----

----

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

| £ | 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.) |

| Large accelerated filer £                                             |   | Accelerated filer £    |
|----------------------------------------------------------------------------|--------|-----------------------------|
| Non-accelerated filer £ (do not check if a smaller reporting company) |   | Smaller reporting company R |

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

----

----

----

FOG 

|                          |   |                                                                                  |   | 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 4.                       |   | 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

ITEM 

| FOG CUTTER CAPITAL GROUP INC.CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION(dollars in thousands, except share data)                                                                                                           |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                           |   | September 30, 2009(unaudited) |   |   | December 31,2008 |   |
| Assets                                                                                                                                                                                                                         |
| Current Assets:                                                                                                                                                                                                                |   |   |   |   |   |   |
| Cash and cash equivalents                                                                                                                                                                                                      |   | $ | 374 |   |   | $ | 390 |   |
| Accounts receivable                                                                                                                                                                                                            |   |   | 1,742 |   |   |   | 2,712 |   |
| Notes receivable, current portion                                                                                                                                                                                              |   |   | 33 |   |   |   | 18 |   |
| Inventories                                                                                                                                                                                                                    |   |   | 1,989 |   |   |   | 2,964 |   |
| Other current assets                                                                                                                                                                                                           |   |   | 183 |   |   |   | 294 |   |
| Total current assets                                                                                                                                                                                                           |   |   | 4,321 |   |   |   | 6,378 |   |
|                                                                                                                                                                                                                           |   |   |   |   |   |   |   |   |
| Notes receivable                                                                                                                                                                                                               |   |   | - |   |   |   | 34 |   |
| Property, plant and equipment, net                                                                                                                                                                                             |   |   | 3,089 |   |   |   | 8,253 |   |
| Intangible assets, net                                                                                                                                                                                                         |   |   | 2,592 |   |   |   | 4,068 |   |
| Goodwill                                                                                                                                                                                                                       |   |   | 8,028 |   |   |   | 8,028 |   |
| Investment in Debtor in Possession Subsidiaries                                                                                                                                                                                |   |   | 3,969 |   |   |   | - |   |
| Other assets                                                                                                                                                                                                                   |   |   | 335 |   |   |   | 812 |   |
| Total assets                                                                                                                                                                                                                   |   | $ | 22,334 |   |   | $ | 27,573 |   |
|                                                                                                                                                                                                                           |   |   |   |   |   |   |   |   |
| Liabilities and Stockholders' Equity (Deficit)                                                                                                                                                                                 |   |   |   |   |   |   |   |   |
| Liabilities:                                                                                                                                                                                                                   |   |   |   |   |   |   |   |   |
| Accounts payable and accrued liabilities                                                                                                                                                                                       |   | $ | 13,288 |   |   | $ | 17,486 |   |
| Borrowings and notes payable, current portion                                                                                                                                                                                  |   |   | 17,406 |   |   |   | 14,330 |   |
| Obligations under capital leases, current portion                                                                                                                                                                              |   |   | 1,605 |   |   |   | 1,927 |   |
| Total current liabilities                                                                                                                                                                                                      |   |   | 32,299 |   |   |   | 33,743 |   |
|                                                                                                                                                                                                                           |   |   |   |   |   |   |   |   |
| Deferred income                                                                                                                                                                                                                |   |   | 3,472 |   |   |   | 2,572 |   |
| Total liabilities                                                                                                                                                                                                              |   |   | 35,771 |   |   |   | 36,315 |   |
|                                                                                                                                                                                                                           |   |   |   |   |   |   |   |   |
| Commitments and contingencies                                                                                                                                                                                                  |   |   |   |   |   |   |   |   |
| Minority interests in consolidated subsidiaries                                                                                                                                                                                |   |   | 24 |   |   |   | 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 September 30, 2009 and December 31, 2008;  7,954,928 shares outstanding as of September 30, 2009 and December 31, 2008 |   |   | 172,477 |   |   |   | 172,102 |   |
| Accumulated deficit                                                                                                                                                                                                            |   |   | (173,927 | ) |   |   | (169,198 | ) |
| Treasury stock, 3,802,145 common shares as of September 30, 2009 and December 31, 2008, at cost                                                                                                                                |   |   | (12,011 | ) |   |   | (12,011 | ) |
| Total stockholders' equity (deficit)                                                                                                                                                                                           |   |   | (13,461 | ) |   |   | (9,107 | ) |
| Total liabilities and stockholders' equity (deficit)                                                                                                                                                                           |   | $ | 22,334 |   |   | $ | 27,573 |   |

----

Index

| FOG CUTTER CAPITAL GROUP INC.CONSOLIDATED STATEMENTS OF OPERATIONS(Unaudited)(dollars in thousands, except share data) |   |
|------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                   |   | Quarter Ended |   |   | Nine Months Ended |   |
|                                                                                                                   |   | September 30, |   |   | September 30, |   |
|                                                                                                                   |   | 2009 |   |   | 2008 |   |   | 2009 |   |   | 2008 |   |
| Revenue:                                                                                                               |   |   |   |   |   |   |   |   |   |   |   |   |
| Restaurant and manufacturing sales                                                                                     |   | $ | 2,748 |   |   | $ | 11,292 |   |   | $ | 14,926 |   |   | $ | 32,473 |   |
| Restaurant franchise and royalty fees                                                                                  |   |   | 655 |   |   |   | 1,309 |   |   |   | 1,957 |   |   |   | 2,613 |   |
| Total revenue                                                                                                          |   |   | 3,403 |   |   |   | 12,601 |   |   |   | 16,883 |   |   |   | 35,086 |   |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Operating costs and expenses:                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Restaurant and manufacturing cost of sales                                                                             |   |   | 1,455 |   |   |   | 6,736 |   |   |   | 8,720 |   |   |   | 19,281 |   |
| Engineering and development                                                                                            |   |   | 229 |   |   |   | 285 |   |   |   | 764 |   |   |   | 865 |   |
| Depreciation and amortization                                                                                          |   |   | 121 |   |   |   | 502 |   |   |   | 688 |   |   |   | 1,508 |   |
| Total operating costs and expenses                                                                                     |   |   | 1,805 |   |   |   | 7,523 |   |   |   | 10,172 |   |   |   | 21,654 |   |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| General and administrative expenses:                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Compensation and employee benefits                                                                                     |   |   | 1,119 |   |   |   | 2,520 |   |   |   | 4,086 |   |   |   | 9,067 |   |
| Professional fees                                                                                                      |   |   | 132 |   |   |   | 668 |   |   |   | 957 |   |   |   | 2,378 |   |
| Other                                                                                                                  |   |   | 283 |   |   |   | 3,664 |   |   |   | 4,686 |   |   |   | 11,719 |   |
| Total general and administrative expenses                                                                              |   |   | 1,534 |   |   |   | 6,852 |   |   |   | 9,729 |   |   |   | 23,164 |   |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-operating income (expense):                                                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest income                                                                                                        |   |   | - |   |   |   | 30 |   |   |   | 16 |   |   |   | 101 |   |
| Interest expense                                                                                                       |   |   | (498 | ) |   |   | (646 | ) |   |   | (1,770 | ) |   |   | (1,505 | ) |
| Other expense, net                                                                                                     |   |   | (357 | ) |   |   | (1,760 | ) |   |   | (247 | ) |   |   | (1,780 | ) |
| Total non-operating income (expense)                                                                                   |   |   | (855 | ) |   |   | (2,376 | ) |   |   | (2,001 | ) |   |   | (3,184 | ) |
| Loss before provision for income taxes, minority interests, and equity in income of equity investees                   |   |   | (791 | ) |   |   | (4,150 | ) |   |   | (5,019 | ) |   |   | (12,916 | ) |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Minority interest in (earnings) losses                                                                                 |   |   | 119 |   |   |   | (214 | ) |   |   | 306 |   |   |   | (10 | ) |
| Equity in income of equity investees                                                                                   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 218 |   |
| Income tax (expense) benefit                                                                                           |   |   | - |   |   |   | - |   |   |   | (3 | ) |   |   | 52 |   |
| Loss from continuing operations                                                                                        |   |   | (672 | ) |   |   | (4,364 | ) |   |   | (4,716 | ) |   |   | (12,656 | ) |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Income (loss) from discontinued operations (including gain on sale of $4,217 in 2008)                                  |   |   | - |   |   |   | - |   |   |   | (13 | ) |   |   | 3,473 |   |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net loss                                                                                                               |   | $ | (672 | ) |   | $ | (4,364 | ) |   | $ | (4,729 | ) |   | $ | (9,183 | ) |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Basic loss per share from continuing operations                                                                        |   | $ | (0.08 | ) |   | $ | (0.55 | ) |   | $ | (0.59 | ) |   | $ | (1.59 | ) |
| Basic earnings per share from discontinued operations                                                                  |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | 0.44 |   |
| Basic loss per share                                                                                                   |   | $ | (0.08 | ) |   | $ | (0.55 | ) |   | $ | (0.59 | ) |   | $ | (1.15 | ) |
| Basic weighted average shares outstanding                                                                              |   |   | 7,954,928 |   |   |   | 7,954,928 |   |   |   | 7,954,928 |   |   |   | 7,954,928 |   |
|                                                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Dividends declared per share                                                                                           |   | $ | - |   |   | $ | - |   |   | $ | - |   |   | $ | - |   |

----

Index

| FOG CUTTER CAPITAL GROUP INC.CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)(Unaudited)(dollars in thousands, except share data) |   |
|-------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                      |   | Common Stock |   |   | Treasury Stock |   |   | Accumulated Deficit |   |   |   |   |
|                                                                                                                                      |   | Shares (1) |   |   | Amount |   |   | Shares |   |   | Amount |   |   | 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                                                                                                                                  |   |   | - |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (4,729 | ) |   |   | (4,729 | ) |
| Stock options expensed in net loss                                                                                                        |   |   | - |   |   |   | 375 |   |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 375 |   |
| Balance at September 30, 2009                                                                                                             |   |   | 7,954,928 |   |   | $ | 172,477 |   |   |   | 3,802,145 |   |   | $ | (12,011 | ) |   | $ | (173,927 | ) |   | $ | (13,461 | ) |
|                                                                                                                                      |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| (1)     Issued and outstanding                                                                                   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |

----

Index

| FOG CUTTER CAPITAL GROUP INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)(dollars in thousands) |   |
|-----------------------------------------------------------------------------------------------------|--------|
|                                                                                                |   | Quarter Ended |   |   | Nine Months Ended |   |
|                                                                                                |   | September 30, |   |   | September 30, |   |
| Cash flows from operating activities:                                                               |   | 2009 |   |   | 2008 |   |   | 2009 |   |   | 2008 |   |
| Net loss                                                                                            |   | $ | (672 | ) |   | $ | (4,364 | ) |   | $ | (4,729 | ) |   | $ | (9,183 | ) |
| Loss (income) from discontinued operations                                                          |   |   | - |   |   |   | - |   |   |   | 13 |   |   |   | (3,473 | ) |
| Loss from continuing operations                                                                     |   |   | (672 | ) |   |   | (4,364 | ) |   |   | (4,716 | ) |   |   | (12,656 | ) |
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities:           |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Equity in income of equity investees                                                                |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (218 | ) |
| Depreciation and amortization                                                                       |   |   | 189 |   |   |   | 617 |   |   |   | 916 |   |   |   | 1,845 |   |
| Foreign currency loss                                                                               |   |   | - |   |   |   | 696 |   |   |   | - |   |   |   | 160 |   |
| Loss on sale of real estate                                                                         |   |   | - |   |   |   | 563 |   |   |   | - |   |   |   | 563 |   |
| Share based compensation                                                                            |   |   | 111 |   |   |   | 269 |   |   |   | 376 |   |   |   | 895 |   |
| Market value impairment reserve                                                                     |   |   | - |   |   |   | 37 |   |   |   | - |   |   |   | 636 |   |
| Loss on disposal of property and equipment                                                          |   |   | 76 |   |   |   | 735 |   |   |   | 182 |   |   |   | 735 |   |
| Other                                                                                               |   |   | (422 | ) |   |   | 259 |   |   |   | (108 | ) |   |   | 130 |   |
| Change in:                                                                                          |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Other assets                                                                                        |   |   | 31 |   |   |   | (563 | ) |   |   | 1,666 |   |   |   | (1,871 | ) |
| Deferred income                                                                                     |   |   | 84 |   |   |   | (645 | ) |   |   | 905 |   |   |   | (626 | ) |
| Accounts payable and accrued liabilities                                                            |   |   | 658 |   |   |   | 383 |   |   |   | 1,437 |   |   |   | 2,365 |   |
| Net cash provided by (used in) operating activities                                                 |   |   | 55 |   |   |   | (2,013 | ) |   |   | 658 |   |   |   | (8,042 | ) |
|                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash flows from investing activities:                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Principal repayments on notes receivable, including loans to senior executives                      |   |   | 4 |   |   |   | 523 |   |   |   | 18 |   |   |   | 1,728 |   |
| Investment in debtor in possession subsidiaries                                                     |   |   | - |   |   |   | - |   |   |   | (1,219 | ) |   |   | - |   |
| Investments in property, plant, and equipment                                                       |   |   | (182 | ) |   |   | (306 | ) |   |   | (401 | ) |   |   | (1,320 | ) |
| Proceeds on sale of real estate                                                                     |   |   | - |   |   |   | 4,522 |   |   |   | - |   |   |   | 4,522 |   |
| Other                                                                                               |   |   | - |   |   |   | (1 | ) |   |   | (179 | ) |   |   | 190 |   |
| Net cash provided by (used in) investing activities                                                 |   |   | (178 | ) |   |   | 4,738 |   |   |   | (1,781 | ) |   |   | 5,120 |   |
|                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash flows from financing activities:                                                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Proceeds from borrowings                                                                            |   |   | 437 |   |   |   | 1,237 |   |   |   | 1,837 |   |   |   | 3,987 |   |
| Repayments on borrowings                                                                            |   |   | (40 | ) |   |   | (3,495 | ) |   |   | (394 | ) |   |   | (8,403 | ) |
| Repayments under capital leases                                                                     |   |   | (106 | ) |   |   | (55 | ) |   |   | (323 | ) |   |   | (67 | ) |
| Investments by minority interests, net                                                              |   |   | - |   |   |   | 11 |   |   |   | - |   |   |   | 361 |   |
| Net cash provided by (used in) financing activities                                                 |   |   | 291 |   |   |   | (2,302 | ) |   |   | 1,120 |   |   |   | (4,122 | ) |
|                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Effect of exchange rate change on cash                                                              |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (21 | ) |
| Net change in cash and cash equivalents from continuing operations                                  |   |   | 168 |   |   |   | 423 |   |   |   | (3 | ) |   |   | (7,065 | ) |
|                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net change in cash and cash equivalents from discontinued operations:                               |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net cash used in operating activities                                                               |   |   | - |   |   |   | - |   |   |   | (13 | ) |   |   | (955 | ) |
| Net cash provided by investing activities                                                           |   |   | - |   |   |   | - |   |   |   | - |   |   |   | 7,879 |   |
| Net cash used in financing activities                                                               |   |   | - |   |   |   | - |   |   |   | - |   |   |   | (79 | ) |
| Net change in cash and cash equivalents                                                             |   |   | 168 |   |   |   | 423 |   |   |   | (16 | ) |   |   | (220 | ) |
| Cash and cash equivalents at beginning of period                                                    |   |   | 206 |   |   |   | 488 |   |   |   | 390 |   |   |   | 1,131 |   |
| Cash and cash equivalents at end of period                                                          |   | $ | 374 |   |   | $ | 911 |   |   | $ | 374 |   |   | $ | 911 |   |
|                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Supplemental disclosures of cash flow information:                                                  |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Cash paid for interest                                                                              |   | $ | 178 |   |   | $ | 675 |   |   | $ | 434 |   |   | $ | 2,099 |   |
|                                                                                                |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-cash financing and investing activities:                                                        |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net assets capitalized to investment in debtor in possession subsidiaries                           |   | $ | - |   |   | $ | - |   |   | $ | 2,750 |   |   | $ | - |   |

----

Index

NOTES 

----

Index

----

Index

|                              |   | Shares |      |   | Weighted Average ExercisePrice |   |
|-----------------------------------|--------|--------|-----------|--------|--------------------------------|--------|
| Outstanding at January 1, 2009    |   |   | 2,980,833 |   |                           | $      | 1.51 |   |
| Granted                           |   |   | 13,500    |   |                           | $      | 0.16 |   |
| Exercised                         |   |   | -         |   |                           | $      | - |   |
| Cancelled/forfeited               |   |   | -         |   |                           | $      | - |   |
| Outstanding at September 30, 2009 |   |   | 2,994,333 |   |                           | $      | 1.51 |   |

----

Index

| Range ofExercise Prices |              |   | Shares |      |      | Weighted AverageRemainingLife |   |   | Weighted AverageExercisePrice |   |
|-------------------------|-------------------|--------|--------|-----------|-----------|-------------------------------|--------|--------|-------------------------------|--------|
| $                       | 0.01 – 2.00 |   |   |      | 2,493,500 |                          |   |   | 7.3                           |   |   | $ | 1.31 |   |
| $                       | 2.01 – 4.00 |   |   |      | 500,833   |                          |   |   | 7.7                           |   |   | $ | 2.47 |   |
| $                       | 4.01 – 8.00 |   |   |      | -         |                          |   |   | -                             |   |   | $ | - |   |
| Total                   |              |   |   | 2,994,333 |      |                          |   | 7.3    |                          |   | $ | 1.51 |   |

|              |   | September 30, 2009     |   |   | December 31, 2008 |   |
|-------------------|--------|------------------------|--------|--------|-------------------|--------|
|              |   | (dollars in thousands) |   |
|              |   |                   |   |   |              |   |
| Raw materials     |   | $                      | 1,191  |   |              | $      | 2,097 |   |
| Work in progress  |   |                   | 392    |   |              |   | 366 |   |
| Finished goods    |   |                   | 406    |   |              |   | 501 |   |
| Total inventories |   | $                      | 1,989  |   |              | $      | 2,964 |   |

|                                       |   | September 30, 2009     |   |   | December 31, 2008 |   |
|--------------------------------------------|--------|------------------------|--------|--------|-------------------|--------|
|                                       |   | (dollars in thousands) |   |
| Accounts payable                           |   | $                      | 2,574  |   |              | $      | 8,439 |   |
| Sales deposits                             |   |                   | 774    |   |              |   | 1,228 |   |
| Accrued wages, bonus and commissions       |   |                   | 733    |   |              |   | 693 |   |
| Other                                      |   |                   | 9,207  |   |              |   | 7,126 |   |
| Total accounts payable accrued liabilities |   | $                      | 13,288 |   |              | $      | 17,486 |   |

----

Index

|                                       |   | Three months ended September 30, |   |   | Nine months ended September 30, |   |
|--------------------------------------------|--------|----------------------------------|--------|--------|---------------------------------|--------|
|                                       |   | 2009                             |   |   | 2008                            |   |   | 2009 |   |   | 2008 |   |
|                                       |   | (dollars in thousands)           |   |
|                                       |   |                             |   |   |                            |   |   |   |   |   |   |   |
| Company-owned restaurant sales             |   | $                                | 946    |   |                            | $      | 7,755 |   |   | $ | 9,091 |   |   | $ | 23,643 |   |
| Royalty revenue                            |   |                             | 578    |   |                            |   | 562 |   |   |   | 1,681 |   |   |   | 1,697 |   |
| Franchise fee revenue                      |   |                             | 76     |   |                            |   | 748 |   |   |   | 275 |   |   |   | 916 |   |
| Total revenue                              |   |                             | 1,600  |   |                            |   | 9,065 |   |   |   | 11,047 |   |   |   | 26,256 |   |
|                                       |   |                             |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Cost of sales                              |   |                             | (423   | )      |                            |   | (4,577 | ) |   |   | (5,042 | ) |   |   | (14,060 | ) |
| Depreciation and amortization              |   |                             | (104   | )      |                            |   | (527 | ) |   |   | (668 | ) |   |   | (1,601 | ) |
| Other general & administrative costs   |   |                             | (602   | )      |                            |   | (3,889 | ) |   |   | (5,201 | ) |   |   | (12,162 | ) |
| Interest expense                           |   |                             | (726   | )      |                            |   | (166 | ) |   |   | (989 | ) |   |   | (524 | ) |
| Loss on disposal of property and equipment |   |                             | (76    | )      |                            |   | (735 | ) |   |   | (182 | ) |   |   | (735 | ) |
| Other non-operating expense                |   |                             | (191   | )      |                            |   | - |   |   |   | (191 | ) |   |   | - |   |
| Management allocation                      |   |                             | (295   | )      |                            |   | (527 | ) |   |   | (1,117 | ) |   |   | (1,579 | ) |
| Market value impairment reserves           |   |                             | -      |   |                            |   | (37 | ) |   |   | - |   |   |   | (37 | ) |
| Minority interest in (earnings) losses     |   |                             | 118    |   |                            |   | (214 | ) |   |   | 305 |   |   |   | (10 | ) |
| Segment loss                               |   | $                                | (699   | )      |                            | $      | (1,607 | ) |   | $ | (2,038 | ) |   | $ | (4,452 | ) |
|                                       |   |                             |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Capital expenditures                       |   | $                                | -      |   |                            | $      | 371 |   |   | $ | 84 |   |   | $ | 639 |   |
| Segment assets                             |   |                             |   |   |                            |   |   |   |   | $ | 15,262 |   |   | $ | 20,471 |   |
| Minority interests                         |   |                             |   |   |                            |   |   |   |   | $ | 24 |   |   | $ | 671 |   |

|                                     |   | Three months ended September 30, |      |   | Nine months ended September 30, |   |
|------------------------------------------|--------|----------------------------------|-----------|--------|---------------------------------|--------|
|                                     |   | 2009                             |      |   | 2008                            |   |   | 2009 |   |   | 2008 |   |
|                                     |   | (dollars in thousands)           |      |
|                                     |   |                             |      |   |                            |   |   |   |   |   |   |   |
| Manufacturing sales                      |   | $                                | 1,803     |   |                            | $      | 3,536 |   |   | $ | 5,836 |   |   | $ | 8,831 |   |
| Cost of sales                            |   |                             | (1,032    | )      |                            |   | (2,159 | ) |   |   | (3,678 | ) |   |   | (5,221 | ) |
| Engineering and development              |   |                             | (229      | )      |                            |   | (285 | ) |   |   | (764 | ) |   |   | (865 | ) |
| Depreciation and amortization            |   |                             | (36       | )      |                            |   | (42 | ) |   |   | (103 | ) |   |   | (100 | ) |
| Other general & administrative costs |   |                             | (577      | )      |                            |   | (707 | ) |   |   | (1,840 | ) |   |   | (2,293 | ) |
| Interest expense                         |   |                             | (9        | )      |                            |   | (12 | ) |   |   | (41 | ) |   |   | (33 | ) |
| Other non-operating income (expense)     |   |                             | (1        | )      |                            |   | 259 |   |   |   | 4 |   |   |   | 285 |   |
| Segment income (loss)                    |   | $                                |  (81 | )      |                            | $      | 590 |   |   | $ | (586 | ) |   | $ | 604 |   |
|                                     |   |                             |      |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Capital expenditures                     |   | $                                | 114       |   |                            | $      | (40 | ) |   | $ | 280 |   |   | $ | 381 |   |
| Segment assets                           |   |                             |      |   |                            |   |   |   |   | $ | 5,692 |   |   | $ | 7,289 |   |

|                                     |   | Three months ended September 30, |   |   | Nine months ended September 30, |   |
|------------------------------------------|--------|----------------------------------|--------|--------|---------------------------------|--------|
|                                     |   | 2009                             |   |   | 2008                            |   |   | 2009 |   |   | 2008 |   |
|                                     |   | (dollars in thousands)           |   |
|                                     |   |                             |   |   |                            |   |   |   |   |   |   |   |
| Rental income                            |   | $                                | -      |   |                            | $      | - |   |   | $ | - |   |   | $ | - |   |
| Operating expenses                       |   |                             | -      |   |                            |   | - |   |   |   | - |   |   |   | - |   |
| Depreciation and amortization            |   |                             | -      |   |                            |   | - |   |   |   | - |   |   |   | - |   |
| Other general & administrative costs |   |                             | -      |   |                            |   | (1 | ) |   |   | - |   |   |   | (14 | ) |
| Interest income                          |   |                             | -      |   |                            |   | 27 |   |   |   | 3 |   |   |   | 90 |   |
| Interest expense                         |   |                             | -      |   |                            |   | (489 | ) |   |   | - |   |   |   | (1,468 | ) |
| Other non-operating expense              |   |                             | -      |   |                            |   | (680 | ) |   |   | - |   |   |   | (121 | ) |
| Loss on sale of real estate              |   |                             | -      |   |                            |   | (563 | ) |   |   | - |   |   |   | (563 | ) |
| Market value impairment reserves         |   |                             | -      |   |                            |   | - |   |   |   | - |   |   |   | (599 | ) |
| Equity in income of equity investees     |   |                             | -      |   |                            |   | - |   |   |   | - |   |   |   | 218 |   |
| Segment income (loss)                    |   | $                                | -      |   |                            | $      | (1,706 | ) |   | $ | 3 |   |   | $ | (2,457 | ) |
|                                     |   |                             |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Capital expenditures                     |   | $                                | -      |   |                            | $      | - |   |   | $ | - |   |   | $ | - |   |
| Segment assets                           |   |                             |   |   |                            |   |   |   |   | $ | 33 |   |   | $ | 5,353 |   |
| Minority interests                       |   |                             |   |   |                            |   |   |   |   | $ | - |   |   | $ | 106 |   |

----

Index

|                                       |   | Three months ended September 30, |   |   | Nine months ended September 30, |   |
|--------------------------------------------|--------|----------------------------------|--------|--------|---------------------------------|--------|
|                                       |   | 2009                             |   |   | 2008                            |   |   | 2009 |   |   | 2008 |   |
|                                       |   | (dollars in thousands)           |   |
|                                       |   |                             |   |   |                            |   |   |   |   |   |   |   |
| Segment loss from operations               |   | $                                | (780   | )      |                            | $      | (1,988 | ) |   | $ | (2,621 | ) |   | $ | (5,570 | ) |
| Corporate expenses                         |   |                             | (838   | )      |                            |   | (2,189 | ) |   |   | (3,907 | ) |   |   | (8,502 | ) |
| Elimination of intercompany charges        |   |                             | 946    |   |                            |   | 548 |   |   |   | 1,815 |   |   |   | 2,099 |   |
| Income tax (expense) benefit               |   |                             | -      |   |                            |   | - |   |   |   | (3 | ) |   |   | 52 |   |
| Income (loss) from discontinued operations |   |                             | -      |   |                            |   | - |   |   |   | (13 | ) |   |   | 3,473 |   |
| Net loss                                   |   | $                                | (672   | )      |                            | $      | (3,629 | ) |   | $ | (4,729 | ) |   | $ | (8,448 | ) |

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

----

Index

ITEM 

|   | · | 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. |
|--------|-------|---------------------------------------|

|               |   | Three months ended September 30,              |   |   | Nine months ended September 30, |   |
|--------------------|--------|-----------------------------------------------|--------|--------|---------------------------------|--------|
|               |   | 2009                                          |   |   | 2008                            |   |   | 2009 |   |   | 2008 |   |
|               |   | (dollars in thousands, except per share data) |   |
| Net loss           |   | $                                             | (672   | )      |                            | $      | (4,364 | ) |   | $ | (4,716 | ) |   | $ | (12,656 | ) |
| Net loss per share |   | $                                             | (0.08  |   |                            | $      | (0.55 | ) |   | $ | (0.59 | ) |   | $ | (1.59 | ) |

----

Index

|                                           |   | Three months ended September 30,      |   |   | Nine months ended September 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 |   |                                  | (20.3  | %)     |                            |   | (26.9 | %) |   |   | (24.6 | %) |   |   | (26.2 | %) |
| Cost of sales – wages and benefits       |   |                                  | (24.4  | %)     |                            |   | (32.1 | %) |   |   | (30.9 | %) |   |   | (33.3 | %) |
| Restaurant depreciation and amortization       |   |                                  | (11.0  | %)     |                            |   | (6.1 | %) |   |   | (7.3 | %) |   |   | (6.0 | %) |
| Operating margin (restaurant sales only)       |   |                                  | 44.3   | %      |                            |   | 34.9 | % |   |   | 37.2 | % |   |   | 34.5 | % |

|                               |   | Three months ended September 30, |   |   | Nine months ended September 30, |   |
|------------------------------------|--------|----------------------------------|--------|--------|---------------------------------|--------|
|                               |   | 2009                             |   |   | 2008                            |   |   | 2009 |   |   | 2008 |   |
|                               |   | (% to total revenue)             |   |
| Total restaurant operations:       |   |                             |   |   |                            |   |   |   |   |   |   |   |
| Company-owned restaurant sales     |   |                             | 59.1   | %      |                            |   | 85.6 | % |   |   | 82.3 | % |   |   | 90.0 | % |
| Royalty revenue                    |   |                             | 36.1   | %      |                            |   | 6.2 | % |   |   | 15.2 | % |   |   | 6.5 | % |
| Franchise fee revenue              |   |                             | 4.8    | %      |                            |   | 8.2 | % |   |   | 2.5 | % |   |   | 3.5 | % |
| Total revenue                      |   |                             | 100.0  | %      |                            |   | 100.0 | % |   |   | 100.0 | % |   |   | 100.0 | % |
|                               |   |                             |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Cost of sales                      |   |                             | (26.4  | %)     |                            |   | (55.7 | %) |   |   | (45.6 | %) |   |   | (59.0 | %) |
| General & administrative costs |   |                             | (56.1  | %)     |                            |   | (43.5 | %) |   |   | (54.9 | %) |   |   | (47.0 | %) |
| Loss on disposal of fixed assets   |   |                             | (4.8   | %)     |                            |   | (8.1 | %) |   |   | (1.6 | %) |   |   | (2.8 | %) |
| Interest expense                   |   |                             | (45.4  | %)     |                            |   | (1.8 | %) |   |   | (9.0 | %) |   |   | (2.0 | %) |
| Management allocation              |   |                             | (18.4  | %)     |                            |   | (6.2 | %) |   |   | (10.1 | %) |   |   | (6.2 | %) |
| Minority interest in losses        |   |                             | 7.4    | %      |                            |   | (2.4 | %) |   |   | 2.8 | % |   |   | 0.0 | % |
| Segment loss                       |   |                             | (43.7  | %)     |                            |   | (17.7 | %) |   |   | (18.4 | %) |   |   | (17.0 | %) |

----

Index

|                        |   | Three months ended September 30, |   |   | Nine months ended September 30, |   |
|-----------------------------|--------|----------------------------------|--------|--------|---------------------------------|--------|
|                        |   | 2009                             |   |   | 2008                            |   |   | 2009 |   |   | 2008 |   |
|                        |   | (% to total revenue)             |   |
| Manufacturing sales         |   |                             | 100.0  | %      |                            |   | 100.0 | % |   |   | 100.0 | % |   |   | 100.0 | % |
| Manufacturing cost of sales |   |                             | (57.2  | %)     |                            |   | (61.0 | %) |   |   | (63.0 | %) |   |   | (59.1 | %) |
| Engineering and development |   |                             | (12.7  | %)     |                            |   | (8.1 | %) |   |   | (13.1 | %) |   |   | (9.8 | %) |
| Operating margin            |   |                             | 30.1   | %      |                            |   | 30.9 | % |   |   | 23.9 | % |   |   | 31.1 | % |
|                        |   |                             |   |   |                            |   |   |   |   |   |   |   |   |   |   |   |
| Compensation expense        |   |                             | (21.2  | %)     |                            |   | (12.5 | %) |   |   | (20.1 | %) |   |   | (16.2 | %) |
| Depreciation expense        |   |                             | (2.0   | %)     |                            |   | (1.2 | %) |   |   | (1.7 | %) |   |   | (1.1 | %) |
| Other operating expense     |   |                             | (2.4   | %)     |                            |   | (0.5 | %) |   |   | (12.1 | %) |   |   | (7.0 | %) |
| Segment income              |   |                             | (4.5   | %)     |                            |   | 16.7 | % |   |   | (10.0 | %) |   |   | 6.8 | % |

|                               |   | Three months ended September 30, |   |   | Nine months ended September 30, |   |
|------------------------------------|--------|----------------------------------|--------|--------|---------------------------------|--------|
|                               |   | 2009                             |   |   | 2008                            |   |   | 2009 |   |   | 2008 |   |
|                               |   | (dollars in thousands)           |   |
| Compensation and employee benefits |   | $                                | 484    |   |                            | $      | 1,341 |   |   | $ | 1,601 |   |   | $ | 5,377 |   |
| Insurance                          |   |                             | 39     |   |                            |   | 96 |   |   |   | 147 |   |   |   | 234 |   |
| Directors fees                     |   |                             | 34     |   |                            |   | 94 |   |   |   | 191 |   |   |   | 282 |   |
| Occupancy costs                    |   |                             | 44     |   |                            |   | 34 |   |   |   | 101 |   |   |   | 104 |   |
| Other expenses                     |   |                             | 237    |   |                            |   | 624 |   |   |   | 1,867 |   |   |   | 2,508 |   |
| Total operating expenses           |   | $                                | 838    |   |                            | $      | 2,189 |   |   | $ | 3,907 |   |   | $ | 8,502 |   |

----

Index

|                                                   |   | Three months ended September 30, |   |   | Nine months ended September 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                             |   |                             | -      |   |                            |   | - |   |   |   | (13 | ) |   |   | 8 |   |
| Gain on sale of discontinued real estate operations    |   |                             | -      |   |                            |   | - |   |   |   | - |   |   |   | 4,217 |   |
| Income (loss) from discontinued real estate operations |   | $                                | -      |   |                            | $      | - |   |   | $ | (13 | ) |   | $ | 4,392 |   |

|                        |   | Three months ended September 30, |   |   | Nine months ended September 30, |   |
|-----------------------------|--------|----------------------------------|--------|--------|---------------------------------|--------|
|                        |   | 2009                             |   |   | 2008                            |   |   | 2009 |   |   | 2008 |   |
|                        |   | (dollars in thousands)           |   |
| Software sales              |   | $                                | -      |   |                            | $      | - |   |   | $ | - |   |   | $ | 128 |   |
| Engineering and development |   |                             | -      |   |                            |   | - |   |   |   | - |   |   |   | (158 | ) |
| Compensation expense        |   |                             | -      |   |                            |   | - |   |   |   | - |   |   |   | (92 | ) |
| Depreciation expense        |   |                             | -      |   |                            |   | - |   |   |   | - |   |   |   | (182 | ) |
| Other operating expense     |   |                             | -      |   |                            |   | - |   |   |   | - |   |   |   | (123 | ) |
| Interest expense            |   |                             | -      |   |                            |   | - |   |   |   | - |   |   |   | (492 | ) |
| Segment loss                |   | $                                | -      |   |                            | $      | - |   |   | $ | - |   |   | $ | (919 | ) |

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Index

|                                       |   | September 30, 2009     |    |   | December 31, 2008 |   |
|--------------------------------------------|--------|------------------------|---------|--------|-------------------|--------|
|                                       |   | (dollars in thousands) |    |
| Total assets                               |   | $                      | 22,334  |   |              | $      | 27,573 |   |
| Total liabilities                          |   | $                      | 35,771  |   |              | $      | 36,315 |   |
| Total minority interests                   |   | $                      | 24      |   |              | $      | 365 |   |
| Total stockholders’ equity (deficit) |   | $                      | (13,461 | )      |              | $      | (9,107 | ) |

|   | · | $0.6 million of cash provided by operations – comprised primarily of our net loss from continuing operations of $4.7 million adjusted for net non-cash items of $5.3 million; |
|--------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $1.8 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 $0.4 million; and |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | · | $1.1 million of cash provided in financing activities, including proceeds from borrowings of $1.8 million, net of payments on borrowings of $0.4 million and payments on capital leases of $0.3 million. |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|                                    |   | September 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 |   | $                      | 2,592       |   |              | $      | 4,068 |   |
| Total net intangible assets             |   | $                      | 2,592       |   |              | $      | 4,068 |   |

|                     |   | September 30, 2009     |   |   | December 31, 2008 |   |
|--------------------------|--------|------------------------|--------|--------|-------------------|--------|
|                     |   | (dollars in thousands) |   |
| Trade receivables        |   | $                      | 1,742  |   |              | $      | 2,712 |   |
|                     |   |                   |   |   |              |   |   |   |
| Inventories              |   | $                      | 1,989  |   |              | $      | 2,964 |   |
|                     |   |                   |   |   |              |   |   |   |
| Other current assets:    |   |                   |   |   |              |   |   |   |
| Prepaid expenses         |   | $                      | 183    |   |              | $      | 294 |   |
|                     |   |                   |   |   |              |   |   |   |
|                     |   |                   |   |   |              |   |   |   |
| Other assets:            |   |                   |   |   |              |   |   |   |
| Security deposits        |   | $                      | 261    |   |              | $      | 471 |   |
| Capitalized finance fees |   |                   | -      |   |              |   | 202 |   |
| Other                    |   |                   | 74     |   |              |   | 139 |   |
| Total other assets       |   | $                      | 335    |   |              | $      | 812 |   |

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Index

|                                         |   | September 30, 2009     |   |   | December 31, 2008 |   |
|----------------------------------------------|--------|------------------------|--------|--------|-------------------|--------|
|                                         |   | (dollars in thousands) |   |
| Accounts payable                             |   | $                      | 2,574  |   |              | $      | 8,439 |   |
| Sales deposits                               |   |                   | 774    |   |              |   | 1,228 |   |
| Accrued wages, bonus and commissions         |   |                   | 733    |   |              |   | 693 |   |
| Other                                        |   |                   | 9,207  |   |              |   | 7,126 |   |
| Total accrued expenses and other liabilities |   | $                      | 13,288 |   |              | $      | 17,486 |   |

|   | · | $8.8 million in notes payable and other debt of Fatburger, secured by the assets of Fatburger; |
|--------|--------|------------------------------------------------------------------------------------------------|

|   | · | $1.6 million in capital leases maturing on or before 2010 which are secured by an aircraft and various restaurant assets; |
|--------|--------|---------------------------------------------------------------------------------------------------------------------------|

|   | · | $7.5 million of notes payable secured by various assets of the Company; and |
|--------|--------|-----------------------------------------------------------------------------|

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Index

|   | · | $1.1 million of short-term borrowings secured by the assets of DAC International. |
|--------|--------|-----------------------------------------------------------------------------------|

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Index

ITEM 

ITEM 

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Index

ITEM 

ITEM 

ITEM 

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Index

ITEM 

| 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. |

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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 |   |

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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. |

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