----------------------------|--------|--------|---------------------------|--------|
|                                       |   | 2009                        |   |   | 2008                      |   |   | 2009 |   |   | 2008 |   |
|                                       |   | (dollars in thousands)      |   |
|                                       |   |                        |   |   |                      |   |   |   |   |   |   |   |
| Segment loss from operations               |   | $                           | (540   | )      |                      | $      | (2,272 | ) |   | $ | (1,841 | ) |   | $ | (3,582 | ) |
| Corporate expenses                         |   |                        | (1,567 | )      |                      |   | (2,421 | ) |   |   | (3,069 | ) |   |   | (6,314 | ) |
| Elimination of intercompany charges        |   |                        | 321    |   |                      |   | 733 |   |   |   | 869 |   |   |   | 1,551 |   |
| Income tax (expense) benefit               |   |                        | -      |   |                      |   | 1 |   |   |   | (3 | ) |   |   | 52 |   |
| Income (loss) from discontinued operations |   |                        | -      |   |                      |   | (424 | ) |   |   | (13 | ) |   |   | 3,473 |   |
|    Net loss                 |   | $                           | (1,786 | )      |                      | $      | (4,383 | ) |   | $ | (4,057 | ) |   | $ | (4,820 | ) |

|                                                   |   | Three months ended June 30, |   |   | Six months ended June 30, |   |
|--------------------------------------------------------|--------|----------------------------------|--------|--------|--------------------------------|--------|
|                                                   |   | 2009                             |   |   | 2008                           |   |   | 2009 |   |   | 2008 |   |
|                                                   |   | (dollars in thousands)           |   |
| Operating revenue                                      |   | $                                | -      |   |                           | $      | - |   |   | $ | - |   |   | $ | 610 |   |
| Operating expenses                                     |   |                             | -      |   |                           |   | - |   |   |   | - |   |   |   | (240 | ) |
| Depreciation and amortization                          |   |                             | -      |   |                           |   | - |   |   |   | - |   |   |   | (39 | ) |
| Operating margin                                       |   |                             | -      |   |                           |   | - |   |   |   | - |   |   |   | 331 |   |
|                                                   |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| General and administrative expenses                    |   |                             | -      |   |                           |   | - |   |   |   | - |   |   |   | (7 | ) |
| Interest expense                                       |   |                             | -      |   |                           |   | - |   |   |   | - |   |   |   | (157 | ) |
| Other non-operating income (expense)                   |   |                             | -      |   |                           |   | - |   |   |   | (13 | ) |   |   | 8 |   |
| Gain on sale of discontinued real estate operations    |   |                             | -      |   |                           |   | - |   |   |   | - |   |   |   | 4,217 |   |
| Income (loss) from discontinued real estate operations |   | $                                | -      |   |                           | $      | - |   |   | $ | (13 | ) |   | $ | 4,392 |   |
|                                                   |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
|    Capital expenditures                 |   | $                                | -      |   |                           | $      | - |   |   | $ | - |   |   | $ | 20 |   |
|    Segment assets                       |   |                             |   |   |                           |   |   |   |   |   | - |   |   |   | - |   |

----

Index

|                                     |   | Three months ended June 30, |   |   | Six months ended June 30, |   |
|------------------------------------------|--------|----------------------------------|--------|--------|--------------------------------|--------|
|                                     |   | 2009                             |   |   | 2008                           |   |   | 2009 |   |   | 2008 |   |
|                                     |   | (dollars in thousands)           |   |
|                                     |   |                             |   |   |                           |   |   |   |   |   |   |   |
| Software sales                           |   | $                                | -      |   |                           | $      | 26 |   |   | $ | - |   |   | $ | 128 |   |
| Engineering and development              |   |                             | -      |   |                           |   | (78 | ) |   |   | - |   |   |   | (158 | ) |
| Depreciation and amortization            |   |                             | -      |   |                           |   | (73 | ) |   |   | - |   |   |   | (182 | ) |
| Other general & administrative costs |   |                             | -      |   |                           |   | (100 | ) |   |   | - |   |   |   | (215 | ) |
| Interest expense                         |   |                             | -      |   |                           |   | (199 | ) |   |   | - |   |   |   | (492 | ) |
| Segment loss                             |   | $                                | -      |   |                           | $      | (424 | ) |   | $ | - |   |   | $ | (919 | ) |
|                                     |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Capital expenditures                     |   | $                                | -      |   |                           | $      | - |   |   | $ | - |   |   | $ | - |   |
| Segment assets                           |   |                             |   |   |                           |   |   |   |   | $ | - |   |   | $ | - |   |

----

Index

ITEM 2

| ●   | economic factors, particularly in the market areas in which the Company operates; |
|---------------------|-----------------------------------------------------------------------------------|

| ●   | the financial and securities markets and the availability of and costs associated with sources of liquidity; |
|---------------------|--------------------------------------------------------------------------------------------------------------|

| ●   | competitive products and pricing; |
|---------------------|-----------------------------------|

| ●   | the ability to sell assets to maintain liquidity; |
|---------------------|---------------------------------------------------|

| ●   | fiscal and monetary policies of the U.S. Government; |
|---------------------|------------------------------------------------------|

| ●   | changes in prevailing interest rates; |
|---------------------|---------------------------------------|

| ●   | changes in currency exchange rates; |
|---------------------|-------------------------------------|

| ●   | acquisitions and the integration of acquired businesses; |
|---------------------|----------------------------------------------------------|

| ●   | performance of retail/consumer markets, including consumer preferences and concerns about diet; |
|---------------------|-------------------------------------------------------------------------------------------------|

| ●   | effective expansion of the Company’s restaurants in new and existing markets; |
|---------------------|-------------------------------------------------------------------------------------|

| ●   | profitability and success of franchisee restaurants; |
|---------------------|------------------------------------------------------|

| ●   | availability of quality real estate locations for restaurant expansion; |
|---------------------|-------------------------------------------------------------------------|

| ●   | credit risk management; and |
|---------------------|-----------------------------|

| ●   | asset/liability management |
|---------------------|----------------------------|

----

Index

|   | (i)     | Restaurant operations – conducted through our Fatburger subsidiary, |
|--------|-----------------------------|---------------------------------------------------------------------------|

|   | (ii)    | Manufacturing operations – conducted through our wholly owned subsidiary, DAC International (“DAC”), and |
|--------|------------------------|----------------------------------------------------------------------------------------------------------------------------|

|   | (iii)   | Real estate and financing operations. |
|--------|-------------------|---------------------------------------|

----

Index

|               |   | Three months ended June 30,              |   |   | Six months ended June 30, |   |
|--------------------|--------|-----------------------------------------------|--------|--------|--------------------------------|--------|
|               |   | 2009                                          |   |   | 2008                           |   |   | 2009 |   |   | 2008 |   |
|               |   | (dollars in thousands, except per share data) |   |
| Net loss           |   | $                                             | (1,786 | )      |                           | $      | (3,959 | ) |   | $ | (4,057 | ) |   | $ | (8,293 | ) |
| Net loss per share |   | $                                             | (0.22  | )      |                           | $      | (0.50 | ) |   | $ | (0.51 | ) |   | $ | (1.04 | ) |

|                                                             |   | Three months ended June 30,      |   |   | Six months ended June 30, |   |
|------------------------------------------------------------------|--------|---------------------------------------|--------|--------|--------------------------------|--------|
|                                                             |   | 2009                                  |   |   | 2008                           |   |   | 2009 |   |   | 2008 |   |
|                                                             |   | (% to Company-owned restaurant sales) |   |
| Restaurant sales:                                                |   |                                  |   |   |                           |   |   |   |   |   |   |   |
|    Company-owned restaurant sales                 |   |                                  | 100.0  | %      |                           |   | 100.0 | % |   |   | 100.0 | % |   |   | 100.0 | % |
|    Cost of sales – food, paper, merchandise |   |                                  | (24.8  | %)     |                           |   | (26.4 | %) |   |   | (25.1 | %) |   |   | (25.8 | %) |
|    Cost of sales – wages and benefits       |   |                                  | (31.8  | %)     |                           |   | (33.9 | %) |   |   | (31.6 | %) |   |   | (33.9 | %) |
|    Restaurant depreciation and amortization       |   |                                  | (1.2   | %)     |                           |   | (6.1 | %) |   |   | (6.9 | %) |   |   | (6.0 | %) |
|    Operating margin (restaurant sales only)       |   |                                  | 42.2   | %      |                           |   | 33.6 | % |   |   | 36.4 | % |   |   | 34.3 | % |

|                                                 |   | Three months ended June 30, |   |   | Six months ended June 30, |   |
|------------------------------------------------------|--------|----------------------------------|--------|--------|--------------------------------|--------|
|                                                 |   | 2009                             |   |   | 2008                           |   |   | 2009 |   |   | 2008 |   |
|                                                 |   | (% to total revenue)             |   |
| Total restaurant operations:                         |   |                             |   |   |                           |   |   |   |   |   |   |   |
|    Company-owned restaurant sales     |   |                             | 57.9   | %      |                           |   | 92.4 | % |   |   | 86.2 | % |   |   | 92.4 | % |
|    Royalty revenue                    |   |                             | 33.6   | %      |                           |   | 6.9 | % |   |   | 11.7 | % |   |   | 6.6 | % |
|    Franchise fee revenue              |   |                             | 8.5    | %      |                           |   | 0.7 | % |   |   | 2.1 | % |   |   | 1.0 | % |
|    Total revenue                      |   |                             | 100.0  | %      |                           |   | 100.0 | % |   |   | 100.0 | % |   |   | 100.0 | % |
|                                                 |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
|    Cost of sales                      |   |                             | (32.8  | %)     |                           |   | (61.3 | %) |   |   | (48.9 | %) |   |   | (60.8 | %) |
|    General & administrative costs |   |                             | (83.2  | %)     |                           |   | (50.3 | %) |   |   | (55.8 | %) |   |   | (48.8 | %) |
|    Interest expense                   |   |                             | (3.1   | %)     |                           |   | (1.9 | %) |   |   | (2.8 | %) |   |   | (2.1 | %) |
|    Management allocation              |   |                             | (17.3  | %)     |                           |   | (6.1 | %) |   |   | (8.7 | %) |   |   | (6.1 | %) |
|    Minority interest in losses        |   |                             | 6.5    | %      |                           |   | 1.4 | % |   |   | 2.0 | % |   |   | 1.2 | % |
|    Segment loss                       |   |                             | (29.9  | %)     |                           |   | (18.2 | %) |   |   | (14.2 | %) |   |   | (16.6 | %) |

----

Index

|                        |   | Three months ended June 30, |   |   | Six months ended June 30, |   |
|-----------------------------|--------|----------------------------------|--------|--------|--------------------------------|--------|
|                        |   | 2009                             |   |   | 2008                           |   |   | 2009 |   |   | 2008 |   |
|                        |   | (% to total revenue)             |   |
| Manufacturing sales         |   |                             | 100.0  | %      |                           |   | 100.0 | % |   |   | 100.0 | % |   |   | 100.0 | % |
| Manufacturing cost of sales |   |                             | (65.8  | %)     |                           |   | (56.7 | %) |   |   | (65.6 | %) |   |   | (57.8 | %) |
| Engineering and development |   |                             | (10.1  | %)     |                           |   | (9.8 | %) |   |   | (13.3 | %) |   |   | (11.0 | %) |
| Operating margin            |   |                             | 24.1   | %      |                           |   | 33.5 | % |   |   | 21.1 | % |   |   | 31.2 | % |
|                        |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| Compensation expense        |   |                             | (14.3  | %)     |                           |   | (14.0 | %) |   |   | (19.6 | %) |   |   | (18.7 | %) |
| Depreciation expense        |   |                             | (1.3   | %)     |                           |   | (1.2 | %) |   |   | (1.6 | %) |   |   | (1.1 | %) |
| Other operating expense     |   |                             | (9.8   | %)     |                           |   | (12.2 | %) |   |   | (12.4 | %) |   |   | (11.1 | %) |
| Segment income (loss)       |   |                             | (1.3   | %)     |                           |   | 6.1 | % |   |   | (12.5 | %) |   |   | 0.3 | % |

----

Index

|                               |   | Three months ended June 30, |   |   | Six months ended June 30, |   |
|------------------------------------|--------|----------------------------------|--------|--------|--------------------------------|--------|
|                               |   | 2009                             |   |   | 2008                           |   |   | 2009 |   |   | 2008 |   |
|                               |   | (dollars in thousands)           |   |
| Compensation and employee benefits |   | $                                | 371    |   |                           | $      | 1,306 |   |   | $ | 1,117 |   |   | $ | 4,036 |   |
| Professional fees                  |   |                             | 352    |   |                           |   | 296 |   |   |   | 363 |   |   |   | 744 |   |
| Travel and entertainment           |   |                             | 38     |   |                           |   | 499 |   |   |   | 128 |   |   |   | 848 |   |
| Insurance                          |   |                             | 30     |   |                           |   | 42 |   |   |   | 108 |   |   |   | 138 |   |
| Directors fees                     |   |                             | 78     |   |                           |   | 94 |   |   |   | 157 |   |   |   | 189 |   |
| Occupancy costs                    |   |                             | 20     |   |                           |   | 32 |   |   |   | 57 |   |   |   | 70 |   |
| Other expenses                     |   |                             | 677    |   |                           |   | 152 |   |   |   | 1,139 |   |   |   | 289 |   |
| Total operating expenses           |   | $                                | 1,566  |   |                           | $      | 2,421 |   |   | $ | 3,069 |   |   | $ | 6,314 |   |

|                                                |   | Three months ended June 30, |   |   | Six months ended June 30, |   |
|-----------------------------------------------------|--------|----------------------------------|--------|--------|--------------------------------|--------|
|                                                |   | 2009                             |   |   | 2008                           |   |   | 2009 |   |   | 2008 |   |
|                                                |   | (dollars in thousands)           |   |
| Operating revenue                                   |   | $                                | -      |   |                           | $      | - |   |   | $ | - |   |   | $ | 610 |   |
| Operating expenses                                  |   |                             | -      |   |                           |   | - |   |   |   | - |   |   |   | (240 | ) |
| Depreciation and amortization                       |   |                             | -      |   |                           |   | - |   |   |   | - |   |   |   | (39 | ) |
| Operating margin                                    |   |                             | -      |   |                           |   | - |   |   |   | - |   |   |   | 331 |   |
|                                                |   |                             |   |   |                           |   |   |   |   |   |   |   |   |   |   |   |
| General and administrative expenses                 |   |                             | -      |   |                           |   | - |   |   |   | - |   |   |   | (7 | ) |
| Interest expense                                    |   |                             | -      |   |                           |   | - |   |   |   | - |   |   |   | (157 | ) |
| Other non-operating income (expense)                |   |                             | -      |   |                           |   | - |   |   |   | (13 | ) |   |   | 8 |   |
| Gain on sale of discontinued real estate operations |   |                             | -      |   |                           |   | - |   |   |   | - |   |   |   | 4,217 |   |
| Income from discontinued real estate operations     |   | $                                | -      |   |                           | $      | - |   |   | $ | (13 | ) |   | $ | 4,392 |   |

----

Index

|                          |   | Three months ended June 30, |   |   | Six months ended June 30, |   |
|-------------------------------|--------|----------------------------------|--------|--------|--------------------------------|--------|
|                          |   | 2009                             |   |   | 2008                           |   |   | 2009 |   |   | 2008 |   |
|                          |   | (dollars in thousands)           |   |
| Software sales                |   | $                                | -      |   |                           | $      | 26 |   |   | $ | - |   |   | $ | 128 |   |
| Engineering and development   |   |                             | -      |   |                           |   | (78 | ) |   |   | - |   |   |   | (158 | ) |
| Compensation expense          |   |                             | -      |   |                           |   | (43 | ) |   |   | - |   |   |   | (92 | ) |
| Depreciation and amortization |   |                             | -      |   |                           |   | (73 | ) |   |   | - |   |   |   | (182 | ) |
| Other operating expense       |   |                             | -      |   |                           |   | (57 | ) |   |   | - |   |   |   | (123 | ) |
| Interest expense              |   |                             | -      |   |                           |   | (199 | ) |   |   | - |   |   |   | (492 | ) |
| Segment loss                  |   | $                                | -      |   |                           | $      | (424 | ) |   | $ | - |   |   | $ | (919 | ) |

|                                       |   | June 30, 2009     |    |   | December 31, 2008 |   |
|--------------------------------------------|--------|------------------------|---------|--------|------------------------|--------|
|                                       |   | (dollars in thousands) |    |
| Total assets                               |   | $                      | 22,284  |   |                   | $      | 27,573 |   |
| Total liabilities                          |   | $                      | 35,006  |   |                   | $      | 36,315 |   |
| Total minority interests                   |   | $                      | 177     |   |                   | $      | 365 |   |
| Total stockholders’ equity (deficit) |   | $                      | (12,899 | )      |                   | $      | (9,107 | ) |

|   | ● | $0.6 million of cash provided by operations – comprised primarily of our net loss from continuing operations of $4.0 million adjusted for net non-cash items of $4.6 million; |
|--------|---------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | $1.6 million of cash used in investing activities, including investment in Debtor In Possession Subsidiaries of $1.2 million and investment in property, plant and equipment of $0.2 million; and |
|--------|---------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | ● | $0.8 million of cash provided in financing activities, including proceeds from borrowings of $1.4 million, net of payments on borrowings of $0.4 million and payments on capital leases of $0.2 million. |
|--------|---------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                    |   | June 30, 2009     |   |   | December 31, 2008 |   |
|-----------------------------------------|--------|------------------------|--------|--------|------------------------|--------|
|                                    |   | (dollars in thousands) |   |
| Goodwill – Fatburger              |   | $                      | 6,563  |   |                   | $      | 6,563 |   |
| Goodwill – DAC International      |   |                   | 1,465  |   |                   |   | 1,465 |   |
| Total goodwill                          |   | $                      | 8,028  |   |                   | $      | 8,028 |   |
|                                    |   |                   |   |   |                   |   |   |   |
| Net intangible assets – Fatburger |   | $                      | 2,629  |   |                   | $      | 4,068 |   |
| Total net intangible assets             |   | $                      | 2,629  |   |                   | $      | 4,068 |   |

----

Index

|                     |   | June 30, 2009     |   |   | December 31, 2008 |   |
|--------------------------|--------|------------------------|--------|--------|------------------------|--------|
|                     |   | (dollars in thousands) |   |
| Trade receivables        |   | $                      | 1,759  |   |                   | $      | 2,712 |   |
|                     |   |                   |   |   |                   |   |   |   |
| Inventories              |   | $                      | 1,996  |   |                   | $      | 2,964 |   |
|                     |   |                   |   |   |                   |   |   |   |
| Other current assets:    |   |                   |   |   |                   |   |   |   |
| Prepaid expenses         |   | $                      | 144    |   |                   | $      | 294 |   |
|                     |   |                   |   |   |                   |   |   |   |
|                     |   |                   |   |   |                   |   |   |   |
| Other assets:            |   |                   |   |   |                   |   |   |   |
| Security deposits        |   | $                      | 371    |   |                   | $      | 471 |   |
| Capitalized finance fees |   |                   | -      |   |                   |   | 202 |   |
| Other                    |   |                   | 14     |   |                   |   | 139 |   |
| Total other assets       |   | $                      | 385    |   |                   | $      | 812 |   |

|                                           |   | June 30, 2009     |   |   | December 31, 2008 |   |
|------------------------------------------------|--------|------------------------|--------|--------|------------------------|--------|
|                                           |   | (dollars in thousands) |   |
| Accounts payable                               |   | $                      | 5,066  |   |                   | $      | 8,439 |   |
| Sales deposits                                 |   |                   | 835    |   |                   |   | 1,228 |   |
| Accrued wages, bonus and commissions           |   |                   | 370    |   |                   |   | 693 |   |
| Other                                          |   |                   | 7,756  |   |                   |   | 7,126 |   |
| Total accounts payable and accrued liabilities |   | $                      | 14,027 |   |                   | $      | 17,486 |   |

----

Index

|   | ●  | $8.6 million in notes payable and other debt of Fatburger, secured by the assets of Fatburger; |
|--------|---------------|------------------------------------------------------------------------------------------------|

|   | ●  | $1.7 million in capital leases maturing on or before 2010 which are secured by an aircraft and various restaurant assets; |
|--------|---------------|---------------------------------------------------------------------------------------------------------------------------|

|   | ●  | $6.5 million of notes payable secured by various assets of the Company; and |
|--------|---------------|-----------------------------------------------------------------------------|

|   | ●  | $0.8 million of short-term borrowings secured by the assets of DAC International. |
|--------|---------------|-----------------------------------------------------------------------------------|

----

Index

ITEM 3

ITEM 4

----

Index

PART II

ITEM 1.

ITEM 1A. 

ITEM 3.

----

Index

ITEM 6

| 11.1  | Computation of Loss Per Common Share. |
|------------|---------------------------------------|

| 31.1 | Certification of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|------|------------------------------------------------------------------------------------------------------|

| 31.2 | Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|------|------------------------------------------------------------------------------------------------------|

| 32.1 | Certification of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

| 32.2 | Certification of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

----

Index

|   | SIGNATURES |
|--------|------------|

|   | FOG CUTTER CAPITAL GROUP INC. |
|--------|-------------------------------|

|   | By:  /s/ Andrew A. Wiederhorn           |   |
|--------|---------------------------------------------------|--------|
|   | Andrew A. Wiederhorn                              |   |
|   | Chief Executive Officer                           |   |
|   |                                              |   |
|   | By:  /s/ R. Scott Stevenson             |   |
|   | R. Scott Stevenson                                |   |
|   | Senior Vice President and Chief Financial Officer |   |

----

Index

| 11.1 | Computation of Loss Per Common Share. |
|------|---------------------------------------|

| 31.1 | Certification of Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|------|------------------------------------------------------------------------------------------------------|

| 31.2 | Certification of Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|------|------------------------------------------------------------------------------------------------------|

| 32.1 | Certification of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

| 32.2 | Certification of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|------|---------------------------------------------------------------------------------------------------------------------------------------------------------|

----