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U.S.SECURITIES AND EXCHANGE COMMISSION

Washington, DC20549

FORM 10-K

(MarkOne)

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|   | Annual reportpursuant to Section 13 or 15(d) of the Securities Exchange Act of1934. |

For the fiscal year ended April30,2006.

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|   | Transitionreport pursuant to Section 13 or 15(d) of the Securities Exchange Actof 1934. |

For the transition period from                             to                                .

CommissionFile Number0-18369

BOSTON RESTAURANTASSOCIATES,INC.

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(ExactName of Registrant as Specified in itsCharter)

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| Delaware                                                     |  |  | 61-1162263                          |
| (State or Other Jurisdiction ofIncorporation orOrganization) |  |  | (I.R.S.Employer Identification No.) |
| 999 Broadway,Suite 400 Saugus,Massachusetts                  |  |  | 01906                               |
| (Address of Principal ExecutiveOffices                       |  |  | (Zip Code)                          |
|                                                              |

(781)231-7575

(Registrant’sTelephone Number, Including AreaCode)

Securities registered pursuant toSection 12(b) of the Securities Exchange Act of1934:

None

Securitiesregistered under Section 12(g) of the Securities Exchange Act of1934:

Common Stock, $.01 par value pershare

(Title ofClass)

Indicate by check mark if the registrant is awell-known seasoned issuer, as defined in Rule 405 of the SecuritiesAct. Yes         No 

Indicate bycheck mark if the registrant is not required to file reports pursuantto Section 13 or Section 15(d) of the Act. Yes         No

Indicate by check mark whether the registrant:(1) has filed all reports required to be filed by Section 13 or 15(d)of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days. Yes         No 

Indicate bycheck mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K is not contained herein, and will not be contained, tothe best of the registrant’s knowledge, in definitive proxy orinformation statements incorporated by reference in Part III of thisForm 10-K or any amendments to this Form 10-K. 

Indicateby check mark whether the registrant is a large accelerated filer, anaccelerated filer, or a non-accelerated filer. See definition of‘‘accelerated filer and large acceleratedfiler’’ in Rule 12b-2 of the Exchange Act (CheckOne):

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| LargeAccelerated Filer |  |  | Accelerated Filer |  |  | Non-Accelerated Filer |
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Indicate by check mark whetherthe registrant is a shell company (as defined in Rule 12b-2 of theExchange Act). Yes         No 

The aggregatemarket value of registrant’s Common Stock, $.01 par value pershare, held by non-affiliates of the registrant as of the end of thesecond quarter fiscal year 2006 was $4,080,399 based upon the averageof the closing bid and asked prices of such stock on that date asreported on the OTC Bulletin Board. As of June  29,  2006there were 7,035,170 shares of the registrant’s Common Stock,$.01 par value per share outstanding.

DOCUMENTSINCORPORATED BYREFERENCE

None

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INDEX

|          |  |  |                                                                                                           |  |  |  |  |    |  |  |  |        |
|----------|--|--|-----------------------------------------------------------------------------------------------------------|--|--|--|--|----|--|--|--|--------|
| PARTI    |  |  |                                                                                                      |
| ITEM1.   |  |  | BUSINESS                                                                                                  |  |  |  |  | 4  |  |  |  |   |
| ITEM1A.  |  |  | RISK FACTORS                                                                                              |  |  |  |  | 9  |  |  |  |   |
| ITEM2.   |  |  | PROPERTIES                                                                                                |  |  |  |  | 10 |  |  |  |   |
| ITEM3.   |  |  | LEGALPROCEEDINGS                                                                                          |  |  |  |  | 12 |  |  |  |   |
| ITEM4.   |  |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS                                                        |  |  |  |  | 12 |  |  |  |   |
| PARTII   |  |  |                                                                                                      |
| ITEM 5.  |  |  | MARKET FORREGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS ANDISSUER PURCHASES OF EQUITYSECURITIES |  |  |  |  | 13 |  |  |  |   |
| ITEM6.   |  |  | SELECTED FINANCIALDATA                                                                                    |  |  |  |  | 14 |  |  |  |   |
| ITEM7.   |  |  | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIALCONDITION AND RESULTS OFOPERATIONS                       |  |  |  |  | 14 |  |  |  |   |
| ITEM7A.  |  |  | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKETRISKS                                                 |  |  |  |  | 27 |  |  |  |   |
| ITEM 8.  |  |  | FINANCIALSTATEMENTS AND SUPPLEMENTARYDATA                                                                 |  |  |  |  | 28 |  |  |  |   |
| ITEM 9.  |  |  | CHANGES INAND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIALDISCLOSURE                        |  |  |  |  | 28 |  |  |  |   |
| ITEM9A.  |  |  | CONTROLS ANDPROCEDURES                                                                                    |  |  |  |  | 28 |  |  |  |   |
| ITEM9B.  |  |  | OTHERINFORMATION                                                                                          |  |  |  |  | 28 |  |  |  |   |
| PARTIII  |  |  |                                                                                                      |
| ITEM 10. |  |  | DIRECTORSAND EXECUTIVE OFFICERS OF THEREGISTRANT                                                          |  |  |  |  | 29 |  |  |  |   |
| ITEM11.  |  |  | EXECUTIVECOMPENSATION                                                                                     |  |  |  |  | 32 |  |  |  |   |
| ITEM12.  |  |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS ANDMANAGEMENT AND RELATED STOCKHOLDERMATTERS              |  |  |  |  | 35 |  |  |  |   |
| ITEM13.  |  |  | CERTAIN RELATIONSHIPS AND RELATEDTRANSACTIONS                                                             |  |  |  |  | 38 |  |  |  |   |
| ITEM14.  |  |  | PRINCIPAL ACCOUNTANT FEES ANDSERVICES                                                                     |  |  |  |  | 39 |  |  |  |   |
| PARTIV   |  |  |                                                                                                      |
| ITEM 15. |  |  | EXHIBITS ANDFINANCIAL STATEMENTSCHEDULES                                                                  |  |  |  |  | 41 |  |  |  |   |
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FORM10-K

CAUTIONARY STATEMENT FOR THE PURPOSES OF THE‘‘SAFEHARBOR’’ PROVISIONS OF THEPRIVATE SECURITIES LITIGATIONREFORM ACT OF1995

Forward-looking statements in this report, includingwithout limitation statements relating to the adequacy of theCompany’s working capital and other resources, ability to obtainadditional financing, the timing of the Company’s new storeopenings and future expansion, the Company’s potential mergertransaction, and anticipated future cash flows from particular sourcesare made pursuant to the safe harbor provisions of the PrivateSecurities Litigation Reform Act of 1995. Investors are cautioned thatsuch forward-looking statements involve risks and uncertainties,including without limitation: risks associated with theCompany’s ability to obtain funding; potential quarterlyfluctuations in the Company’s operating results; seasonality ofsales; competition; risks associated with expansion; risks associatedwith the failure to close the Company’s merger transaction; theCompany’s reliance on key employees; risks generally associatedwith the restaurant industry; risks associated with geographicconcentration of the Company’s restaurants, risks associatedwith serving alcoholic beverages, and other risks and uncertaintiesindicated from time to time in the Company’s filings with theSecurities and Exchange Commission. In addition, forward-lookingstatements generally can be identified by the use of forward-lookingterminology such as ‘‘may’’,‘‘will’’,‘‘expect’’,‘‘intend’’, ‘‘‘‘estimate’’,‘‘anticipate’’ or‘‘believe’’ or the negative thereof orvariations thereon or similar terminology. Although the Companybelieves that the expectations reflected in such forward-lookingstatements will prove to have been correct, it can give no assurancethat such expectations will prove to have been correct. Investors arecautioned not to place undue reliance on these forward-lookingstatements, which speak only as of the date hereof. (See‘‘Item 1. Business — RiskFactors.’’)

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PARTI

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| ITEM1.  | BUSINESS |

General

Duringthe fiscal year ended April  30,  2006(‘‘Fiscal 2006’’) Boston RestaurantAssociates, Inc. (the ‘‘Company’’) operateda chain of sixteen restaurants including one sit down and twelvefast-service, high volume pizzerias under the ‘‘PizzeriaRegina’’ name, three full-service family-styleItalian/American restaurants under the ‘‘Polcari’sNorth End’’ name for the entire year and onePolcari’s North End restaurant for three months. A majority ofrestaurants are located in metropolitan Boston,Massachusetts.

The Pizzeria Regina restaurants feature theCompany’s signature product, its premium Neapolitan style, thincrust pizza, prepared in gas-fired brick ovens. The original PizzeriaRegina, located in Boston’s historic North End, has served theCompany’s premium brick oven pizza since 1926. The Companybelieves that the Pizzeria Regina brand name and the pizza itself arelocal symbols of superior and distinctive pizza. Of the currentlyexisting Pizzeria Regina restaurants, twelve are food court kiosks(self-service, take-out style emphasizing pizza slices with common areaseating), while the original 1926 North End Pizzeria Regina is a waitservice restaurant (full-service style emphasizing whole pizzas within-restaurant seating). (See ‘‘Pizzeria ReginaRestaurants.’’)

The Polcari’s North Endrestaurants are full-service Italian/American, family-style restaurantsthat capture the community spirit of the 1940s and 1950s inBoston’s Italian North End neighborhood. These restaurantshighlight exposed gas-fired brick ovens in open view of diners,memorabilia and photographs depicting 1940s and 1950s scenes inBoston’s North End, and large tables to encourage family-styledining. (See ‘‘Polcari’s North EndRestaurants.’’)

The first Pizzeria Regina wasopened in 1926, and the predecessor corporation was incorporated in1986. The Company became public in 1994, and since that date hascontinuously operated a restaurant chain which has increased over timeto the present 16 operating restaurants. The Company’s principaloffices are located at 999 Broadway, Saugus, Massachusetts 01906 andits telephone number is (781) 231-7575 and its corporate website iswww.polcaris.com As used in this Report, unless otherwise indicated,the term ‘‘Company’’ refers to BostonRestaurant Associates, Inc. and its subsidiaries. We make available,free of charge through our website, our annual report on Form 10-K,quarterly reports on Form 10-Q and current reports on Form 8-K, andamendments to these reports filed or furnished pursuant to Section13(a) of the Securities Exchange Act of 1934 as soon as practicableafter we electronically file such material with or furnish it to theSecurities and Exchange Commission (the‘‘SEC’’).

The information found onour website is not part of this or any other report we file with orfurnish to the SEC.

You may read and copy any document we file atthe SEC’s public reference room located at: Headquarters Office,100F Street N.E., Room 1580, Washington, DC 20549.

You may obtaininformation on the operation of the Public Reference Room by Callingthe SEC at 1-800-SEC-0330. Our SEC filings are also available at theSEC’s website at http://www.sec.gov. This website address isincluded in this document as an inactive textual referenceonly.

Recent Developments

On March  17,2006, the Company entered into an Agreement and Plan of Merger (the‘‘Merger Agreement’’) by and among theCompany, Dolphin Direct Equity Partners, LP(‘‘Dolphin’’) and Braidol AcquisitionCorp., (‘‘Braidol’’) a wholly-ownedsubsidiary of Dolphin, whereby Braidol will merge (the‘‘Merger’’) with and into the Company withthe Company surviving the Merger. Under the terms of the MergerAgreement, the common stockholders of the Company, would be entitled toreceive an amount equal to $0.70, without interest, per share of commonstock. Under the terms of 

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the Merger Agreement, the preferredstockholders of the Company would be entitled to receive a liquidationpreference of $0.85 per share ($974,998) plus accrued and unpaiddividends as set forth in the certificate of designation for thepreferred stock, without interest, as well as the product of the numberof shares of common stock that such shares of preferred stock areconvertible into immediately prior to the merger and $.70, withoutinterest. The consummation of the Merger is subject to customaryclosing conditions, including the approval of the stockholders of theCompany. In addition, the consummation of the Merger is subject to thecondition that certain transaction costs incurred by the Company notexceed $625,000. The Company has determined that it is unlikely thatthe Company will satisfy this condition and has sought a waiver fromDolphin. As of June  29,  2006, the Company has notreceived that waiver.

In any event, the Company is required topay certain of Dolphin’s expenses. As of the date hereof,Dolphin and its affiliate Dolphin Offshore Partners, L.P. hold a40.3% beneficial interest in the Company’s common stock.Peter Salas, a member of the Company’s Board of Directors, isPresident of Dolphin Asset Management Corp. an affiliate of Dolphin,and its related companies.

Financing

For the year endedApril  30,  2006, after an asset impairment ofapproximately $307,000 the Company had income from continuingoperations before dividends to preferred shareholders of approximately$228,000. As of that date, the Company had a working capital deficiencyof approximately $1,175,000 and stockholders’ equity of $55,000.The Company was in compliance with all financial covenants for fiscalyear ended April  30,  2006.

The Company has analyzedcash flow and believes that cash flow from operations will besufficient to fund operations for the next twelve months. TheCompany’s growth and expansion will be dependent upon obtainingadditional financing. There can be no assurance that any futureadditional financing will be available on commercially reasonableterms, or at all, and the success or lack of success of theCompany’s restaurants opened within recent years and planned tobe opened in the future may have a critical effect on theCompany’s ability to raise funds through the sale of stock orotherwise.

Pizzeria Regina Restaurants

The Companycurrently operates thirteen Pizzeria Regina restaurants which arefast-service, high volume pizzerias that feature premium brick ovenpizza and cater primarily to the lunchtime diner (with the exception ofthe original North End location, which serves both the lunch and dinnermarkets). Of these thirteen restaurants, twelve are food court kiosksand the original North End Pizzeria Regina is a wait-servicerestaurant.

The Pizzeria Regina restaurants feature theCompany’s premium Neapolitan style, thin crust, brick ovenpizza. This pizza features a proprietary dough and pizza sauce, whichthe Company believes combine to produce a distinct flavor and superiorpizza. These pizzas are offered with a wide variety of fresh vegetableand cured meat toppings. The Company believes that the premium qualityof its pizza, a result of a proprietary ingredient mix and bakingprocess, provides appeal to both the lunch and dinner markets. Theoriginal Pizzeria Regina, located in Boston’s historic NorthEnd, has served the Company’s premium brick oven pizza since1926.

The Company’s twelve food court kiosks primarilyserve pizza by the slice with multiple topping choices and operateside-by-side with other fast food vendors in retail malls. Menu itemsare presented in a self-service, take-out style designed to allowcustomers to order, pay for and consume their food in a very shortperiod of time. Customers who desire to sit down after purchasing theirfood may join customers of other food court vendors in one or moredesignated common areas within the mall. The focused menu,self-service, take-out style and common seating provide food courtcustomers with a fast, low cost dining alternative as compared to moretraditional full-service restaurants.

The Company intends toseek locations for additional Pizzeria Regina food court kiosks inmalls and high traffic areas. Management estimates that the cost ofopening a typical food court kiosk 

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currently is approximately $550,000. TheCompany cannot guarantee that actual costs will not significantlyexceed these estimates, that the Company will be able to obtainfinancing necessary to construct additional food courts kiosks, thatthe Company will be able to complete the construction of new kiosks ona timely basis and within budget, if at all, or that the Company willbe able to operate these kiosks successfully.

In April, 2006 theCompany entered into a long term lease with Station Landing, LLC inMedford, Massachusetts.

Polcari’s North EndRestaurants

In March  1995, the Company opened its firstPolcari’s North End restaurant in Saugus, Massachusetts,recreating a restaurant similar to one that the Company’spredecessor had operated from 1954-1989 in Boston’s North End.The Polcari’s North End restaurant concept is designed to createan Italian/American casual dining ambiance that captures the communityspirit of the 1940s and 1950s in Boston’s Italian North Endneighborhood. The restaurant highlights exposed gas-fired brick ovensin open view of diners. In addition, memorabilia and photographsdepicting scenes in Boston’s North End in the 1940s and 1950sare used to create a neighborhood atmosphere rich with history. Therestaurant also features large tables of six or more seats to encouragefamily style dining and a value-oriented menu that includes brandedPizzeria Regina pizza, large Italian/American pasta dishes and freshbaked breads.

The Company has also developed a bistro-restaurantconcept, which was inspired by the success of the Saugus-basedPolcari’s North EndTM restaurant. Unlike the Saugusrestaurant, the bistro restaurants are smaller in size, creating a moreintimate family dining experience. In addition, the menu is a modifiedversion of the Saugus-based offerings, providing for a lighter diningexperience. The bistro restaurants operate under the Polcari’sNorth EndTM trademark in order to capitalize on thatmark’s recognition for quality. The Company currently operatestwo Polcari’s North End bistro Restaurants in Woburn,Massachusetts and Salem, New Hampshire.

SiteSelection

The Company considers the specific location of arestaurant to be critical to the restaurant’s long term success.It devotes significant time and resources to the investigation andevaluation of each prospective site, including consideration of localmarket demographics, population density, average household incomelevels and site characteristics such as visibility, accessibility andtraffic.

The Company seeks sites for the Pizzeria Regina kioskrestaurants within high-traffic locations including food courts andretail shopping malls located in metropolitan areas. The Company alsoconsiders existing local competition and, to the extent suchinformation is available, the sales of other comparably pricedrestaurants operating in the area.

RestaurantOperations

The Company invests substantial time and effort inits training programs, which focus on all aspects of restaurantoperations, including kitchen, bar and dining room operations, foodquality and preparation, alcoholic beverage service, liquor liabilityavoidance, customer service and employee relations. The Company holdsregular meetings of its managers to address new products, continuingtraining and other aspects of business management. Managers also attendperiodic seminars conducted by Company personnel and outside experts ona broad range of topics.

New employees are trained by experiencedemployees who have demonstrated their ability to implement theCompany’s commitment to provide high quality food and attentiveservice. The Company has developed manuals regarding its policies andprocedures for restaurant operations. Supervisory management regularlyvisits Company restaurants and meets with their management teams toensure compliance with the Company’s strategies and standards ofquality in all aspects of restaurant operations and personneldevelopment.

The Company seeks to attract and retain qualityrestaurant managers by providing them with an appropriate balance ofautonomy and direction. Annual performance objectives and budgets foreach 

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restaurant are jointly determined byrestaurant managers and senior management. To provide incentives, theCompany has implemented a cash bonus program tied to achievement ofspecified objectives.

The staff for a typical Pizzeria Reginakiosk restaurant consists of one general manager, two managers andapproximately 12 to 15 hourly employees. The staff of the originalPizzeria Regina consists of a general manager, two managers, andapproximately 15 to 25 hourly employees. The staff for a typicalPolcari’s North End restaurant consists of one general manager,two managers, one kitchen manager and approximately 40 to 60 hourlyemployees. Most of the Company’s hourly employees are part-timepersonnel. The general manager of each restaurant is primarilyresponsible for the day-to-day operations of the entire restaurant andfor maintaining standards of quality and performance established by theCompany.

Purchasing and Commissary Operations

The Companymaintains a commissary where pizza dough is produced for theCompany’s restaurants. The dough preparation requires a highdegree of consistency that would be more difficult to maintain at theindividual restaurant locations. The Company believes that close,centralized monitoring of the dough preparation ensures a moreconsistent premium product. All other food preparation is performed onsite at the restaurant level.

The Company negotiates directlywith wholesale suppliers of certain high volume food ingredients suchas cheese, tomato sauce, and flour to ensure consistent quality andfreshness of products across its restaurants and to obtain competitivepricing. These ingredients are then purchased for the Company by athird party independent distributor at the negotiated price andredistributed to the Company’s restaurants. All other foodingredients and beverage products are purchased directly by the generalmanager of each restaurant in accordance with corporate guidelines. TheCompany believes that essential food and beverage products areavailable from a choice of many qualified wholesalesuppliers.

Advertising and Marketing

The Company’starget market for the Pizzeria Regina restaurants is very broad,consisting of individuals and families who seek fast-service and highvalue-to-price meals during the lunch period. The target market for thePolcari’s North End restaurants is adults and families who seekmoderately priced Italian dinner entrees in a comfortable environment.The Company believes that its focus on premium quality, service andvalue is the most effective approach to attracting customers. TheCompany plans to rely upon local advertising, high volume traffic flowat retail malls and word of mouth exposure to market itsrestaurants.

Competition

The restaurant business ishighly competitive. Price, restaurant location, food quality, serviceand attractiveness of facilities are important aspects of competition,and the competitive environment is often affected by factors beyond theCompany’s or a particular restaurant’s control, includingchanges in the public’s tastes and eating and drinking habits,population and traffic patterns and local economic conditions. TheCompany’s restaurants compete with a wide variety of restaurantsranging from national and regional restaurant chains (some of whichhave substantially greater financial resources than the Company) tolocally-owned restaurants. There is also active competition for liquorlicenses in certain markets and for advantageous commercial real estatesites suitable for restaurants. The Pizzeria Regina restaurants competewith other fast-service, high volume food providers on the basis ofprice, value, location, menu and speed of service. The Polcari’sNorth End restaurants compete with other casual, full-servicerestaurants primarily on the basis of menu selection, quality, price,service, ambiance and location.

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Seasonality

Certain of theCompany’s restaurants are subject to seasonal fluctuations insales volume. Sales at the Pizzeria Regina restaurants are typicallyhigher in June through August, and in November and December due toincreased volume in shopping malls during the holiday and touristseasons and school vacations.

Employees

As of June29,  2006 the Company had approximately 425 employees, of whom 11were corporate and administrative personnel, approximately 55 werefield supervision or restaurant managers or management trainees, andthe remainder were hourly restaurant personnel. Many of theCompany’s hourly employees work part-time. The Company believesthat its relationship with its employees is good. None of theCompany’s employees are covered by a collective bargainingagreement.

Trademarks and Service Marks

The Companyregards its trademarks and its service marks as having significantvalue and as being important factors in the marketing of its products.The Company’s most significant trademarks are‘‘Pizzeria Regina,’’ the Regina crowndesign logo, and ‘‘Polcari’s NorthEnd,’’ each of which are U.S. registered trademarks ownedby the Company. The Company has also registered with the U.S. Patentand Trademark Office ‘‘Regina,’’ the‘‘Polcari’s’’ logo,‘‘Pizzeria Regina of Boston’s NorthEnd’’ and ‘‘Pizzeria Regina,Boston’s Brick Oven Pizza’’ as servicemarks.

Government Regulation

The Company is subject to avariety of federal, state, local laws, and regulations. Each of theCompany’s restaurants is subject to licensing and regulation bya number of government authorities, including alcoholic beveragecontrol, health, safety, sanitation, building and fire agencies in thestate or municipality in which the restaurant is located. Difficultiesin obtaining or failure to obtain required licenses or approvals coulddelay or prevent the development of a new restaurant in a particulararea.

The selection of new restaurant sites is affected byfederal, state, local laws, regulations regarding environmentalmatters, zoning and land use and the sale of alcoholic beverages.Various requirements (particularly at the local level) may result inincreases in the cost and time required for opening new restaurants, aswell as increases in the cost of operating restaurants. Difficulties inobtaining necessary licenses or permits could cause delays in orcancellations of new restaurant openings.

A significant portionof the Company’s revenues at the Polcari’s North Endrestaurants and the original Pizzeria Regina location in the North Endis attributable to the sale of alcoholic beverages. Alcoholic beveragecontrol regulations require each of the Company’s restaurantsthat serve alcohol to apply to both a state authority and municipalauthorities for a license or permit to sell alcoholic beverages on thepremises. Typically, licenses must be renewed annually and may berevoked or suspended for cause at any time. Alcoholic beverage controlregulations affect numerous aspects of restaurant operations, includingminimum age of patrons and employees, hours of operation, advertising,wholesale purchasing, inventory control and handling, storage anddispensing of alcoholic beverages. The failure of the Company to obtainor retain liquor service licenses could have a material adverse affecton the particular restaurant’s operations and the business ofthe Company overall.

The Company is subject to‘‘dram shop’’ statutes, which generallyprovide a person injured by an intoxicated person the right to recoverdamages from an establishment that wrongfully served alcoholicbeverages to the intoxicated person. The Company presently carriesliquor liability coverage for its restaurants, as well as excessliability coverage. The Company has never been named as a defendant ina lawsuit involving ‘‘dram shop’’liability. The Company cannot guarantee that dram shop insurance willcontinue to be available to the Company at commercially reasonableprices, if at all, or that such insurance, if maintained, will besufficient to cover any claims against the Company for dram shopliability for which it may be held liable.

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The Company’s restaurant operationsare all subject to federal and state laws governing such matters asminimum wage and health insurance requirements. A significant number ofthe Company’s personnel are paid at rates related to the federalminimum wage, and increases in the minimum wage could increase theCompany’s labor costs.

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| ITEM1A.  | RISK FACTORS |

In additionto the risks discussed elsewhere in this Form 10-K, investors shouldconsider carefully the following risk factors in evaluating aninvestment in the Company.

The Company’sAbility To Grow, Including Its Plans To Open A New Pizzeria ReginaRestaurant In Medford, Massachusetts, May Be Dependent On AdditionalFunding

For the year ended April  30,  2006, theCompany has income before dividends to preferred shareholders ofapproximately $298,000. As of that date, the Company had a workingcapital deficiency of approximately $1,175,000 and stockholders’equity of $55,000. The long-term financial stability of the Company andcompliance with the bank covenants will be substantially dependent uponachieving sustained profitable operations. If the Company fails tocomply with bank covenants, the bank debt could be due on demand. TheCompany’s growth, including its plans to open a new PizzeriaRegina restaurant in Medford, Massachusetts, will be dependent uponobtaining adequate additional financing. There can be no assurance thatany future additional financing will be available on commerciallyreasonable terms, or at all, and the success or lack of success of theCompany’s restaurants opened within recent years may have acritical effect on the Company’s ability to raise funds throughthe sale of stock or otherwise.

The Company May Be Unable toExpand As Planned

The Company intends to open additionalrestaurants in an orderly manner as conditions permit, including itsplans to open a new Pizzeria Regina restaurant in Medford,Massachusetts. The Company’s ability to open additional Companyrestaurants will depend upon a number of factors, such as identifyingsatisfactory sites, negotiating satisfactory leases, securing requiredgovernmental permits and approvals, obtaining of any required financingat acceptable terms, providing adequate supervision of construction,and recruiting and training management personnel, some of which arebeyond the control of the Company. The Company cannot guarantee that itwill be able to open any other future restaurants within budget or on atimely basis, if at all, or that any of the new restaurants willoperate profitably. If the Company is unable to expand, it may reducethe Company’s ability to increase profitability.

TheRestaurant Business Is Risky

The Company’s futureperformance will be subject to a number of factors that affect therestaurant industry generally, including: (i) the highly competitivenature of the industry, (ii) general and local economic conditions,(iii) changes in tastes and eating and drinking habits, (iv) changes infood costs due to shortages, inflation or other causes, (v) populationand traffic patterns, (vi) demographic trends, (vii) generalemployment, and wage and benefit levels in the restaurant industry,which may be affected by changes in federal and local minimum wagerequirements or by federally or locally mandated health insurance,(viii) the number of people willing to work at or near the minimum wageand (ix) weather conditions. (See‘‘Competition.’’)

We AreDependent on Key Executive Officers

The future success ofthe Company will depend in large part on the continued services of itsPresident, George R. Chapdelaine, as well as on the Company’sability to attract and retain other qualified senior managementpersonnel. The Company carries $2,000,000 of key man life insurance onthe life of Mr.  Chapdelaine.

Insiders Control theCompany

The Company’s executive officers, directorsand their affiliates and members of their immediate families controlthe vote of approximately 67.2% of the outstanding shares of theCommon Stock. As 

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a result, they have the practical ability toimplement or block changes in the Company’s management anddirection which may or may not be in the best interest of stockholdersgenerally.

The Merger May Not Be Completed

OnMarch  17,  2006 the Company entered into and Agreement andPlan of Merger by and among the Company, Dolphin Direct EquityPartners, LP and Braidol Acquisition Corp., a wholly owned subsidiaryof Dolphin by which Braidol will merge with and into the Company withthe Company surviving the Merger. The consummation of the Merger issubject to customary closing conditions, including the approval ofstockholders of the Company. Should the merger be completed,stockholder’s common and preferred stock would be redeemed andstockholders would no longer participate in any future earnings, shouldthere be any future earnings. In addition, the consummation of theMerger is subject to the condition that certain transaction costsincurred by the Company not exceed $625,000. The Company has determinedthat it is unlikely that the Company will satisfy this condition andhas sought a waiver from Dolphin. As of June  29,  2006,the Company has not received that waiver. Under certain circumstances,if the Merger is not completed, the Company is required to pay atermination fee of up to $325,000, less any expenses it has paid forthe benefit of Dolphin and its affiliates. In addition, the Companyestimates that it will be required to incur direct transaction costs of$625,000, which include fees related to financial advisors, attorneys,accountants and financial printers. The Company has capitalized certainof these costs as deferred merger costs at April 30, 2006. If theMerger is not closed, the Company’s financial results, includingearnings per share, could suffer, and the Company’s market pricecould decline.

The Company’s Restaurants AreConcentrated in Massachusetts

A total of eleven of theCompany’s sixteen existing restaurants are located in easternMassachusetts. As a result, the Company’s results of operationsmay be materially affected by changes in the Massachusetts economy.

Our Stock Is Relatively Illiquid and the Price IsVolatile

Compared to many other publicly traded companies,the Company is relatively small and has a relatively low average dailytrading volume. Quarterly operating results of the Company or otherrestaurant companies, changes in general conditions in the economy, therestaurant industry, or the financial markets, or other developmentsaffecting the Company, its competitors or the financial markets couldcause the market price of the Company’s Common Stock tofluctuate significantly. These broad market fluctuations may adverselyaffect the market price of the Company’s Common Stock. Inaddition, the low trading volume may make it difficult for astockholder to buy or sell a significant amount of stock withoutaffecting the market price. The Company’s securities areprincipally traded on the OTC Bulletin Board or its successor. (See‘‘Item 5. Market for Registrant Common Equity, RelatedStockholder Matters and Issuer Purchases of EquitySecurities.’’)

|              |            |
|--------------|------------|
| ITEM2.  | PROPERTIES |

Of theCompany’s sixteen restaurants operating on April30,  2006, fifteen were located in leased space and onerestaurant, the North End Pizzeria Regina location, is owned by theCompany.

All of the Company’s leases provide for a minimumannual rent, and most call for additional rent based on sales volume atthe particular location over a specified minimum level. Generally,these leases are net leases, which require the Company to pay the costof insurance, taxes and a portion of the lessor’s operatingcosts. Certain mall locations also require the Company to participatein upkeep of common areas and promotionalactivities.

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The following table sets forth certaininformation with respect to the Company’s restaurantproperties:

|                                    |  |  |                                   |
|------------------------------------|--|--|-----------------------------------|
| Location                           |  |  | Type(1)                           |
| AuburnMall Auburn, MA              |  |  | food court                        |
| NorthEnd Boston, MA(2)             |  |  | waitservice                       |
| Faneuil Hall Marketplace Boston,MA |  |  | food court                        |
| Prudential CenterBoston, MA        |  |  | food court                        |
| SouthStation Boston, MA            |  |  | foodcourt                         |
| Burlington Mall(3)Burlington, MA   |  |  | food court                        |
| HolyokeMall Holyoke, MA            |  |  | foodcourt                         |
| Independence Mall Kingston,MA      |  |  | food court                        |
| South Shore PlazaBraintree, MA     |  |  | food court                        |
| Solomon PondMall Marlborough, MA   |  |  | foodcourt                         |
| Oviedo Market Place Oviedo,FL      |  |  | food court                        |
| Paramus ParkParamus, NJ            |  |  | food court                        |
| ProvidencePlace Providence, RI     |  |  | foodcourt                         |
| Salem, NH                          |  |  | Polcari’sNorth End (bistro) |
| Saugus,MA                          |  |  | Polcari’s North End         |
| Woburn,MA                          |  |  | Polcari’s North End(bistro) |
|                                    |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                                                                                                                                                                                                        |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Pizzeria Reginafood court locations have no independent seating capacity. Seating iscentralized in the common areas of the food courts. The North End seatsapproximately 75 customers; the Saugus Polcari’s North Endlocation seats approximately 360 customers; the two bistro restaurantseach seat approximately 200customers. |

|     |                                                                                                                                                                                                                                                                               |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | Company-owned. This property issubject to a mortgage in favor of Commerce Bank and Trust Company. (See‘‘Item 7. Management’s Discussion And Analysis OfFinancial Condition and Results of Operations — Liquidity andCapital Resources.’’) |

The Company occupiesapproximately 5,325 square feet of executive office space in Saugus,Massachusetts. The lease for this location expires on October31,  2006 and the Company anticipates negotiating a new lease.The Company also leases approximately 5,000 square feet of warehousespace located in Somerville, Massachusetts under a lease expiring onJuly  31,  2007 (including all extension options that maybe exercised by the Company in its discretion) and approximately 2,741square feet for its commissary located in Charlestown, Massachusettsunder a lease expiring on August  14,  2006. InApril  2006 the Company entered into a long-term lease withStation Landing LLC in Medford, Massachusetts.

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|              |                   |
|--------------|-------------------|
| ITEM3.  | LEGAL PROCEEDINGS |

TheCompany is not a party to any material litigation proceedings. OnMarch  6,  2006 a Charge of Discrimination was filed by aformer employee with the Massachusetts Commission AgainstDiscrimination and with the Equal Opportunity Commission. The Companyintends to vigorously defend this action.

From time to time theCompany has been, and expects to continue to be, subject to legalproceedings and claims in the ordinary course of its business. Suchclaims, even if not meritorious, could result in the expenditure ofsignificant financial and managerial resources.

|              |                                                    |
|--------------|----------------------------------------------------|
| ITEM4.  | SUBMISSION OF MATTERS TO A VOTE OFSECURITY HOLDERS |

None

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PARTII

|              |                                                                                                                  |
|--------------|------------------------------------------------------------------------------------------------------------------|
| ITEM5.  | MARKET FOR REGISTRANT’SCOMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OFEQUITY SECURITIES |

The Company’s Common Stock istraded publicly on the OTC Bulletin Board . As of May  26,2006, there were approximately 600 holders of record of theCompany’s Common Stock. On June  19,  2006, the lastbid and asked price of the Company’s Common Stock as reported onthe OTC Bulletin Board were each $.67 per share,respectively.

The table below represents the quarterly high andlow bid and asked prices for the Company’s Common Stock for theCompany’s last two fiscal years, as reported on the OTC BulletinBoard. The prices listed in this table reflect quotations withoutadjustment for retail mark-up, mark-down or commission, and may notrepresent actualtransactions.

|                                 |  |  |         |   |        |        |  |  |           |   |        |          |  |  |  |   |        |  |  |  |  |   |        |  |
|---------------------------------|--|--|---------|---|--------|--------|--|--|-----------|---|--------|----------|--|--|--|---|--------|--|--|--|--|---|--------|--|
|                            |  |  | HighBid |   |        | LowBid |  |  | HighAsked |   |        | LowAsked |
| Fiscal Year Ended April30,2006  |  |  |         |   |   |        |  |  |           |   |   |          |  |  |  |   |   |  |  |  |  |   |   |  |
| FirstQuarter                    |  |  |         | $ | 1.01   |        |  |  |           | $ | .37    |          |  |  |  | $ | 1.50   |  |  |  |  | $ | .47    |  |
| SecondQuarter                   |  |  |         | $ | .99    |        |  |  |           | $ | .47    |          |  |  |  | $ | .99    |  |  |  |  | $ | .55    |  |
| ThirdQuarter                    |  |  |         | $ | .67    |        |  |  |           | $ | .39    |          |  |  |  | $ | .80    |  |  |  |  | $ | .49    |  |
| FourthQuarter                   |  |  |         | $ | .67    |        |  |  |           | $ | .55    |          |  |  |  | $ | .67    |  |  |  |  | $ | .60    |  |
| FiscalYear Ended April  24,2005 |  |  |         |   |   |        |  |  |           |   |   |          |  |  |  |   |   |  |  |  |  |   |   |  |
| FirstQuarter                    |  |  |         | $ | .65    |        |  |  |           | $ | .53    |          |  |  |  | $ | .75    |  |  |  |  | $ | .65    |  |
| SecondQuarter                   |  |  |         | $ | .60    |        |  |  |           | $ | .30    |          |  |  |  | $ | .70    |  |  |  |  | $ | .36    |  |
| ThirdQuarter                    |  |  |         | $ | .63    |        |  |  |           | $ | .25    |          |  |  |  | $ | .75    |  |  |  |  | $ | .30    |  |
| FourthQuarter                   |  |  |         | $ | .62    |        |  |  |           | $ | .40    |          |  |  |  | $ | 1.00   |  |  |  |  | $ | .50    |  |
|                                 |

TheCompany has never paid cash dividends on its capital stock and does notanticipate paying any cash dividends in the foreseeable future otherthan dividends on its Series A Preferred Stock. The Company’sCredit Facility prohibits the payment of cash dividends without thelender’s prior consent.

Company EquityCompensation Plans

The Company presently maintains a 1994Employee Combination Stock Option Plan under which options are nolonger issued, a 1994 Director Stock Option Plan, and the CombinationStock Option and Share Award Plan (the ‘‘2002Plan’’), pursuant to which it granted equity awards toeligible persons. The following table gives information about thoseplans.

|                                                          |  |  |                                                                                           |  |           |                                                                          |  |  |                                                                                                                                           |   |     |  |  |  |  |  |         |  |
|----------------------------------------------------------|--|--|-------------------------------------------------------------------------------------------|--|-----------|--------------------------------------------------------------------------|--|--|-------------------------------------------------------------------------------------------------------------------------------------------|---|-----|--|--|--|--|--|---------|--|
| Plancategory                                             |  |  | (a)                                                                                       |  |           | (b)                                                                      |  |  | (c)                                                                                                                                       |
|                                                     |  |  | Numberof securities to be issued upon exercise of outstandingoptions, warrants and rights |  |           | Weighted average exerciseprice of outstanding options, warrant andrights |  |  | Number of securities remaining available for futureissuance under equity compensation plans (excluding securitiesreflected in column (a)) |
| Equity compensation plansapproved by security holders    |  |  |                                                                                           |  | 1,210,000 |                                                                          |  |  |                                                                                                                                           | $ | .75 |  |  |  |  |  | 300,000 |  |
| Equitycompensation plans not approved by securityholders |  |  |                                                                                           |  | 0         |                                                                          |  |  |                                                                                                                                           |   | 0   |  |  |  |  |  | 0       |  |
| Total                                                    |  |  |                                                                                           |  | 1,210,000 |                                                                          |  |  |                                                                                                                                           | $ | .75 |  |  |  |  |  | 300,000 |  |
|                                                          |

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|              |                         |
|--------------|-------------------------|
| ITEM6.  | SELECTED FINANCIAL DATA |

Thefollowing table sets forth selected financial data for the fiscalperiods indicated: a 53 week period for fiscal 2006 and, a 52 weekperiod for fiscal 2005, 2004, 2003, and 2002, which have been derivedfrom the Company’s audited financial statements.

|                                                            |  |  |               |   |            |                 |  |  |                  |   |            |                   |  |  |                 |   |            |   |  |  |  |   |            |   |  |  |  |   |            |   |
|------------------------------------------------------------|--|--|---------------|---|------------|-----------------|--|--|------------------|---|------------|-------------------|--|--|-----------------|---|------------|---|--|--|--|---|------------|---|--|--|--|---|------------|---|
|                                                       |  |  | April30, 2006 |   |            | April  24, 2005 |  |  | April25, 2004(1) |   |            | April  27,2003(1) |  |  | April  28, 2002 |
| Income Statement Data:                                     |  |  |               |   |       |                 |  |  |                  |   |       |                   |  |  |                 |   |       |   |  |  |  |   |       |   |  |  |  |   |       |   |
| Totalrevenues                                              |  |  |               | $ | 23,535,406 |                 |  |  |                  | $ | 22,629,052 |                   |  |  |                 | $ | 19,482,986 |   |  |  |  | $ | 19,697,538 |   |  |  |  | $ | 20,580,156 |   |
| Costsandexpenses:                                          |  |  |               |   |       |                 |  |  |                  |   |       |                   |  |  |                 |   |       |   |  |  |  |   |       |   |  |  |  |   |       |   |
| Costof food, beverages andliquor                           |  |  |               |   | 4,477,172  |                 |  |  |                  |   | 4,628,052  |                   |  |  |                 |   | 3,769,034  |   |  |  |  |   | 3,620,451  |   |  |  |  |   | 4,056,393  |   |
| Otheroperatingexpenses                                     |  |  |               |   | 14,735,338 |                 |  |  |                  |   | 13,912,348 |                   |  |  |                 |   | 12,044,045 |   |  |  |  |   | 11,666,240 |   |  |  |  |   | 12,243,675 |   |
| Generalandadministrative                                   |  |  |               |   | 2,484,226  |                 |  |  |                  |   | 2,450,578  |                   |  |  |                 |   | 2,738,690  |   |  |  |  |   | 2,610,666  |   |  |  |  |   | 2,132,756  |   |
| Depreciationandamortization                                |  |  |               |   | 981,549    |                 |  |  |                  |   | 976,686    |                   |  |  |                 |   | 930,272    |   |  |  |  |   | 922,366    |   |  |  |  |   | 1,003,709  |   |
| Pre-openingcosts                                           |  |  |               |   | 312        |                 |  |  |                  |   | 93,196     |                   |  |  |                 |   | 77,140     |   |  |  |  |   | —    |   |  |  |  |   | —    |   |
| Litigationand settlement credits                           |  |  |               |   | (28,805    | )               |  |  |                  |   | (98,259    | )                 |  |  |                 |   | (246,228   | ) |  |  |  |   | (443,445   | ) |  |  |  |   | —    |   |
| Chargefor assetimpairment                                  |  |  |               |   | 306,787    |                 |  |  |                  |   | —    |                   |  |  |                 |   | —    |   |  |  |  |   | —    |   |  |  |  |   | —    |   |
| Totalcosts andexpenses                                     |  |  |               |   | 22,956,579 |                 |  |  |                  |   | 21,962,601 |                   |  |  |                 |   | 19,312,953 |   |  |  |  |   | 18,376,278 |   |  |  |  |   | 19,436,533 |   |
| Operatingincome                                            |  |  |               |   | 578,827    |                 |  |  |                  |   | 666,451    |                   |  |  |                 |   | 170,033    |   |  |  |  |   | 1,321,260  |   |  |  |  |   | 1,143,623  |   |
| Interestexpense,net                                        |  |  |               |   | (372,941   | )               |  |  |                  |   | (475,132   | )                 |  |  |                 |   | (493,200   | ) |  |  |  |   | (377,829   | ) |  |  |  |   | (467,766   | ) |
| Otherincome,net                                            |  |  |               |   | 21,936     |                 |  |  |                  |   | 8,418      |                   |  |  |                 |   | 221,630    |   |  |  |  |   | 9,436      |   |  |  |  |   | 8,866      |   |
| Income(loss) from continuingOperations                     |  |  |               |   | 227,822    |                 |  |  |                  |   | 199,737    |                   |  |  |                 |   | (101,537   | ) |  |  |  |   | 952,867    |   |  |  |  |   | 684,723    |   |
| Income(loss) from discontinuedoperations                   |  |  |               |   | 70,436     |                 |  |  |                  |   | (628,452   | )                 |  |  |                 |   | (3,335,741 | ) |  |  |  |   | 40,022     |   |  |  |  |   | 206,008    |   |
| Netincome(loss)                                            |  |  |               |   | 298,258    |                 |  |  |                  |   | (428,715   | )                 |  |  |                 |   | (3,437,278 | ) |  |  |  |   | 992,889    |   |  |  |  |   | 890,731    |   |
| Less:Preferred stockdividends                              |  |  |               |   | (78,866    | )               |  |  |                  |   | (20,583    | )                 |  |  |                 |   | —    |   |  |  |  |   | —    |   |  |  |  |   | —    |   |
| Income(loss) available to commonshareholders               |  |  |               |   | 219,392    |                 |  |  |                  | $ | (449,298   | )                 |  |  |                 | $ | (3,437,278 | ) |  |  |  | $ | 992,889    |   |  |  |  | $ | 890,731    |   |
| Income(loss) per share of common stock (Basic andDiluted): |  |  |               |   |       |                 |  |  |                  |   |       |                   |  |  |                 |   |       |   |  |  |  |   |       |   |  |  |  |   |       |   |
| ContinuingOperations                                       |  |  |               | $ | .02        |                 |  |  |                  | $ | .03        |                   |  |  |                 | $ | (.01       | ) |  |  |  | $ | .13        |   |  |  |  | $ | .10        |   |
| DiscontinuedOperations                                     |  |  |               | $ | .01        |                 |  |  |                  | $ | (.09       | )                 |  |  |                 | $ | (.48       | ) |  |  |  | $ | .01        |   |  |  |  | $ | .03        |   |
| Income(loss) available to commonshareholders               |  |  |               | $ | .03        |                 |  |  |                  | $ | (.06       | )                 |  |  |                 | $ | (.49       | ) |  |  |  | $ | .14        |   |  |  |  | $ | .13        |   |
| BalanceSheetItems:                                         |  |  |               |   |       |                 |  |  |                  |   |       |                   |  |  |                 |   |       |   |  |  |  |   |       |   |  |  |  |   |       |   |
| TotalAssets                                                |  |  |               | $ | 6,390,678  |                 |  |  |                  | $ | 6,741,301  |                   |  |  |                 | $ | 7,740,807  |   |  |  |  | $ | 8,273,745  |   |  |  |  | $ | 8,640,734  |   |
| LongTermObligations                                        |  |  |               | $ | 3,533,640  |                 |  |  |                  | $ | 3,981,286  |                   |  |  |                 | $ | 2,353,177  |   |  |  |  | $ | 3,213,292  |   |  |  |  | $ | 3,750,876  |   |
| TotalLiabilities                                           |  |  |               | $ | 6,335,266  |                 |  |  |                  | $ | 6,905,281  |                   |  |  |                 | $ | 8,409,528  |   |  |  |  | $ | 5,535,187  |   |  |  |  | $ | 6,895,065  |   |
|                                                            |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Infiscal 2005, the Company closed its Pizzeria Regina in Richmond,Virginia, completed the assets sale of Polcari’s of Hyannis,Inc. and entered into an agreement for the asset sale ofPolcari’s of Cambridge, Inc. The sale of Polcari’s ofCambridge, Inc., was completed in fiscal 2006. The Income StatementData for fiscal 2004, 2003, and 2002 has been reclassified to reflectPolcari’s of Hyannis, Inc., Polcari’s of Cambridge, Inc.,and Pizzeria Regina at Richmond, Virginia as discontinued operations.See Note 13 to the Company’s Consolidated FinancialStatement. |

|              |                                                                                            |
|--------------|--------------------------------------------------------------------------------------------|
| ITEM7.  | MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF OPERATIONS |

ThisManagement’s Discussion and Analysis describes the principalfactors affecting the results of operations, liquidity and capitalresources, as well as the critical accounting policies of the Company.This discussion should be read in conjunction with the accompanyingaudited financial statements, 

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which include additional information aboutour significant accounting policies and practices and the transactionsthat underlie our financial results.

The Company reports theresults of its Pizzeria Regina restaurants and its Polcari North Endrestaurants as one operating segment since they have similar economiccharacteristics.

Except as otherwise indicated, references toyears mean our fiscal year ended April  30,  2006,April  24,  2005 and April  25,2004.

RESULTS OF OPERATIONS

Overview:

The keyfactors that affect our operating results are the impact of new storeopenings, comparable restaurant sales, which are driven by comparablecustomer counts and check average, and our ability to manage operatingexpenses such as food cost, labor and benefits and other costs. Changesin the number of restaurants in operation can dramatically change theabsolute dollar amounts of revenues and expenses, and opening of newstores can dramatically affect operating profits. Each restaurantunit’s contribution margin will vary over the life of therestaurant. Margins tend to be low when a restaurant is first openeduntil customer traffic reaches planned levels. Margins can alsodeteriorate at the end of a unit’s life cycle due to a declinein customer traffic caused by a variety of factors outside the controlof the Company. These economic conditions impact both the PizzeriaRegina units and the Polcari North End units.

There were 16 unitsin continuing operations for all fiscal 2006 and one for 3 months.There were 15 units in continuing operations for all fiscal 2005, onenew Pizzeria Regina was added in the third month of fiscal 2005. Therewere 14 units in operation for all fiscal 2004, and one new PizzeriaRegina was added in the twelfth month of fiscal 2004.

Duringfiscal 2006 the Company completed the asset sale of Polcari’s ofCambridge, Inc. on July  22,  2005.

On March17,  2006, the Company entered into an Agreement and Plan ofMerger (the ‘‘Merger Agreement’’) by andamong the Company, Dolphin Direct Equity Partners, LP(‘‘Dolphin’’) and Braidol AcquisitionCorp., (‘‘Braidol’’) a wholly-ownedsubsidiary of Dolphin (‘‘Sub’’), wherebyBraidol Sub will merge (the ‘‘Merger’’)with and into the Company with the Company surviving the Merger. Underthe terms of the Merger Agreement, the common stockholders of theCompany, would be entitled to receive an amount equal to $0.70, withoutinterest, per share of common stock. Under the terms of the MergerAgreement, the preferred stockholders of the Company would be entitledto receive a liquidation preference of $.0.85 per share $974,998 plusall accrued but unpaid dividends as set forth in the certificate ofdesignation for the preferred stock, without interest, as well as theproduct of the number of shares of common stock that such shares ofpreferred stock are convertible in to immediately prior to the mergerand $.70, without interest. The consummation of the Merger is subjectto customary closing conditions, including the approval of thestockholders of the Company. In addition, the consummation of theMerger is subject to the condition that certain transaction costsincurred by the Company not exceed $625,000. The Company has determinedthat it is unlikely that the Company will satisfy this condition andhas sought a waiver from Dolphin. As of June  29,  2006,the Company has not received that waiver.

In any event, theCompany is required to pay certain of Dolphin’s expenses. Undercertain circumstances, if the Merger is not completed, the Company isrequired to pay a termination fee of up to $325,000, less any expensesit has paid for the benefit of Dolphin and its affiliates. As of thedate hereof, Dolphin and its affiliate Dolphin Offshore Partners, L.P.hold a 40.3% beneficial interest in the Company’s commonstock. Peter Salas, a member of the Company’s Board ofDirectors, is President of Dolphin Asset Management Corp. an affiliateof Dolphin, and its related companies.

If the merger issuccessfully completed, the Company will operate as a private Companywith no SEC reporting obligations.

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The following table sets forth allrevenues, costs and expenses as a percentage of total revenues for theperiods indicated for revenue and expense items included in theconsolidated statements of operations:    

|                                             |  |  |                |  |         |                                       |  |  |              |  |         |    |  |  |  |  |         |    |
|---------------------------------------------|--|--|----------------|--|---------|---------------------------------------|--|--|--------------|--|---------|----|--|--|--|--|---------|----|
|                                        |  |  | April30,  2006 |  |         | April 24,    2005 |  |  | April25,2004 |
| Revenues:                                   |  |  |                |  |    |                                       |  |  |              |  |    |    |  |  |  |  |    |    |
| RestaurantSales                             |  |  |                |  | 100.0   | %                                     |  |  |              |  | 100.0   | %  |  |  |  |  | 99.9    | %  |
| Other                                       |  |  |                |  | — |                                       |  |  |              |  | — |    |  |  |  |  | .1      |    |
| TotalRevenues                               |  |  |                |  | 100.0   |                                       |  |  |              |  | 100.0   |    |  |  |  |  | 100.0   |    |
| Costsand expenses:                          |  |  |                |  |    |                                       |  |  |              |  |    |    |  |  |  |  |    |    |
| Costof food, beverages andliquor            |  |  |                |  | 19.0    |                                       |  |  |              |  | 20.4    |    |  |  |  |  | 19.3    |    |
| Otheroperatingexpenses-payroll              |  |  |                |  | 29.3    |                                       |  |  |              |  | 29.5    |    |  |  |  |  | 30.3    |    |
| Otheroperating expenses exclusive ofpayroll |  |  |                |  | 33.3    |                                       |  |  |              |  | 32.0    |    |  |  |  |  | 31.5    |    |
| Generalandadministrative                    |  |  |                |  | 10.5    |                                       |  |  |              |  | 10.8    |    |  |  |  |  | 14.1    |    |
| Depreciationandamortization                 |  |  |                |  | 4.2     |                                       |  |  |              |  | 4.3     |    |  |  |  |  | 4.8     |    |
| Pre-openingcosts                            |  |  |                |  | — |                                       |  |  |              |  | .4      |    |  |  |  |  | .4      |    |
| Litigationand settlementcredits             |  |  |                |  | (.1     | )                                     |  |  |              |  | (.4     | )  |  |  |  |  | (1.3    | )  |
| Chargefor assetImpairment                   |  |  |                |  | 1.3     |                                       |  |  |              |  | — |    |  |  |  |  | — |    |
| Operatingincome(loss)                       |  |  |                |  | 2.5     |                                       |  |  |              |  | 3.0     |    |  |  |  |  | .9      |    |
| Interestexpense,net                         |  |  |                |  | (1.6    | )                                     |  |  |              |  | (2.1    | )  |  |  |  |  | (2.5    | )  |
| Otherincome, net                            |  |  |                |  | .1      |                                       |  |  |              |  | — |    |  |  |  |  | 1.1     |    |
| Income(loss) from continuing operations     |  |  |                |  | 1.0     |                                       |  |  |              |  | .9      |    |  |  |  |  | (.5     | )  |
| Income (loss)from discontinuedoperations    |  |  |                |  | .3      |                                       |  |  |              |  | (2.8    | )  |  |  |  |  | (17.1   | )  |
| Netincome(loss)                             |  |  |                |  | 1.3     | %                                     |  |  |              |  | (1.9    | )% |  |  |  |  | (17.6   | )% |
|                                             |

Resultsof Operations for the Years Ended April  30,  2006 andApril  24,  2005

During fiscal 2006 the Companycompleted the asset sale of Polcari’s of Cambridge, Inc. onJuly  22,  2005 and recorded a gain on the sale of$132,004.

Restaurant Sales

Restaurant sales in fiscal2006 were $23,535,000 compared to $22,629,000 in fiscal 2005. TheCompany believes the increase in restaurant sales in fiscal 2006compared to fiscal 2005 was attributable to the improved economy in theNortheastern United States and to the Pizzeria Regina at South Stationin Boston, Massachusetts operating for the entire period. Sales volumefor the restaurants open throughout both fiscal 2006 and 2005 increasedby 3.3%.

Net sales at the Company’s Pizzeria Reginarestaurants increased 5.9% to $14,594,000 in fiscal 2006 from$13,785,000 in fiscal 2005. The increase in restaurant sales volume wasprincipally due to the improved economy in the Northeastern UnitedStates and to the Pizzeria Regina at South Station being open for theentire period.

Net sales at the Company’s full servicecasual dining restaurants increased by .7% to $8,870,000 infiscal 2006 from $8,806,000 in fiscal 2005. The increase in restaurantsales was primarily attributable to an improved economy in theNortheastern United States.

Sales at the Company’scommissary were $71,000 in fiscal 2006 compared to $38,000 in fiscal2005. The increase in commissary sales was primarily attributable topurchases from a licensee.

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Costs andExpenses

Cost of Food, Beverages andLiquor

Cost of food, beverages and liquor as a percentageof total revenues for all restaurants was 19% in fiscal 2006compared to 20% in fiscal 2005. The decrease as a percentage oftotal revenues was primarily attributable to the elimination of fooditems at two Pizzeria Regina locations and to a decrease in cheesecosts.

The cost of food, beverages and liquor was $4,477,000 infiscal 2006 compared to $4,628,000 in fiscal 2005. The dollar decreasewas due in part to the elimination of food items at two Pizzeria Reginalocations and to a decrease in cheese costs.

The cost of food,beverages, and liquor as a percentage of restaurant sales at thePizzeria Regina restaurants was 16% in fiscal 2006 compared to18% in fiscal 2005. The decrease as a percentage of restaurantsales was principally due to the elimination of food items at twoPizzeria Regina locations and to a decrease in cheese costs.

Thecost of food, beverages and liquor at the Pizzeria Regina restaurantswas $2,278,000 in fiscal 2006 compared to $2,447,000 in fiscal 2005.The dollar decrease was due to two Pizzeria Regina locations thateliminated certain food items from their menus and to a decrease incheese costs.

The cost of food, beverages and liquor as apercentage of restaurant sales at the Company’s full servicecasual dining restaurants was 25% in both fiscal 2006 and fiscal2005.

The cost of food, beverages and liquor at theCompany’s full service casual dining restaurants was $2,199,000in fiscal 2006 compared to $2,181,000 in fiscal 2005. The dollarincrease is a result of higher revenues.

Other OperatingExpenses

Payroll Expenses.    Payroll expensesas a percentage of total revenues for all restaurants were 29%in fiscal 2006 compared to 30% in fiscal 2005. The decrease as apercentage of total revenues was attributable to the Pizzeria Reginalocations which generally have lower payroll costs than theCompany’s full service casual dining restaurants.

Payrollexpenses for all the restaurants were $6,892,000 in fiscal 2006compared to $6,676,000 in fiscal 2005. The dollar increase in payrollexpenses was primarily due to the Pizzeria Regina at South Station inBoston, Massachusetts being open for the entire period and to higheremployee incentive costs.

Payroll expenses at the Pizzeria Reginarestaurants were 25% of restaurant sales in fiscal 2006 comparedto 26% in fiscal 2005. The decrease as a percentage ofrestaurant sales was principally due to the reduction in personnel attwo Pizzeria Regina restaurants due to the elimination of food itemsfrom their menus.

Payroll expenses at the Pizzeria Reginarestaurants were $3,606,000 in fiscal 2006 compared to $3,585,000 infiscal 2005. This dollar increase was primarily due to higher employeeincentive costs and to the Pizzeria Regina at South Station, Boston,Massachusetts being open for the entire period.

Payroll expensesat the Company’s full service casual dining restaurantsincreased to 32% of restaurant sales in fiscal 2006 from30% of restaurant sales in fiscal 2005. The increase as apercentage of restaurant sales was primarily attributable to higheremployee incentive costs.

Payroll expenses at theCompany’s full service casual dining restaurants were $2,848,000in fiscal 2006 compared to $2,678,000 in fiscal 2005. This dollarincrease was primarily due to higher employee incentivecosts.

Payroll expenses at the Company’s Commissary were$438,000 for fiscal 2006 as compared to $413,000 in fiscal2005.

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Other Operating Expenses, Exclusiveof Payroll.

Other operating expenses, exclusive of payroll,were 33% of total revenues in fiscal 2006 compared to 32%in fiscal 2005. The increase as a percentage of total revenues wasprimarily attributable to costs associated with the negotiation andextension of the Company’s leases for certain PizzeriaReginas.

Other operating expenses, exclusive of payroll were$7,843,000 in fiscal 2006 compared to $7,237,000 in fiscal 2005. Thisdollar increase is primarily attributable to the Pizzeria Regina atSouth Station in Boston, Massachusetts being open for the entire periodand to costs associated with the negotiation and extension of theCompany’s leases for certain Pizzeria Reginas.

Otheroperating expenses, exclusive of payroll, from the Pizzeria Reginarestaurants were 34% of restaurant sales in fiscal 2006 comparedto 33% in fiscal 2005. The increase as a percentage of sales wasprimarily attributable to costs associated with the negotiation andextension of the Company’s leases for certain Pizzeria Reginasand to higher energy costs.

Other operating expenses, exclusiveof payroll from the Pizzeria Regina restaurants were $4,962,000 infiscal 2006 compared to $4,540,000 in fiscal 2005. This dollar increasewas primarily attributable to the addition of a new Pizzeria Reginarestaurant at South Station operating for the entire period and tocosts associated with the negotiation and extension of theCompany’s leases for certain Pizzeria Reginas and to higherenergy costs.

Other operating expenses, exclusive of payroll,from the Company’s full service casual dining restaurantsincreased to 31 % of restaurant sales in fiscal 2006 from29% of restaurant sales in fiscal 2005. The increase as apercentage of restaurant sales was primarily attributable to higherenergy and maintenance costs at the Company’s full servicecasual dining restaurants.

Other operating expenses, exclusiveof payroll, from the Company’s full service casual diningrestaurants were $2,747,000 in fiscal 2006 compared to $2,569,000 infiscal 2005. The dollar increase was primarily attributable to higherenergy costs and maintenance at the Company’s full servicecasual dining restaurants.

Other operating expenses also includecommissary expenses, which were $134,000 in fiscal 2006 and $128,000 infiscal 2005.

General and AdministrativeExpenses

General and administrative expenses were11% of total revenues in both fiscal 2006 and in fiscal2005.

General and administrative expenses were $2,484,000 infiscal 2006, compared to $2,451,000 in fiscal 2005. The dollar increaseis consistent with prior year.

Depreciation and AmortizationExpenses

Depreciation and amortization expenses as apercentage of total revenues were 4% in both fiscal 2006 andfiscal 2005.

Depreciation and amortization expense was $982,000in fiscal 2006, as compared to $977,000 in fiscal 2005.

Pre-Opening Costs

Pre-opening expenses in fiscal2006 were $0 compared to $93,000 in fiscal 2005. The costs whichconsist of labor, rent and training materials are primarilyattributable to the opening of the new Pizzeria Regina restaurant atSouth Station in Boston, Massachusetts in fiscal2005.

Litigation and Settlement Credits

In 1998the Company formed a joint venture with Italian Ventures, LLC, aKentucky limited liability company (‘‘ItalianVentures’’), and entered into a development agreementwith it. 

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Approximately eight months after the jointventure and development agreement were entered into, the Company fileda lawsuit against Italian Ventures and certain related parties seekingdissolution of the joint venture. In fiscal 2001, the Company reached asettlement of the dispute with Italian Ventures, LLC in which it agreedto pay royalties on future revenues from certain ‘‘Bistrorestaurants’’, as defined in the settlement agreement.The Company accrued a liability of $955,000 in the fourth quarter offiscal 2001 as the estimated cost of the obligation to pay the futureroyalties, based upon a forecast of Bistro restaurant gross sales forthe period May  2001 through April  2008 using historicalinformation and estimates of growth of existing Bistro units, as wellas anticipated future Bistro unit openings and closings. In the fourthquarter of fiscal 2003, the Company reduced the accrual by $443,000 toreflect the Company’s revised estimate of its remainingobligation under the settlement agreement with Italian Ventures. In2004, the Company experienced the opening of an under performingPolcari’s in Cambridge, Massachusetts, which caused the Companyto reassess its expansion plans due to financial constraints. As aresult of this reassessment in fiscal 2004 the amount of accrual wasreduced by $246,000 to $258,000 to reflect the Company’s revisedestimates of the remaining obligations under the settlement agreementwith Italian Ventures. In fiscal 2005, the Company closed aPolcari’s bistro restaurant in Hyannis, Massachusetts. As aresult, the Company reduced the accrual by $98,000 to reflect theCompany’s revised estimate of its remaining obligation under thesettlement agreement with Italian Ventures. As of the end of fiscal2005, the total remaining accrual was $126,000. In fiscal 2006, theCompany reduced the accrual by $29,000 to reflect the Company’srevised estimate of its remaining obligations under the settlementagreement with Italian Ventures.

Charge for AssetImpairment

The Company recorded an impairment charge of$307,000 in the fourth quarter of fiscal 2006 which is included in theconsolidated statements of operations related to the write-down ofcertain long-lived assets. The Company reviewed the carrying value ofits long-lived assets and noted that the expected future cash flows forits Polcari’s bistro restaurant in Salem, New Hampshire are notsufficient to recover the recorded carrying value of long-lived assetsat this location. The Company then reviewed the revenue and incometrends at this location and determined that cash flow would notimprove. Subsequent to this analysis the Company reviewed variousscenarios and weighed the probability of each scenario. Accordingly,the Company recognized an impairment charge to reduce the carryingvalue of the leasehold improvementsto zero and restaurant equipment toa fair value of $161,000. The Company currently plans to continue tooperate this restaurant for its remaining lease term.

OtherIncome

Other income was $22,000 in fiscal 2006 compared to$8,000 in fiscal 2005. The increase was primarily due to insurancereimbursement for business interruption insurance at the PizzeriaRegina restaurant in Paramus, New Jersey, due to a malfunction of theParamus Mall’s HVAC system, which resulted in the closure of theentire mall.

Interest Expense and InterestIncome

Interest expense decreased to $390,000 in fiscal2006, compared to $478,000 in fiscal 2005. This decrease was primarilydue to a refinancing of the Company’s creditfacility.

Interest income was $17,000 in fiscal 2006 compared to$3,000 in fiscal 2005 due to an increase in cash reserves and higherinterest rates.

Discontinued Operations

In thefiscal 2006 period, the sale of Polcari’s of Cambridge, Inc. wascompleted on July  22,  2005. In fiscal 2005, the Companycompleted the asset sale of Polcari’s of Hyannis, Inc. in March,2005 and closed the Pizzeria Regina in Richmond, Virginia at the end ofthe lease term in November, 2004. The financial results ofPolcari’s of Hyannis, Inc., Polcari’s of Cambridge, Inc.and Pizzeria Regina in Richmond, Virginia are reflected in discontinuedoperations for all periods presented.

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The income from discontinued operationswas $70,000 in the fiscal 2006 period compared to a loss of $628,000 infiscal 2005 period. In the fiscal 2006 period, the income fromdiscontinued operations represents operating losses from thePolcari’s bistro restaurant in Hyannis, Massachusetts, thePolcari’s North End restaurant in Cambridge, Massachusetts and again of $132,000 from the disposal of certain assets of thePolcari’s North End Restaurant in Cambridge, Massachusetts. Inthe fiscal 2005 period, the loss of $628,000 from discontinuedoperations represents operating losses from the Polcari’s bistrorestaurant in Hyannis, Massachusetts, the Polcari’s North Endrestaurant in Cambridge, Massachusetts, and the Pizzeria Reginarestaurant in Richmond, Virginia, and a gain of $15,000 from thedisposal of certain assets of the Polcari’s bistro restaurant inHyannis, Massachusetts.

Results of Operations for the YearsEnded April  24,  2005 and April  25,2004

During fiscal 2005 the Company closed the PizzeriaRegina in Richmond, Virginia at the end of the lease term, completedthe asset sale of Polcari’s of Hyannis, Inc. and entered into anagreement to sell the assets of Polcari’s of Cambridge, Inc. onJuly  22,  2005 therefore the following results ofoperations for fiscal year ended April  24,  2005,April  25,  2004, and April  27,  2003 havebeen reclassified to reflect Polcari’s of Hyannis, Inc.,Polcari’s of Cambridge, Inc., and Pizzeria Regina in Richmond,Virginia as discontinued operations.

RestaurantSales

Restaurant sales in fiscal 2005 were $22,629,000 comparedto $19,466,000 in fiscal 2004. The Company believes the increase inrestaurant sales in fiscal 2005 compared to fiscal 2004 wasattributable to the opening of the new Pizzeria Regina at thePrudential Center in Boston, Massachusetts in April  2004, thenew Pizzeria Regina at South Station in Boston, Massachusetts inJuly  2004, and by the improved economy in the NortheasternUnited States. Sales volume for the restaurants open throughout bothfiscal 2005 and 2004 increased by 3.8%.

Net sales at theCompany’s Pizzeria Regina restaurants increased 25.5% to$13,785,000 in fiscal 2005 from $10,985,000 in fiscal 2004. Theincrease in restaurant sales volume was principally due to the openingof the new Pizzeria Regina at the Prudential Center, the new PizzeriaRegina at South Station and to an increase in same store sales of3.4%.

Net sales at the Company’s full servicecasual dining restaurants increased by 4.4% to$8,806,000 in fiscal 2005 from $8,436,000 in fiscal 2004.The increase in restaurant sales was primarily attributable to anincrease in same store sales of 4.4%.

Sales at theCompany’s commissary were $38,000 in fiscal 2005 compared to$45,000 in fiscal 2004. The decrease in commissary sales was primarilyattributable to the closing of a domestic Pizzeria Regina franchise inLas Vegas, Nevada in April  2004.

Franchise Fees andRoyalties

During fiscal 2005, the Company recognizedapproximately $300 in royalties from a domestic Pizzeria Reginafranchise at the Palms Casino Resort in Las Vegas, Nevada which closedon April  30,  2004, compared to approximately $17,000 inroyalties in fiscal 2004.

Costs andExpenses

Cost of Food, Beverages andLiquor

Cost of food, beverages and liquor as a percentageof total revenues for all restaurants was 20% infiscal 2005 compared to 19% in fiscal 2004. The increase as apercentage of total revenues was primarily attributable to the twoPizzeria Regina locations which have higher food costs than the otherPizzeria Regina units due to the addition of food items to their menusand to an increase in costs from suppliers in general.

The costof food, beverages and liquor was $4,628,000 in fiscal 2005 compared to$3,769,000 in fiscal 2004. The dollar increase was due in part to thetwo additional Pizzeria Regina locations and an increase in costs fromsuppliers in general.

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The cost of food, beverages, and liquor asa percentage of restaurant sales at the Pizzeria Regina restaurants was18% in fiscal 2005 compared to 16% in fiscal 2004. Theincrease as a percentage of restaurant sales was primarily due to theopening of the two new Pizzeria Regina restaurants which have higherfood costs due to the additional food items to their menus and from anincrease in cost from suppliers in general.

The cost of food,beverages and liquor at the Pizzeria Regina restaurants was $2,447,000in fiscal 2005 compared to $1,741,000 in fiscal 2004. The dollarincrease was primarily due to the opening of two additional PizzeriaRegina restaurants.

The cost of food, beverages and liquor as apercentage of restaurant sales at the Company’s full servicecasual dining restaurants increased to 25% in fiscal 2005 from24% in fiscal 2004. The increase as a percentage of restaurantsales was principally due to increases in costs from suppliers ingeneral.

The cost of food, beverages and liquor at theCompany’s full service casual dining restaurants was $2,181,000in fiscal 2005 compared to $2,028,000 in fiscal 2004. The dollarincrease was primarily due to increases in costs from suppliers ingeneral.

Other Operating Expenses

PayrollExpenses.    Payroll expenses as a percentage of total revenuesfor all restaurants were 29% in fiscal 2005 compared to30% in fiscal 2004. The decrease as a percentage of totalrevenues was attributable to the opening of the two additional PizzeriaRegina locations which generally have lower payroll costs than theCompany’s full service casual dining restaurants. This waspartially offset by startup costs associated with the opening of thesetwo locations because, as is typical in the restaurant industry, theCompany overstaffed these locations during the first few months oftheir operations to help them succeed.

Payroll expenses for allthe restaurants were $6,676,000 in fiscal 2005 compared to $5,914,000in fiscal 2004. The dollar increase in payroll expenses was primarilydue to the two new Pizzeria Regina restaurants in Boston,Massachusetts.

Payroll expenses at the Pizzeria Reginarestaurants were 26% of restaurant sales in fiscal 2005 comparedto 25% in fiscal 2004. The increase as a percentage ofrestaurant sales was principally due to the two new Pizzeria Reginarestaurants in Boston, Massachusetts and to increased costs in employeehealth benefits.

Payroll expenses at the Pizzeria Reginarestaurants were $3,585,000 in fiscal 2005 compared to $2,798,000 infiscal 2004. This dollar increase was primarily due to the opening oftwo new Pizzeria Regina locations and to increased costs in employeehealth benefits.

Payroll expenses at the Company’s fullservice casual dining restaurants decreased to 30% of restaurantsales in fiscal 2005 from 32% of restaurant sales in fiscal2004. The decrease as a percentage of restaurant sales was primarilyattributable to lower employee incentive costs.

Payroll expensesat the Company’s full service casual dining restaurants were$2,678,000 in fiscal 2005 compared to $2,712,000 in fiscal 2004. Thisdollar decrease was primarily due to lower employee incentivecosts.

Payroll expenses at the Company’s Commissary were$413,000 for fiscal 2005 as compared to $404,000 in fiscal2004.

Other Operating Expenses, Exclusive ofPayroll.

Other operating expenses, exclusive of payroll,were 32% of total revenues in fiscal 2005 compared to 31%in fiscal 2004. The increase as a percentage of total revenues wasattributable to higher promotion, energy and maintenance costs.

Other operating expenses, exclusive of payroll were $7,237,000 infiscal 2005 compared to $6,130,000 in fiscal 2004. This dollar increaseis primarily attributable to the new Pizzeria Regina at PrudentialCenter in Boston, Massachusetts, the new Pizzeria Regina at SouthStation in Boston, Massachusetts and higher energycosts.

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Other operating expenses, exclusive ofpayroll, from the Pizzeria Regina restaurants were 33% ofrestaurant sales in both fiscal 2005 and in fiscal 2004.

Otheroperating expenses, exclusive of payroll from the Pizzeria Reginarestaurants were $4,540,000 in fiscal 2005 compared to $3,624,000 infiscal 2004. This dollar increase was primarily attributable to theaddition of two new Pizzeria Regina locations and higher energycosts.

Other operating expenses, exclusive of payroll, from theCompany’s full service casual dining restaurants increased to29% of restaurant sales in fiscal 2005 from 28% ofrestaurant sales in fiscal 2004. The increase as a percentage ofrestaurant sales was primarily attributable to an increase inpromotions at the Polcari’s bistro restaurant in Salem, NewHampshire and higher energy costs and maintenance at theCompany’s full service casual dining restaurants.

Otheroperating expenses, exclusive of payroll, from the Company’sfull service casual dining restaurants were $2,569,000 in fiscal 2005compared to $2,381,000 in fiscal 2004. The dollar increase wasprimarily attributable to the increase in promotions at thePolcari’s bistro restaurant in Salem, New Hampshire and higherenergy costs and maintenance at the Company’s full servicecasual dining restaurants.

Other operating expenses also includecommissary expenses, which were $128,000 in fiscal 2005 and $125,000 infiscal 2004.

General and AdministrativeExpenses

General and administrative expenses were11% of total revenues in fiscal 2005 compared to14% in fiscal 2004. The decrease as a percentage oftotal revenues was attributable to a higher revenue base and loweremployee incentive costs and lower consulting costs.

General andadministrative expenses were $2,451,000 in fiscal 2005, compared to$2,739,000 in fiscal 2004. The dollar decrease was primarilyattributable to lower employee incentive costs and consultingcosts.

Depreciation and AmortizationExpenses

Depreciation and amortization expenses as apercentage of total revenues were 4% in the fiscal 2005 periodcompared to 5% in the fiscal 2004 period. The decrease as apercentage of total revenue was attributable to a higher revenuebase.

Depreciation and amortization expense was $977,000 infiscal 2005, as compared to $930,000 in fiscal 2004. The increase indepreciation and amortization expense was primarily due to the additionof two Pizzeria Regina restaurants in Boston,Massachusetts.

Pre-Opening Costs

Pre-openingexpenses in fiscal 2005 were $93,000 compared to $77,000 in fiscal2004. The costs which consist of labor, rent and training materials areprimarily attributable to the opening of the new Pizzeria Reginarestaurant at South Station in Boston, Massachusetts in fiscal 2005 andto the new Pizzeria Regina restaurant at the Prudential Centerrestaurant in Boston, Massachusetts in fiscal 2004.

Litigation and Settlement Credits

In 1998 theCompany formed a joint venture with Italian Ventures, LLC, a Kentuckylimited liability company (‘‘ItalianVentures’’), and entered into a development agreementwith it. Approximately eight months after the joint venture anddevelopment agreement were entered into, the Company filed a lawsuitagainst Italian Ventures and certain related parties seekingdissolution of the joint venture. In fiscal 2001, the Company reached asettlement of the dispute with Italian Ventures, LLC in which it agreedto pay royalties on future revenues from certain ‘‘Bistrorestaurants’’, as defined in the settlement agreement.The Company accrued a liability of $955,000 in the fourth quarter offiscal 2001 as the estimated cost of the obligation to pay the futureroyalties, 

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based upon a forecast of Bistro restaurantgross sales for the period May  2001 through April  2008using historical information and estimates of growth of existing Bistrounits, as well as anticipated future Bistro unit openings and closings.In the fourth quarter of fiscal 2003, the Company reduced the accrualby $443,000 to reflect the Company’s revised estimate of itsremaining obligation under the settlement agreement with ItalianVentures. In 2004, the Company experienced the opening of an underperforming Polcari’s in Cambridge, Massachusetts, which causedthe Company to reassess its expansion plans due to financialconstraints. As a result of this reassessment in fiscal 2004 the amountof accrual was reduced by $246,000 to $258,000 to reflect theCompany’s revised estimates of the remaining obligations underthe settlement agreement with Italian Ventures. In fiscal 2005, theCompany closed a Polcari’s bistro restaurant in Hyannis,Massachusetts. As a result, the Company reduced the accrual by $98,000to reflect the Company’s revised estimate of its remainingobligation under the settlement agreement with Italian Ventures. As ofthe end of fiscal 2005, the total remaining accrual was$126,000.

Other Income

Other income was $8,000in fiscal 2005 compared to $222,000 in fiscal 2004. The prioryear’s other income mainly consisted of insurance proceedsrelated to the temporary closing of the Faneuil Hall Pizzeria Reginarestaurant.

Interest Expense and InterestIncome

Interest expense decreased to $478,000 in fiscal2005, compared to $496,000 in fiscal 2004. This decrease was primarilydue to a decrease in interest expense under the Company’s creditfacility.

Interest income was $3,000 in both fiscal 2005 andfiscal 2004 years.

Discontinued Operations

Infiscal 2005, the Company completed the asset sale of Polcari’sof Hyannis, Inc. and entered into an agreement for the asset sale ofPolcari’s of Cambridge, Inc. The Company received approximately$552,000 of net proceeds from the sale of Polcari’s of Hyannis.The sale of Polcari’s of Cambridge, Inc. is scheduled to becompleted on July  22,  2005 and the net proceeds will berecorded when the sale is completed. In November  2004, at theend of the lease term, the Company ceased operations of the PizzeriaRegina in Richmond, Virginia. The Company has reclassified itsfinancial results to reflect Polcari’s of Hyannis, Inc.,Polcari’s of Cambridge, Inc., and Pizzeria Regina in Richmond,Virginia as discontinued operations.

The loss from discontinuedoperations was $628,000 in fiscal 2005 compared to $3,336,000 in fiscal2004. In fiscal 2005, the loss from discontinued operations representsoperating losses from the Polcari’s bistro restaurant inHyannis, Massachusetts, the Polcari’s North End restaurant inCambridge, Massachusetts, and the Pizzeria Regina restaurant inRichmond, Virginia of $643,000 and a gain of $15,000 from the disposalof certain assets of the Polcari’s bistro in Hyannis,Massachusetts. In fiscal 2004, the loss of $3,336,000 from discontinuedoperations represents operating losses from the Polcari’s bistrorestaurant in Hyannis, Massachusetts the Pizzeria Regina restaurant inRichmond, Virginia and the Polcari’s North End in Cambridge,Massachusetts, including an impairment charge of $2,163,000related to the write-down of certain long lived assets for thatlocation.

The Company reviewed the carrying value of its longlived assets and noted that the expected future cash flows for thislocation were not sufficient to recover the recorded carrying value oflong-lived assets at this location. Accordingly, the Company recognizedan impairment charge to reduce the carrying value of long lived assetsat this location. The Company recognized an impairment charge to reducethe carrying value of leasehold improvements to zero and restaurantequipment to an estimated fair market value based on the estimatedresidual value of the equipment.

LIQUIDITY AND CAPITALRESOURCES

Our primary sources of funding during fiscal 2006 werecash provided by operations, and the proceeds received from thedisposition of the assets of Polcari’s of Cambridge.

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At April  30,  2006, theCompany had a working capital deficit of $1,175,000 compared to adeficit of $1,339,000 at the end of fiscal 2005, and cash and cashequivalents $812,000, compared to $687,000 at the end offiscal 2005. For the year ended April  30,  2006, theCompany has net income before dividends to preferred shareholders ofapproximately $298,000. As of that date, the Company hadstockholders’ equity of $55,000 as compared to a deficit of$164,000 at the end of fiscal 2005.

During fiscal 2006, theCompany had a net increase in cash and cash equivalents of $124,000,reflecting net cash provided by operating activities of $794,000, netcash used for investing activities of $203,000 and net cash used forfinancing activities of $467,000.

Net cash provided by operatingactivities of $794,000 included net income of $298,000, depreciationand amortization expense of $981,000, a charge for asset impairment of$307,000, a decrease in inventories of $122,000, an increase inaccounts payables of $216,000 and a decrease in accounts receivables of$13,000. This was partially offset by, an increase of other assets of$561,000 , a decrease in other long-term liabilities of $29,000, adecrease in deferred rent of $16,000, a decrease in accrued expenses of$324,000, an increase in prepaid expenses of $52,000 and a reduction ofthe litigation settlement of $29,000 and a gain on sale of discontinuedoperations of $132,000. Net cash used for investing activities of$203,000 reflects capital expenditures associated with thePolcari’s North End restaurant, Polcari’s North Endbistro restaurants and various Pizzeria Regina restaurants partiallyoffset by the asset sale of Polcari’s North End in Cambridge,Massachusetts, in the amount of $214,000. Net cash used for financingactivities of $467,000 consisted of repayments of long term debt, leaseobligations, stockholders loans and payments of preferreddividends.

At April  30,  2006, the Company hadcurrent liabilities of $2,802,000, including $998,000 of accountspayable, $1,422,000 of accrued expenses and, current maturities of longterm obligations in the amount of $382,000. At April  30,2006, the Company had long-term obligations, less current maturities,in the amount of $3,534,000, including $76,000 of notes payable to astockholder, $1,579,000 due under its credit facility with CommerceBank and Trust Company, $1,450,000 of convertible subordinateddebentures, $352,000 of deferred rent, and $77,000 of other long-termliabilities primarily related to the litigation settlement agreementwith Italian Ventures, LLC.

Regardless of whether the Companycompletes the Merger described in ‘‘Results of Operations— Overview’’ of this Item 7, the Company believesthat its existing resources, together with cash flow generated fromoperations, will be sufficient to fund its cash flow requirements andmaintain debt covenant compliance for the next twelve months. Undercertain circumstances, if the Merger is not completed, the Company isrequired to pay a termination fee of up to $325,000, less any expensesit has paid for the benefit of Dolphin and its affiliates. In addition,the Company estimates that it will be required to incur directtransaction costs of $625,000, which include fees related to financialadvisors, attorneys, accountants and financial printers. The Companyhas capitalized certain of these costs as deferred merger costs atApril 30, 2006.

However, the Company’s growth will bedependent upon obtaining additional financing. There can be noassurance that any future additional financing will be available oncommercially reasonable terms, or at all, and the success or lack ofsuccess of the Company’s restaurants opened within the last yearand planned to be opened in the future may have a critical effect onthe Company’s ability to raise funds through the sale of stockor otherwise.

Contractual Obligations

TheCompany has long-term contractual obligations primarily in the form ofleases and debt obligations. The following table summarizes theCompany’s contractual obligations and their aggregate maturitiesas of April  30,  2006. (See discussions of cash flows,financial position and capital resources as well as the Notes to theApril  30,  2006 consolidated financial statements forfurther details).

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| ContractualObligations       |  |  | Total |   |            | Less than 1year |  |  | 1-3 years |   |           | 3-5 years |  |  | More than 5years |
| Long term debtobligations(1) |  |  |       | $ | 3,404,045  |                 |  |  |           | $ | 374,754   |           |  |  |                  | $ | 866,068   |  |  |  |  | $ | 713,223   |  |  |  |  | $ | 1,450,000 |  |
| Operatingleaseobligations    |  |  |       |   | 19,215,983 |                 |  |  |           |   | 3,107,683 |           |  |  |                  |   | 5,601,400 |  |  |  |  |   | 3,764,200 |  |  |  |  |   | 6,742,700 |  |
| Purchaseobligations          |  |  |       |   | —    |                 |  |  |           |   | —   |           |  |  |                  |   | —   |  |  |  |  |   | —   |  |  |  |  |   | —   |  |
| ShareholderNote(2)           |  |  |       |   | 82,431     |                 |  |  |           |   | 6,736     |           |  |  |                  |   | 14,440    |  |  |  |  |   | 15,812    |  |  |  |  |   | 45,443    |  |
| Total                        |  |  |       |   | 22,702,459 |                 |  |  |           |   | 3,489,173 |           |  |  |                  |   | 6,481,908 |  |  |  |  |   | 4,493,235 |  |  |  |  |   | 8,238,143 |  |
|                              |

|  |
|--|
|  |  |
|  |

|     |                                                                                                                                         |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Consistsprincipally of bank borrowings under the Credit Facility and the$1,450,000 principal amount of long term convertibledebentures. |

|     |                                          |
|-----|------------------------------------------|
| (2) | Consists principally ofshareholder note. |

The Company requires cash to pay itsoperating expenses and to service the obligations listed above. TheCompany’s principal sources of funds are its operations. TheCompany cannot guarantee that its operations will generate cash infuture periods.

The Credit Facility requires compliance withvarious financial covenants, of which the most restrictive are cash todebt ratio and profitability. If the Company defaults under any of theprovisions of the Credit Facility, all amounts outstanding under eachof the term facilities become due and payable, and the bank may proceedagainst its collateral, which includes substantially all of theCompany’s assets. As of April  30,  2006 the Companywas in compliance with the financial covenants of the CreditFacility.

CRITICAL ACCOUNTING POLICIES

The Companyconsiders its accounting policies with respect to the use of estimates,long-lived assets and goodwill, and revenue recognition as the mostcritical to its results of operations and financialcondition.

Use of Estimates

The preparation of financialstatements in conformity with generally accepted accounting principlesin the United States of America requires management to make estimatesand assumptions that affect the reported amounts of assets andliabilities, and disclosure of contingent assets and liabilities at thedate of the financial statements, and reported amounts of revenues andexpenses during the reporting period. Actual results could differ fromthose estimates. For example, in fiscal 2001 the Company recorded anon-recurring charge for a litigation settlement agreement. Thisestimate was based on projected sales of current and future bistrorestaurants, which assumed the number and timing of new BistroRestaurants as defined in the settlement agreement as demonstrated byour discussion of this accrual in our results of operations. The actualroyalty payments ultimately required to be paid may vary significantlyfrom both the Company’s original and its revisedestimates.

Long-Lived Assets

The Company evaluates itslong-lived assets under the provisions of Statement of FinancialAccounting Standards No. 144 (‘‘SFAS No.144’’). SFAS No. 144 establishes accounting standards forthe impairment of long-lived assets and certain identifiableintangibles to be held and used and for long-lived assets, and certainidentifiable intangibles to be disposed of.

Whenever events orchanges in circumstances indicate that the carrying amounts of theassets may not be recoverable, the Company reviews the carrying valuesof its long-lived and identifiable intangible assets for possibleimpairment, as appropriate. In fiscal 2006 the Company recorded animpairment charge of $307,000 related to the write down of certainlong-lived assets of a Polcari’s Bistro located in Salem, NewHampshire. In fiscal 2004, the Company recorded an impairment charge of$2,163,000, included in discontinued operations, related to thewrite-down of certain long-lived 

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assets of the Polcari’s North Endlocated in Cambridge, Massachusetts. The Company determined that thefuture cash flows which the Company estimated would be received fromthe respective restaurants would not be sufficient to recover therecorded carrying value of the long-lived assets applicable to thatlocation.

Goodwill

Goodwill resulting from the excess ofcost over fair value of net assets acquired is being tested forimpairment in accordance with the guidelines in SFAS No. 142. SFAS No.142 requires among other things, that companies no longer amortizegoodwill but test goodwill for impairment at least annually. As ofApril  30,  2006, the Company’s goodwill of $453,643was associated with the acquisition of Capucino’s, Inc. in 1994.No adjustment to the $453,643 balance of goodwill was deemed necessaryduring the year ended April  30,  2006. Prior to theadoption of SFAS 142, the Company amortized goodwill over twentyyears.

Revenue Recognition

Substantially all restaurantsales represent retail sales to the general public throughCompany-owned restaurants. Such amounts are recognized as revenue atthe point of sale.

Franchise fees resulting from the sale ofindividual franchise locations are recognized as revenue upon thecommencement of franchise operations. Revenues from the sale of areadevelopment rights are recognized proportionately as the franchisedrestaurants commence operations. Franchise royalties, which are basedon a percentage of franchised restaurants’ sales are recognizedwhen revenue is earned.

Recently Issued AccountingStandards

In May  2005, the FASB issued SFAS No. 154,‘‘Accounting Changes and ErrorCorrection’’, replaces ABP Opinion 20,‘‘Accounting Changes,’’ and FASBStatement No. 3, ‘‘Reporting Accounting Changes inInterim Financial Statements,’’ and changes therequirements for the accounting for and reporting of a change inaccounting principle. SFAS No. 154 requires retrospective applicationto prior period’s financial statements of changes in accountingprinciple, unless it is impracticable to determine either theperiod-specific effects or the cumulative effect of the change. SFASNo. 154 shall be effective for accounting changes and corrections oferrors made in fiscal years beginning after December  15,2005. Early adoption is permitted for accounting changes andcorrections of error made in fiscal years beginning after the date SFASNo. 154 was issued. At the present time, we do not believe thatadoption of SFAS No. 154 will have a material effect on our financialposition, results of operations or cash flows.

InDecember 2004, the FASB issued SFAS No. 123R whichaddresses the accounting for transactions in which a company receivesemployee services in exchange for (a) equity instruments of thecompany or (b) liabilities that are based on the fair value ofthe company's equity instruments or that may be settled by theissuance of such equity instruments. It eliminates the ability toaccount for share-based compensation transactions using APB OpinionNo. 25, and generally requires that such transactions beaccounted for using a fair-value-based method. As permitted by thecurrent SFAS No. 123, Accounting for Stock-BasedCompensation, we have been accounting for share-based compensationto employees using APB Opinion No. 25's intrinsic valuemethod and, as such, we generally recognize no compensation cost foremployee stock options. Under the original guidance of SFASNo. 123R, we were to adopt the statement's provisions forthe interim period beginning after June 15, 2005. However, inApril 2005, as a result of an action by the Securities andExchange Commission, companies were allowed to adopt the provisions ofSFAS No. 123R at the beginning of their fiscal year that beginsafter June 15, 2005. Consequently, we adopted SFASNo. 123R on May 1, 2006. While we expect thatthe requirement to expense stock options and other equity intereststhat have been or will be granted pursuant to our equity incentiveprogram will significantly increase our operating expenses and resultin lower earnings per share, the amount of the increase in operatingexpenses will depend on the level of future grants, the terms and fairvalues of such grants, 

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and expected volatilities, among otherfactors, present at the grant dates. The adoption of SFASNo. 123R will have no impact on our cash flows.

|               |                                                            |
|---------------|------------------------------------------------------------|
| ITEM7A.  | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUTMARKET RISKS. |

Interest Rate Risk.

We have exposureto interest rate risk related to certain instruments entered into forother than trading purposes. Specifically, borrowings under the CreditFacility described in Item 7 bear interest at a variable rate based onthe bank’s prime rate. A 100 basis point change in the CreditFacility interest rate (approximately 9.75% at April30,  2006) would cause the interest expense for fiscal 2007 tochange by approximately $13,000. This computation is determined byconsidering the impact of hypothetical interest rates on our variablelong-term debt at April  30,  2006. However, the nature andamount of our borrowings under the Credit Facility may vary as a resultof future business requirements, market conditions covenant complianceand other factors.

Our other outstanding long-term debt bearsfixed rates of interest. The Company believes there is no materialexposure to a market interest rate risk that could affect futureresults of operations or financial conditions.

Commodity PriceRisk.

Many of the food products and other operating essentialspurchased by us are affected by commodity pricing and are, therefore,subject to price volatility caused by weather, production problems,delivery difficulties and other factors that are beyond our control.Our supplies and raw materials are available from several sources andwe are not dependent upon any single source for these items. TheCompany negotiates directly with wholesale suppliers of certain highvolume food ingredients such as cheese, tomato sauce, and flour toensure consistent quality and competitive pricing. These ingredientsare then purchased for the Company by a third party independentdistributor at the negotiated price and redistributed to theCompany’s restaurants. All other food ingredients and beverageproducts are purchased directly by the general manager of eachrestaurant in accordance with corporate guidelines. Certain significantitems that could be subject to price fluctuations are cheese and flourproducts. The Company believes that it will be able to pass throughincreased commodity costs by adjusting menu pricing in most cases.However, we believe that any changes in commodity pricing that cannotbe offset by changes in menu pricing or other product deliverystrategies would not be material.

27

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|             |                                           |
|-------------|-------------------------------------------|
| ITEM8  | FINANCIAL STATEMENTS AND SUPPLEMENTALDATA |

BOSTON RESTAURANT ASSOCIATES, INC. ANDSUBSIDIARIES INDEX TO FINANCIALSTATEMENTS

|                                                       |  |  |                  |
|-------------------------------------------------------|--|--|------------------|
|                                                  |  |  | Page             |
| Index to FinancialStatements                          |  |  | F-1              |
| Reportof Independent Registered Public AccountingFirm |  |  | F-2              |
| Consolidated FinancialStatements                      |  |  |             |
| Balance sheets                                        |  |  | F3 –F-4    |
| Statements ofoperations                               |  |  | F-5              |
| Statements ofstockholders’ equity(deficit)      |  |  | F-6              |
| Statements of cashflows                               |  |  | F-7              |
| Summary of accountingpolicies                         |  |  | F-8 – F-14 |
| Notes toconsolidated financial statements             |  |  | F-15 –F-32 |
|                                                       |

The Company’s FinancialStatements, together with the Report of the Registered PublicAccounting Firm have been included at Item 15 and appear at Pages F-1through F-32.

|               |                                                                                    |
|---------------|------------------------------------------------------------------------------------|
| ITEM 9.  | CHANGES IN ANDDISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIALDISCLOSURE |

None.

|               |                         |
|---------------|-------------------------|
| ITEM9A.  | CONTROLS AND PROCEDURES |

As of theend of the period covered by this report, the Company’s ChiefExecutive Officer and Chief Financial Officer performed an evaluationof the effectiveness of the Company’s disclosure controls andprocedures (as defined in SEC Rule 13a-15 or 15d-15), which have beendesigned to ensure that material information related to the Company istimely disclosed. Based upon that evaluation, they concluded that thedisclosure and procedures were effective and remained unchanged in thefourth quarter of year ended April  30,  2006. In addition,there was no change in the Company's internal controls overfinancial reporting that occured during the Company's fourthquarter that has materially affected, or is reasonably likely tomaterially affect, internal controls over financial reporting.

|                |                  |
|----------------|------------------|
| ITEM 9B.  | OTHERINFORMATION |

None.

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PARTIII

|                |                                                   |
|----------------|---------------------------------------------------|
| ITEM 10.  | DIRECTORS ANDEXECUTIVE OFFICERS OF THE REGISTRANT |

The followingtable sets forth information with respect todirectors:

|                     |  |  |     |  |    |          |  |  |                                              |  |  |  |  |      |  |
|---------------------|--|--|-----|--|----|----------|--|--|----------------------------------------------|--|--|--|--|------|--|
| Directors           |  |  | Age |  |    | Position |  |  | Since                                        |
| GeorgeR.Chapdelaine |  |  |     |  | 61 |          |  |  | ChiefExecutive Officer,President andDirector |  |  |  |  | 1994 |  |
| HughDevine          |  |  |     |  | 58 |          |  |  | Director                                     |  |  |  |  | 2000 |  |
| EdwardP. GraceIII   |  |  |     |  | 56 |          |  |  | Director                                     |  |  |  |  | 2004 |  |
| RogerLipton         |  |  |     |  | 65 |          |  |  | Director                                     |  |  |  |  | 1996 |  |
| John P.Polcari,Jr.  |  |  |     |  | 75 |          |  |  | Director                                     |  |  |  |  | 1994 |  |
| PeterE.Salas        |  |  |     |  | 52 |          |  |  | Director                                     |  |  |  |  | 2005 |  |
| RobertC.Taft        |  |  |     |  | 53 |          |  |  | Director                                     |  |  |  |  | 2004 |  |
|                     |

Mr.Chapdelaine was elected President, Chief Executive Officer and adirector of the Company in April  1994. Mr.  Chapdelaineserved as President, Chief Executive Officer and a director of PizzeriaRegina, Inc., a predecessor of the Company, from 1982 until it wasacquired by the Company in April  1994. Prior to 1982, Mr.Chapdelaine worked in the food service industry in various capacities,including as an independent marketing consultant, a general manager ofthe Food Service division for H.P. Hood, Inc. and a sales manager forChiquita Brands, a subsidiary of United Brands. Mr.  Chapdelaineholds an MBA from Clark University and graduated with a B.S. in Hoteland Restaurant Management from Oklahoma State University. He currentlyserves on the Board of the Massachusetts Restaurant Association.

Mr.  Devine has been the President of Devine & PearsonAdvertising, Inc. (an advertising and communications agency with 29years experience marketing to the food service industry) since 1976.Mr.  Devine is nationally recognized for identifying marketingopportunities for clients, both food service operators andmanufacturers of food, beverages, equipment and supplies. He serves onthe boards of directors of the YMCA, American Association ofAdvertising Agencies and Advertising Club of GreaterBoston.

Mr.  Grace has been President of Phelps GraceInternational, Inc., an investment management company, and ManagingDirector of Grace Venture Partners, LP. since 1998. Mr.Grace has over 30 years experience in the food serviceindustry. He was the founder, Chairman, President and CEO ofBugaboo Creek Steak House, Inc., operator of both The Capital Grill, a20 location fine dining restaurant, and the Bugaboo Creek Steak House,a casual dining restaurant chain with locations throughout the EastCoast, from 1989 until 1996. He was Vice Chairman and a Director ofRARE Hospitality International, Inc. from 1996 to 1998. From1992 until 1994 he was the Chairman of Homestyle Buffet, Inc., a 34location buffet style restaurant chain. Mr.  Grace hasserved as the director of a number of public and private companies,including Professional Facilities Management, Inc., Not Your AverageJoe's Inc., The Gemesis Corporation and Shawmut Design &Construction, Inc. He is currently a Trustee of Johnson &Wales University and of Bryant College and in the past has served onthe boards of a number of other trade associations, and educational andphilanthropic organizations, including the National RestaurantAssociation.

Mr.  Lipton has been President of LiptonFinancial Services, Inc. (a money management and investment bankingfirm, specializing in restaurant, franchising and retailing industries)since 1993. Since February  1995, he has also been a ManagingDirector of Axiom Capital Management, Inc., a NASD broker/dealer. From1981 until February  1995, he was Managing Director of Ladenburg,Thalmann & Co., Inc., a broker/dealer and investment bankingfirm.

Mr.  Polcari was a founder of Pizzeria Regina, Inc.and has been employed by the Company and its predecessor in variouscapacities from its inception. He is a recipient of the NationalRestaurant Association’s state restaurateur of the year awardfor the Commonwealth of Massachusetts.

Mr.  Salas has beenPresident of Dolphin Asset Management Corporation and its relatedcompanies (‘‘Dolphin’’) since he founded itin 1988. Dolphin and its affiliates are the beneficial owners

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of approximately 40.3% of theCompany’s outstanding capital stock, as set forth under theheading ‘‘Security Ownership of Certain Beneficial Ownersand Management. Affiliates of Dolphin have entered into a mergeragreement to acquire the Company. See ‘‘Item 13. CertainRelationships and Related Transactions.’’ Prior tofounding Dolphin, he was with J.P. Morgan Investment Management, Inc.for ten years. Mr.  Salas is currently a director and Chairman ofthe Board of both Tengasco, Inc. (AMEX: TGC), an independent oil andgas producer, and of ACT Teleconferencing, Inc. (OTC: ACTT), a globalteleconferencing provider. He is also a director of Williams Controls,Inc. (OTCBB: WMCO), a manufacturer of electronic throttle controls, andSouthwall Technologies, Inc. (OTCBB: SWTX), a manufacturer of energycontrol systems. Mr.  Salas received an A.B. degree from Harvardin 1978.

Mr.  Taft has been the CEO of Caffino, Inc., achain of double drive-through espresso bars, since September2003. He has over 25 years experience in the food service industry.During 2002 and 2003 Mr.  Taft was Chief Concept Officer ofUltimate Franchise System, Inc., and was President of Sonofresco from2001 to 2002 He was Chief Operating Officer of Fuddruckers, Inc., afast casual restaurant chain with over 200 franchised and company ownedlocations, from 1999 until 2001. From 1996 until 1999, he served asPresident of the Au Bon Pain Bakery Cafes unit of Au Bon Pain, Inc., afast service chain with over 250 locations. From 1993 until 1996,Mr.  Taft was the President and CEO of Papa Gino’s, Inc.He has served on the boards of Ultimate Franchise Systems, Inc. and theWashington and Massachusetts RestaurantAssociations.

Management

Anthony Buccieri, 51, wasappointed Vice President of Operations in April  1994. Mr.Buccieri joined a predecessor of the Company in 1974 and has served invarious capacities since that date, including as operations supervisorsince 1983. Ms.  Fran  Ross, 53, was appointed a CompanyVice President in, February  1995 and Chief Financial Officer inOctober  1995.

CORPORATE GOVERNANCE

General

The Board of Directors of the Company believes that good corporategovernance is important to ensure that the Company is managed for thelong-term benefit of its stockholders. In response to the wave ofcorporate scandals and Congress’s enactment of theSarbanes-Oxley Act of 2002(‘‘Sarbanes-Oxley’’), in the Fall of 2002the Board reviewed our corporate governance policies and practices andcompared them to the provisions of Sarbanes-Oxley, the new and proposedrules of the SEC under that statute and practices suggested by variousauthorities in corporate governance. Based upon that review, inDecember  2002 the Board of Directors took steps to implement thethen proposed new rules and listing standards. In particular, theBoard:

|  |              |                                                                                                                                                        |
|--|--------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | adopted a new charter for ourAudit Committee reflecting the requirements of Sarbanes-Oxley and therules adopted or then proposed for audit committees; |

|  |              |                                                  |
|--|--------------|--------------------------------------------------|
|  | •  | adopted a charter for our CompensationCommittee; |

|  |              |                                                                                                                           |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------|
|  | •  | created a Corporate Governanceand Nominating Committee (initially consisting of the entire Board) andadopted its charter; |

|  |              |                                                                                                                                                                                                      |
|--|--------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | Reviewed theindependence standards for directors then being proposed or adopted bythe SEC and Nasdaq and assessed the independence of existing board andcommittee members under those standards; and |

|  |              |                                                                                                                                       |
|--|--------------|---------------------------------------------------------------------------------------------------------------------------------------|
|  | •  | adopted a Code of Ethics and a Code ofConduct which applies to all executive officers, directors, employeesand agents of the Company. |

Subsequent to the December2002 meeting, the Board also approved adjustments in the actions takenat that meeting to conform to changes in regulations subsequentlyadopted by the SEC and the Nasdaq Stock Market, Inc.

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Board of Directors and RegularCommittees

The Board of Directors has responsibility forestablishing broad corporate policies and reviewing our overallperformance rather than day-to-day operations. The Board’sprimary responsibility is to oversee the management of the Company and,in so doing, to serve the best interests of the Company and itsstockholders. Management keeps the directors informed of Companyactivity through regular written reports and presentations at Board andcommittee meetings.

The Board of Directors held eight meetingsduring the fiscal year ended April  30,  2006. All of theCompany’s directors are encouraged to attend theCompany’s annual meeting of stockholders. All of theCompany’s directors were in attendance at the Company’sSeptember, 2005 Annual Meeting.

The Board of Directors also actedby unanimous written consent in lieu of a special meeting on threeoccasions. Each current director attended at least 75% of themeetings of the Board of Directors and of committees of which he or shewas a member held during the last fiscal year. Under the standards ofthe Nasdaq Stock Market, Inc. (NASD Rule 4200(a)(15)), the Company hasdetermined that five of the seven directors, Messrs. Devine, Grace,Lipton, Salas and Taft, satisfy the requirements to be an independentdirector.

The Board currently has the following committees: anAudit Committee, a Compensation Committee, and a Corporate Governanceand Nominating Committee.

Audit Committee.    Theprimary function of our Audit Committee is to assist the Board infulfilling its oversight responsibilities with respect to themanagement of the Company. The Audit Committee is directly responsiblefor the oversight of : (i) the integrity of the Company’sdisclosure controls and procedures; (ii) the integrity of theCompany’s internal controls over financial reporting; and (iii)the qualifications, independence, appointment, compensation andperformance of the Company’s independent auditors. It also isresponsible for administering the Company’s Code of Ethics andCode of Conduct, the establishment of‘‘whistle-blowing’’ procedures, and theoversight of certain other compliance matters.

Under its charteradopted in December  2002, as subsequently amended andsupplemented by SEC and stock market rules, the Audit Committee mustconsist of not less than one or more than three directors, all of whomsatisfy the independence standards of the SEC, the Nasdaq Stock Market.The Audit Committee has been composed of Mr.  Devine,Mr.  Grace and Mr.  Taft, all of whom the Board ofDirectors determined satisfy those standards. In 2005, the Board ofDirectors reviewed the qualifications of Mr.  Grace andMr.  Taft and determined that each was an ‘‘auditcommittee financial expert’’ as defined by SEC rules. TheAudit Committee held six meetings during the fiscal year endedApril  30,  2006.

CompensationCommittee.    The purpose of the Compensation Committee is toassist the Board in the discharge of its responsibilities related tothe fair and competitive compensation of executives and key employeesof the Company. It is charged with periodic review of the compensationphilosophy of the Company, annual evaluation of the performance of theprincipal executives and key employees, annual review of the totalcompensation of those persons, approval of grants under and supervisionof the administration of stock plans, and issuance of an annual reportto stockholders in accordance with SEC rules.

Under its charteras adopted in December  2002, the Compensation Committee mustconsist of a minimum of one director, and each member must be anon-employee, outside director under various standards of the tax lawsand rules of the SEC, who also satisfies the independence requirementsof the Nasdaq Stock Market. The Compensation Committee currently hasbeen composed of Mr.  Devine,  Mr.  Grace andMr.  Lipton all of whom the Board determined satisfy thosestandards.

The Compensation Committee held one meeting duringthe fiscal year ended April  30,  2006.

CorporateGovernance and. Nominating Committee.    The purpose of theCorporate Governance and Nominating Committee is to review and evaluatethe Company’s policies, codes of conduct and guidelines,evaluate and make recommendations to the Board concerning Boardcommittees, review 

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and evaluate the CEO and other seniormanagement (other than related to compensation), serve as a focal pointfor management succession planning, and identify and evaluatecandidates for nomination as directors.

Under its charter asadopted in December  2002, the Corporate Governance andNominating Committee may consist of either the entire Board or, if lessthan the entire Board, a committee of not less than two non-employeemembers of the Board of Directors, each of whom satisfies theindependence requirements of the Nasdaq Stock Market. The Board ofDirectors considered the functions of the Corporate Governance andNominating Committee and the fact that two of the directors who are notindependent within the meaning of the Nasdaq definition are majorstockholders and collectively the owners of approximately 20.8%of the Company’s outstanding capital stock, and determined thatit was appropriate for the entire Board of Directors to serve as theCorporate Governance and Nominating Committee. The Board met as theCorporate Governance and Nominating Committee once during the lastfiscal year.

Under its charter, the Corporate Governance andNominating Committee is responsible for identifying candidates to serveas directors (whether such directorships are filled by the Board or bystockholders), gathering information on such candidates, conductinginterviews of candidates and their references, and makingrecommendations to the full Board of Directors.

The CorporateGovernance and Nominating Committee may consider nominees recommendedby stockholders and other sources, such as directors, officers, thirdparty search firms or other appropriate sources. In evaluatingcandidates, it will consider personal integrity, sound businessjudgment, business and professional skills and experience, independence(as defined under SEC and Nasdaq rules), diversity, potential conflictsof interest, the extent to which a candidate would fill a present need,and concern for the long term interests of stockholders. In anyparticular situation, the committee may focus on persons possessing aparticular background, experience or qualifications which the Committeebelieves would be important to enhance the effectiveness of the Board.The evaluation process for stockholder recommendations is the same asfor candidates from any other source.

ADDITIONALINFORMATION

Section 16(a) Beneficial Ownership ReportingCompliance

Section 16(a) of the Securities Exchange Act of 1934,as amended (the ‘‘Exchange Act’’), requiresthe Company's directors and executive officers, and persons whobeneficially own more than 10% of the Company's CommonStock, to file reports of ownership and changes in ownership on Forms3, 4 and 5 with the Securities and Exchange Commission. Reportingpersons are also required to furnish the Company with copies of allForms 3, 4, and 5 they file.

Based solely on the Company'sreview of the copies of Forms 3, 4 and 5 which it has received andwritten representations from certain reporting persons the Companybelieves that all of its directors, executive officers, and greaterthan 10% stockholders complied with all Section 16(a) filingrequirements applicable to them during the Company's fiscal yearended April  30,  2006.

|               |                        |
|---------------|------------------------|
| ITEM11.  | EXECUTIVE COMPENSATION |

Thefollowing Summary Compensation Table sets forth the compensation duringeach of the last three fiscal years of the Chief Executive Officer andof each executive officer and others whose annual salary and bonusexceeded $100,000 for services in all capacities to the Company duringfiscal 2006 (collectively, the ‘‘Named ExecutiveOfficers’’).

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SUMMARY COMPENSATIONTABLE

|                                               |  |  |                  |  |           |                    |  |  |                       |  |         |                                       |  |  |  |  |        |  |  |  |  |  |         |  |
|-----------------------------------------------|--|--|------------------|--|-----------|--------------------|--|--|-----------------------|--|---------|---------------------------------------|--|--|--|--|--------|--|--|--|--|--|---------|--|
|                                          |  |  |             |  |           | AnnualCompensation |  |  | Long-TermCompensation |
| Nameand Principal Positions                   |  |  | Fiscal YearEnded |  |           | Salary($)          |  |  | Bonus($)              |  |         | SecuritiesUnderlying Stock Options(#) |
| George R.Chapdelaine                          |  |  |                  |  | 4/30/2006 |                    |  |  |                       |  | 241,000 |                                       |  |  |  |  | 0      |  |  |  |  |  | 0       |  |
| PresidentandCEO                               |  |  |                  |  | 4/24/2005 |                    |  |  |                       |  | 232,000 |                                       |  |  |  |  | 0      |  |  |  |  |  | 50,000  |  |
|                                          |  |  |                  |  | 4/25/2004 |                    |  |  |                       |  | 222,000 |                                       |  |  |  |  | 0      |  |  |  |  |  | 100,000 |  |
| AnthonyBuccieri                               |  |  |                  |  | 4/30/2006 |                    |  |  |                       |  | 137,000 |                                       |  |  |  |  | 0      |  |  |  |  |  | 0       |  |
| VicePresidentOperations                       |  |  |                  |  | 4/24/2005 |                    |  |  |                       |  | 135,000 |                                       |  |  |  |  | 0      |  |  |  |  |  | 20,000  |  |
|                                          |  |  |                  |  | 4/25/2004 |                    |  |  |                       |  | 129,000 |                                       |  |  |  |  | 0      |  |  |  |  |  | 0       |  |
| FranV.Ross                                    |  |  |                  |  | 4/30/2006 |                    |  |  |                       |  | 135,000 |                                       |  |  |  |  | 0      |  |  |  |  |  | 0       |  |
| VicePresidentand                              |  |  |                  |  | 4/24/2005 |                    |  |  |                       |  | 130,000 |                                       |  |  |  |  | 0      |  |  |  |  |  | 20,000  |  |
|     ChiefFinancialOfficer |  |  |                  |  | 4/25/2004 |                    |  |  |                       |  | 125,000 |                                       |  |  |  |  | 0      |  |  |  |  |  | 0       |  |
| JohnPolcari,Jr.                               |  |  |                  |  | 4/30/2006 |                    |  |  |                       |  | 105,000 |                                       |  |  |  |  | 0      |  |  |  |  |  | 0       |  |
|                                          |  |  |                  |  | 4/24/2005 |                    |  |  |                       |  | 105,000 |                                       |  |  |  |  | 0      |  |  |  |  |  | 50,000  |  |
|                                          |  |  |                  |  | 4/25/2004 |                    |  |  |                       |  | 99,900  |                                       |  |  |  |  | 25,000 |  |  |  |  |  | 0       |  |
|                                               |

StockOptions

The following table presents certain informationconcerning stock options held by the Named Executive Officers. No stockoptions were granted to or exercised by the Named Executive Officersduring the last fiscal year.

FISCAL YEAR-END OPTIONVALUES

|                          |  |  |                                                                                                           |  |           |                                                                                        |   |                                                                             |  |   |           |  |
|--------------------------|--|--|-----------------------------------------------------------------------------------------------------------|--|-----------|----------------------------------------------------------------------------------------|---|-----------------------------------------------------------------------------|--|---|-----------|--|
| Name                     |  |  | Numberof Shares of Common StockUnderlying Unexercised OptionsatApril  30, 2006 Exercisable/ Unexercisable |  |           | Valueof Unexercised In-the-Money Optionsat April  30,2006($)Exercisable/ Unexercisable |
| George R.Chapdelaine CEO |  |  | 230,000/0                                                                                                 |  |           | $39,600/$0                                                                             |
| AnthonyBuccieri          |  |  | 65,000/0                                                                                                  |  |           |                                                                                        | $ | 13,200/$0            |  |
| FranV.Ross               |  |  | 65,000/0                                                                                                  |  |           | $13,200/$0                                                                             |
| JohnPolcari,Jr.(1)       |  |  |                                                                                                           |  | 135,000/0 |                                                                                        |   |                                                                             |  | $ | 52,800/$0 |  |
|                          |

|  |
|--|
|  |  |
|  |

|     |                                        |
|-----|----------------------------------------|
| (1) | includesoptions and warrants of spouse |

EmploymentContract

The Company and Mr.  Chapdelaine, the ChiefExecutive Officer and President of the Company, entered into a two yearemployment agreement automatically renewable annually datedApril  23,  2004. This agreement has been renewed throughApril  2007. Mr.  Chapdelaine was also provided with anautomobile plus the cost of annual insurance and with such otheremployee benefits as were generally available to employees or officersof the Company. Pursuant to the employment agreement, the Companyagreed to grant Mr.  Chapdelaine stock options to acquire 100,000shares of Common Stock that vest over two years.

Under the termsof the employment agreement, if Mr.  Chapdelaine'semployment with the Company is terminated by the Company without cause,or if Mr.  Chapdelaine terminates his employment with the Companyfor good reason (either a material reduction in his overall level ofresponsibility or the relocation of the Company's executiveoffices to a location that is more than 35 miles from Boston,Massachusetts, in each case without his consent) or due to a change incontrol of the Company, then the Company must continue to payMr.  Chapdelaine his then-current base salary, payable monthly,during a one-year severance period, and Mr.  Chapdelaine may notcompete with the Company during that period.

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Mr.  Chapdelaine's employmentagreement also contains a non-competition provision that prohibitsMr.  Chapdelaine from directly or indirectly competing with theCompany as long as he is an employee of the Company and, in the case ofhis voluntarily termination or his termination by the Company forcause, for a period of two years thereafter. The agreement alsocontains confidentiality provisions that provide that Mr.Chapdelaine may not disclose proprietary information of the Company,other than in furtherance of the business of the Company or in responseto a court order.

Bonus Program

The Company has adoptedan incentive program under which key contributors, selected by theCompensation Committee, will be paid cash bonuses. The aggregate amountof these bonuses will be based upon a formula related to the financialperformance of the Company. Bonuses, if any, will be allocated by theCompensation Committee among the individual employees based upon theirperformance during the year. No bonuses were paid during the lastfiscal year.

Compensation of Directors

Non-employeedirectors of the Company presently do not receive cash compensation fortheir services as directors. The Company provides health insurancebenefits or the cash equivalent to its directors and reimburses themfor their out-of-pocket expenses in attending board meetings. Inaddition, directors were eligible for the grant of stock options underthe 2002 Combination Stock Option and Share Award Plan. No options topurchase shares of common stock were awarded to directors under theseplans during fiscal 2006.

In May, 2005, the Company created aspecial committee comprised of Messrs. Grace, Devine and Taft toevaluate strategic alternatives for the Company. Members of thecommittee were each paid a fee of $5,000. See ‘‘Item 13.Certain Relationships and RelatedTransactions.’’

Compensation CommitteeReport

The Compensation Committee of the Board of Directors,comprised of independent directors, is responsible for assisting theBoard in the discharge of its responsibilities related to the fair andcompetitive compensation of executives and key employees of theCompany. Among other responsibilities, the Compensation Committeereviews and recommends to the Board of Directors the compensation ofthe Chief Executive Officer and each of the other executive officers ofthe Company.

The objective of the Compensation Committee indetermining the compensation of the Company’s executive officersis to provide a base compensation which allows the Company to attractand retain experienced talent. The Compensation Committee’sphilosophy is to align the executive officers’ interests withthe success of the Company; therefore, the Committee has establishedbonus payments based on the Company’s performance. The cashcompensation for each executive officer consists of a base salary plusthe potential for an annual performance bonus. Mr.Chapdelaine’s salary for fiscal 2006 was based upon hispre-existing contract, and the amount of his bonus for fiscal 2006 wasbased upon his performance in relation to financial targets. TheCompany entered into a new automatically renewable employment agreementwith Mr.  Chapdelaine in April  2004. This agreement hasbeen renewed through April  2007. The terms of this newemployment agreement are in line with the CompensationCommittee’s executive officer compensationphilosophy.

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COMPENSATION COMMITTEE: Hugh Devine,Edward P. Grace, III, Roger Lipton

Performance Graph

Thefollowing graph compares the change in Boston Restaurant Associates,Inc.’s cumulative total stockholder return the last five fiscalyears with the cumulative return on the Russell 2000 and the Standard& Poor Index for Hotel, Restaurant and Leisure for thatperiod.

IndemnificationAgreements

The Company has entered into indemnificationagreements with each of its directors and anticipates that it willenter into similar agreements with any future directors. Generally, theindemnification agreements attempt to provide the maximum protectionpermitted by Delaware law with respect to indemnification ofdirectors.

The indemnification agreements provide that theCompany will pay certain amounts incurred by a director in connectionwith any civil or criminal action or proceeding and specificallyincluding actions by or in the name of the Company (derivative suits)where the individual’s involvement is by reason of the fact thathe is or was a director. Such amounts include, to the maximum extentpermitted by law, attorney’s fees, judgments, civil or criminalfines, settlement amounts, and other expenses customarily incurred inconnection with legal proceedings. Under the indemnificationagreements, a director will not receive indemnification if he is foundnot to have acted in good faith and in a manner he reasonably believedto be in or not opposed to the best interests of theCompany.

|                |                                                                                              |
|----------------|----------------------------------------------------------------------------------------------|
| ITEM 12.  | SECURITYOWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATEDSTOCKHOLDER MATTERS |

Company Equity CompensationPlans

The Company presently maintains a 1994 Director StockOption Plan and a 1994 Employee Combination Stock Option Plan underwhich options are no longer issued, and the Combination Stock Optionand Share Award Plan (the ‘‘2002 Plan’’),pursuant to which it grants equity awards to eligible persons. Thefollowing table gives information about those plans.

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|                                                                                                                                                   |  |  |                                                                                        |  |           |                                                                          |  |  |                                                                                                                                           |   |     |  |  |  |  |  |         |  |
|---------------------------------------------------------------------------------------------------------------------------------------------------|--|--|----------------------------------------------------------------------------------------|--|-----------|--------------------------------------------------------------------------|--|--|-------------------------------------------------------------------------------------------------------------------------------------------|---|-----|--|--|--|--|--|---------|--|
|                                                                                                                                              |  |  | (a)                                                                                    |  |           | (b)                                                                      |  |  | (c)                                                                                                                                       |
| Plancategory                                                                                                                                      |  |  | Number securities to be issuedupon exercise of outstanding options, warrants andrights |  |           | Weighted average exercise price of outstanding optionswarrant and rights |  |  | Number of securities remaining available forfuture issuance under equity compensation plans (excluding securitiesreflected in column (a)) |
| Equitycompensation plans approved by securityholders                                                                                              |  |  |                                                                                        |  | 1,210,000 |                                                                          |  |  |                                                                                                                                           | $ | .75 |  |  |  |  |  | 300,000 |  |
| Equitycompensation               plansnot approved by security holders |  |  |                                                                                        |  | 0         |                                                                          |  |  |                                                                                                                                           |   | 0   |  |  |  |  |  | 0       |  |
| Total                                                                                                                                             |  |  |                                                                                        |  | 1,210,000 |                                                                          |  |  |                                                                                                                                           | $ | .75 |  |  |  |  |  | 300,000 |  |
|                                                                                                                                                   |

Thefollowing table sets forth certain information regarding the beneficialownership of the Company's Common Stock as of June29,  2006 by (i) each person who is known by the Company to ownbeneficially more than five percent of the outstanding shares of CommonStock, (ii) each current director and nominee for director of theCompany, (iii) each of the Named Executive Officers listed in theSummary Compensation Table below, and (iv) all current directors,nominees and executive officers of the Company, as a group. Exceptwhere otherwise indicated, this information is based upon informationprovided to the Company by the namedperson.

|                                                                                                                    |  |  |                                               |  |           |                                 |  |  |       |
|--------------------------------------------------------------------------------------------------------------------|--|--|-----------------------------------------------|--|-----------|---------------------------------|--|--|-------|
| Nameand Address of Beneficial Owner                                                                                |  |  | Amount andNature ofBeneficial Ownership(1)(2) |  |           | Percentageof Outstanding Shares |
| George R.Chapdelaine(3) c/o Boston Restaurant Associates,Inc. 999 Broadway Saugus, MA 01906                        |  |  |                                               |  | 960,390   |                                 |  |  | 13.1% |
| AnthonyBuccieri(9) c/o Boston Restaurant Associates, Inc.999 Broadway, Suite 400 Saugus, MA 01906                  |  |  |                                               |  | 70,100    |                                 |  |  | 1.0%  |
| HughDevine(4) Devine & Pearson Crown ColonyPark 300 Congress Street Quincy, MA 02169                           |  |  |                                               |  | 110,000   |                                 |  |  | 1.5%  |
| Edward P. GraceIII(8) Grace Venture Partners Sun Trust Center,suite 1850 200 South Orange Avenue Orlando, FL 32801 |  |  |                                               |  | 243,547   |                                 |  |  | 3.4%  |
| Roger Lipton(5)(6) 983 Park Avenue New York, NY10028                                                               |  |  |                                               |  | 80,000    |                                 |  |  | 1.1%  |
| John P.Polcari, Jr. (5)(7) c/o Boston RestaurantAssociates, Inc. 999 Broadway Saugus, MA 01906                     |  |  |                                               |  | 1,061,568 |                                 |  |  | 14.7% |
|                                                                                                                    |

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|                                                                                                |  |  |                                               |  |           |                                 |  |  |       |
|------------------------------------------------------------------------------------------------|--|--|-----------------------------------------------|--|-----------|---------------------------------|--|--|-------|
| Nameand Address of Beneficial Owner                                                            |  |  | Amount andNature ofBeneficial Ownership(1)(2) |  |           | Percentageof Outstanding Shares |
| Fran V. Ross (9) c/oBoston Restaurant Associates, Inc. 999 Broadway, suite 400Saugus, MA 01906 |  |  |                                               |  | 89,901    |                                 |  |  | 1.3%  |
| Peter E.Salas(10)(11)Dolphin Asset Management Corp. 129East 17th StreetNew York, NY10003       |  |  |                                               |  | 3,302,811 |                                 |  |  | 44.0% |
| RobertC. Taft (12) Caffino 3130 Crow Canyon ParkPlace, Suite 120 San Ramon, CA 94583           |  |  |                                               |  | 230,573   |                                 |  |  | 3.2%  |
| Jordan IndexFund, Lp. (13) 1876 Woodhollow Lane, Apt. 306 MarylandHeights, MO 63043            |  |  |                                               |  | 903,186   |                                 |  |  | 11.7% |
| All directors,and executive officers as a group (9 persons) (14)                               |  |  |                                               |  | 6,098,890 |                                 |  |  | 75.8% |
|                                                                                                |

|  |
|--|
|  |  |
|  |

|   |                      |
|---|----------------------|
| * | Lessthan one percent |

|     |                                                                                                                                                                                                                                            |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Unlessotherwise indicated in other footnotes, to the knowledge of theCompany, all persons listed have sole voting and investment power withrespect to shares of Common Stock, except to the extent shared withspouses under applicablelaw. |

|     |                                                                                                                                                                                                                                                                                                                                                                               |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2) | In computing the number ofshares beneficially owned and the percentage of ownership of thatperson, shares of Common Stock subject to options or warrantsexercisable within 60 days after the date of the information in thetable are deemed outstanding. However, such shares are not deemedoutstanding for the purpose of computing percentage ownership of anyother person. |

|     |                                                                                                                                                                                                  |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (3) | Based uponinformation contained in a Schedule 13G Amendment as filed with theSecurities and Exchange Commission on January  24,  2006.Includes 230,000 shares issuable pursuant to stockoptions. |

|     |                                                           |
|-----|-----------------------------------------------------------|
| (4) | Includes 110,000shares issuable pursuant to stockoptions. |

|     |                                                          |
|-----|----------------------------------------------------------|
| (5) | Includes 80,000 sharesissuable pursuant to stockoptions. |

|     |                                                                                                                                          |
|-----|------------------------------------------------------------------------------------------------------------------------------------------|
| (6) | Based upon informationcontained in a Schedule 13D, Amendment 3, as filed with the Securitiesand Exchange Commission on October  17,2005. |

|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|-----|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (7) | Based upon informationcontained in a Schedule 13G Amendment as filed with the Securities andExchange Commission on January  24,  2006. Includes 123,658shares issued to Lucille Salhany and Mr.  Polcari jointly withrights of survivorship and 12,741 shares held by Ms.  Salhany forthe benefit of certain family members. Includes 30,000 shares issuablepursuant to stock options, 25,000 shares issuable pursuant to stockwarrants and 58,823 shares of Preferred Stock issued to Ms.Salhany. |

|     |                                                                                                                              |
|-----|------------------------------------------------------------------------------------------------------------------------------|
| (8) | Includes 100,000shares issuable pursuant to stock options and 117,647 shares issuablepursuant to convertible PreferredStock. |

|     |                                                          |
|-----|----------------------------------------------------------|
| (9) | Includes 65,000 sharesissuable pursuant to stockoptions. |

|      |                                                                                                                                       |
|------|---------------------------------------------------------------------------------------------------------------------------------------|
| (10) | Based uponinformation contained in a Schedule 13D, as amended, as filed with theSecurities and Exchange Commission on March  24,2006. |

|      |                                                                          |
|------|--------------------------------------------------------------------------|
| (11) | Includes 470,588 sharesissuable pursuant to convertible Preferred Stock. |

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|      |                                                                                                                                                                                                                                                                                                 |
|------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (12) | Based oninformation provided by Mr.  Taft does not include 77,800 sharesheld by relatives of Mr.  Taft for which he disclaims anybeneficial ownership, however 100,000 shares issuable pursuant to stockoptions and 29,411 shares issuable pursuant to convertible preferredstock are included. |

|      |                                                                                                                                                                                                          |
|------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (13) | Based uponinformation contained in a Schedule 13G as filed with the Securitiesand Exchange Commission on February  13,  1998. Includes500,000 shares issuable pursuant to currently exercisablewarrants. |

|      |                                                                                                                               |
|------|-------------------------------------------------------------------------------------------------------------------------------|
| (14) | Includes 879,800shares issuable pursuant to stock options and 617,646 shares issuablepursuant to convertible Preferred Stock. |

On March17,  2006, the Company entered into an Agreement and Plan ofMerger (the ‘‘Merger Agreement’’) by andamong the Company, Dolphin Direct Equity Partners, LP(‘‘Dolphin’’) and Braidol AcquisitionCorp., (‘‘Braidol’’) a wholly-ownedsubsidiary of Dolphin (‘‘Sub’’), wherebyBraidol Sub will merge (the ‘‘Merger’’)with and into the Company with the Company surviving the Merger. Underthe terms of the Merger Agreement, the common stockholders of theCompany, would be entitled to receive an amount equal to $0.70, withoutinterest, per share of common stock. Under the terms of the MergerAgreement, the preferred stockholders of the Company would be entitledto receive a liquidation preference as set forth in the certificate ofdesignation for the preferred stock, without interest, as well as theproduct of the number of shares of common stock that such shares ofpreferred stock are convertible in to immediately prior to the mergerand $.70, without interest. The consummation of the Merger is subjectto customary closing conditions, including the approval of thestockholders of the Company. In addition, the consummation of theMerger is subject to the condition that certain transaction costsincurred by the Company not exceed $625,000. The Company has determinedthat it is unlikely that the Company will satisfy this condition andhas sought a waiver from Dolphin. As of June  29,  2006,the Company has not received that waiver.

In any event, theCompany is required to pay certain of Dolphin’s expenses. Undercertain circumstances, if the Merger is not completed, the Company isrequired to pay a termination fee of up to $325,000 less any expensesit has paid for the benefit of Dolphin and its affliates. As of thedate hereof, Dolphin and its affiliate Dolphin Offshore Partners, L.P.hold a 40.3%beneficial interest in the Company’s commonstock. Peter Salas, a member of the Company’s Board ofDirectors, is President of Dolphin Asset Management Corp. an affiliateof Dolphin, and its related companies.

|               |                                               |
|---------------|-----------------------------------------------|
| ITEM13.  | CERTAIN RELATIONSHIPS AND RELATEDTRANSACTIONS |

Subordinated Debentures

The Companyhad subordinated debentures outstanding at April  30,  2006consisted of convertible subordinated debentures in the amount of$1,450,000 bearing interest at 8% through 31 December, 1997;10% through 31 December, 1998; 12% through 31December  1999; and 14% through 2011, equivalent to ablended rate of approximately 13.2% annually, payablesemi-annually and convertible into the Company’s Common Stock ata conversion rate of $1.25 per share. The Company can redeem theconvertible debentures under certain conditions. The debentures are due31 December  2011. Mr.  Lipton, a member of the Board ofDirectors of the Company, received a fee equal to 5% of theproceeds as compensation for services in connection with thistransaction in fiscal 1997.

Preferred Stock

OnJanuary  20,  2005, the Company sold 1,147,056 shares ofour Series A Preferred Stock, $.01 par value per share, to 11accredited investors in a private transaction pursuant to subscriptionagreements between each such investor and the Company. Each share ofSeries A Preferred Stock may be converted at any time at the option ofthe holder of such share into one share of the Company’s CommonStock, $.01 par value per share. The investors paid $0.85 per share,for aggregate gross proceeds of $975,000.

The Company agreedpursuant to a rights agreement between the Company and the investors touse commercially reasonable efforts to (i) register the resale of theshares of Common Stock issuable 

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upon the conversion of the shares of SeriesA Preferred Stock upon demand of a sufficient number of the holders ofthe Series A Preferred Stock and (ii) include such shares of CommonStock in any registration statement for the benefit of the Company orany third party upon request of a sufficient number of the holders ofthe Series A Preferred Stock.

The Company sold the shares ofSeries A Preferred Stock pursuant to certain exemptions fromregistration provided by Rule 506 of Regulation D and Section 4(2) ofthe Securities Act of 1933, as amended. Directors of the Company,together with their affiliates, purchased 617,646 shares of this stock(117,647 shares by Mr.  Grace, 470,588 shares by affiliates ofMr.  Salas and 29,411 shares by Mr.Taft).

Merger Agreement

On March17,  2006, the Company entered into an Agreement and Plan ofMerger (the ‘‘Merger Agreement’’) by andamong the Company, Dolphin Direct Equity Partners, LP(‘‘Dolphin’’) and Braidol AcquisitionCorp., (‘‘Braidol’’) a wholly-ownedsubsidiary of Dolphin (‘‘Sub’’), wherebyBraidol Sub will merge (the ‘‘Merger’’)with and into the Company with the Company surviving the Merger. Underthe terms of the Merger Agreement, the common stockholders of theCompany, would be entitled to receive an amount equal to $0.70, withoutinterest, per share of common stock. Under the terms of the MergerAgreement, the preferred stockholders of the Company would be entitledto receive a liquidation preference as set forth in the certificate ofdesignation for the preferred stock, without interest, as well as theproduct of the number of shares of common stock that such shares ofpreferred stock are convertible in to immediately prior to the mergerand $.70, without interest. The consummation of the Merger is subjectto customary closing conditions, including the approval of thestockholders of the Company. In addition, the consummation of theMerger is subject to the condition that certain transaction costsincurred by the Company not exceed $625,000. The Company has determinedthat it is unlikely that the Company will satisfy this condition andhas sought a waiver from Dolphin. As of June  29,  2006,the Company has not received that waiver.

In any event, theCompany is required to pay certain of Dolphin’s expenses. Undercertain circumstances, if the Merger is not completed, the Company isrequired to pay a termination fee of up to $325,000, less any expensesit has paid for the benefit of Dolphin and its affiliates. As of thedate hereof, Dolphin and its affiliate Dolphin Offshore Partners, L.P.hold a 40.3% beneficial interest in the Company’s commonstock. Peter Salas, a member of the Company’s Board ofDirectors, is President of Dolphin Asset Management Corp. an affiliateof Dolphin, and its related companies.

StockholderNotes

Currently the Company has two notes with a stockholderwho is a relative of John Polcari, one of the Company’sdirectors, with current liabilities of $7,000 and long term liabilitiesof $76,000. The notes bear interest at 7.18% and 8% peryear and mature on January, 2017.

|               |                                       |
|---------------|---------------------------------------|
| ITEM14.  | PRINCIPAL ACCOUNTANT FEES ANDSERVICES |

As noted, the Audit Committee appointed BDOSeidman, LLP as the Company’s independent registered publicaccounting firm to audit the consolidated financial statements of theCompany and its subsidiaries for the fiscal year ending April30,  2006. BDO Seidman, LLP has audited the Company’sfinancial statements annually since 1994, and has served either theCompany or its predecessor as independent public accountants for morethan 19 years. The Audit Committee believes it is desirable and in thebest interest of the Company to continue employment of that firm.

Audit Fees.    BDO Seidman, LLP billed the Company anaggregate of $141,319 and $132,625 for the fiscal years endedApril  30,  2006 and April  24,  2005,respectively, for professional services rendered by BDO Seidman, LLP inconnection with its audit of the Company’s financial statements,its review of the Company’s quarterly reports on Form 10-Q, andservices normally provided in connection with statutory or regulatoryfilings or engagements.

Audit Related Fees.    BDOSeidman, LLP billed the Company an aggregate of    $0 and $9,735 inthe fiscal years ended April  30,  2006 and April24,  2005, respectively, for professional services rendered byBDO Seidman, LLP for assurance and related services reasonably relatedto the performance of an audit or review.

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Tax Fees.    BDO Seidman, LLPbilled the Company $52,525 and $28,225 for the fiscal years endedApril  30,  2006 and April  24,  2005,respectively for tax compliance, tax advice and taxplanning.

All Other Fees.    BDO Seidman, LLP did notbill the Company for professional services not otherwise describedabove in the fiscal years ended April  30,  2006 andApril  24,  2005, respectively.

CommencingJanuary  1,  2003, in each case where approval was soughtfor the provision of non-audit services, the Audit Committee consideredwhether the independent auditors’ provision of such services tothe Company is compatible with maintaining the auditors’independence and determined that they were.

Audit CommitteePolicy on Pre-Approval of Services of IndependentAuditors

The Audit Committee’s policy is topre-approve all audit and permissible non-audit services provided bythe independent auditors. These services may include audit services,audit-related services, tax services and other services.

AuditCommittee Report

Management has the primary responsibility forthe financial statements and the reporting process, including thesystems of internal control over financial reporting. Management hasrepresented to the Audit Committee that the Company’sconsolidated financial statements for the fiscal year endedApril  30,  2006 were prepared in accordance withaccounting principles generally accepted in the United States. TheAudit Committee has reviewed and discussed the consolidated financialstatements with management and separately with the independentaccountants. The Audit Committee also reviewed with the independentauditors the accounting policies and practices critical to theCompany’s financial statements, the alternative treatmentswithin generally accepted accounting principles for policies andpractices related to material items that have been discussed withmanagement, the ramifications of each alternative, and the independentauditors’ preferred treatment. It also reviewed the materialwritten communications between management and the independentauditors.

The Company’s independent auditors provided theAudit Committee with the written disclosures and the letter required byIndependence Standards Board Standard No. 1 (Independence Discussionswith Audit Committees). Independence Standards Board Standard No. 1requires auditors annually to disclose in writing all relationshipsthat in the auditor’s professional opinion may reasonably bethought to bear on independence, to confirm their independence and toengage in a discussion of independence. The Audit Committee alsoreviewed with the independent auditors the SEC rules with respect toindependence of auditors. The audit committee received from theCompany’s auditors written communication of the matters requiredby Statement on Auditing Standards No. 61 and discussed these matterswith the Company’s auditors.

The Audit Committee assumedthe responsibility for pre-approval of the performance of all audit andnon-audit services by its independent auditors effective January1,  2003. In each case where approval was sought for theprovision of non-audit services after that date, the Audit Committeeconsidered whether the independent auditors’ provisions of suchservices to the Company is compatible with maintaining theauditors’ independence, and determined that they werecompatible.

Based on the above review and procedures, the AuditCommittee recommended to the Board of Directors that theCompany’s audited consolidated financial statements for fiscalyear April  30,  2006 be included in the Company’sAnnual Report on Form 10-K for that fiscal year. Further, the AuditCommittee has appointed BDO Seidman, LLP as the Company’sIndependent Registered Public Accounting Firm for the fiscal yearending April  29,  2007.

AUDITCOMMITTEE; Hugh Devine, Edward P. Grace III, Robert C.Taft

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PARTIV

|                |                                           |
|----------------|-------------------------------------------|
| ITEM 15.  | EXHIBITS ANDFINANCIAL STATEMENT SCHEDULES |

|           |                                   |
|-----------|-----------------------------------|
| (a)  | FINANCIAL STATEMENTS ANDSCHEDULES |

|  |           |                                                  |
|--|-----------|--------------------------------------------------|
|  | (1)  | Financial Statementslisted under Part II, Item 8 |

|  |           |                                                                                                                                                                                                                   |
|--|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  | (2)  | FinancialStatement Schedules have been omitted because the required informationis not applicable or required, or because the required information isshown either in the Financial Statements or the notesthereto. |

EXHIBITS

|               |    |     |        |  |  |                                                                                                                                                  |  |  |             |
|---------------|----|-----|--------|--|--|--------------------------------------------------------------------------------------------------------------------------------------------------|--|--|-------------|
| ExhibitNumber |    |     |   |  |  | ReferenceNumber                                                                                                                                  |
|               | 2  | .01 |        |  |  | Agreement and Plan of Mergerdated March  17,2006                                                                                                 |  |  | M-2(i)      |
|               | 3  | .01 |        |  |  | Amended Certificateof Incorporation of theRegistrant                                                                                             |  |  | D-3.01*     |
|               | 3  | .02 |        |  |  | AmendedBy-Laws of theRegistrant                                                                                                                  |  |  | A-3(b)*     |
|               | 3  | .03 |        |  |  | Designationof PreferredStock                                                                                                                     |  |  | K-3.02*     |
|               | 4  | .01 |        |  |  | Description ofStock (contained in the Amended Certificate of Incorporation of theRegistrant, filed as Exhibit3.01).                              |  |  | D-4.01*     |
|               | 4  | .02 |        |  |  | Form ofCertificate evidencing shares of CommonStock                                                                                              |  |  | C-4(b)*     |
|               | 10 | .01 |        |  |  | Loan Agreementbetween Boston Restaurant Associates, Inc. and Commerce Bank &Trust Company dated April  30,2002                               |  |  | G-6(a)(i)   |
|               | 10 | .02 |        |  |  | Note fromBoston Restaurant Associates, Inc. to Commerce Bank & Trust Companydated April  30,2002                                             |  |  | G-6(a)(ii)  |
|               | 10 | .03 |        |  |  | SecurityAgreement between Boston Restaurant Associates, Inc. and Commerce Bank& Trust Company dated April  30,2002                           |  |  | G-6(a)(iii) |
|               | 10 | .04 |        |  |  | Form ofIndemnification Agreement with each of the directors and certainofficers of theRegistrant                                                 |  |  | A-10(bb)*   |
|               | 10 | .05 |        |  |  | IncentiveStock Option Plan**                                                                                                                     |  |  | B- I0(h)*   |
|               | 10 | .06 |        |  |  | 2002 Combination Stock Optionand Share AwardPlan**                                                                                               |  |  | F-10(h)*    |
|               | 10 | .07 |        |  |  | Charter of theAudit Committee of Boston Restaurant Associates, Inc., as adoptedDecember  6,  2002 as amended March  5,2004                       |  |  | E-99        |
|               | 10 | .08 |        |  |  | Second Allonge toLoan Agreement between Boston Restaurant Associates, herewith Inc. andCommerce Bank & Trust Company dated February  13,2004 |  |  | I-6(2)(i)*  |
|               | 10 | .09 |        |  |  | First Allongesto Notes from Boston Restaurant Associates, Inc. to Commerce Bank &Trust Company dated February  13,2004                       |  |  | I-6(a)(ii)* |
|               | 10 | .10 |        |  |  | StockPurchase Warrant issued by Boston Restaurant Associates, Inc. in favorof Commerce Bank & Trust Company dated February  13,2004          |  |  | I-6a(iii)*  |
|               | 10 | .11 |        |  |  | Employmentagreement between Boston Restaurant Associates, Inc. and George R.Chapdelaine dated April  23,2004**                                   |  |  | I-99*       |
|               | 10 | .12 |        |  |  | Stock OptionAgreement                                                                                                                            |  |  | J-10(h)*    |
|               |

41

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Table of Contents

|               |    |     |        |  |  |                                                                                                                                                                   |  |  |               |
|---------------|----|-----|--------|--|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|---------------|
| ExhibitNumber |    |     |   |  |  | ReferenceNumber                                                                                                                                                   |
|               | 10 | .13 |        |  |  | Loan Agreement betweenBoston Restaurant Associates, Inc. and Commerce Bank & TrustCompany dated April  21,  2005                                              |  |  | FiledHerewith |
|               | 10 | .14 |        |  |  | Loan Agreement between BostonRestaurant Associates, Inc. and Commerce Bank & Trust Company datedApril  21,  2005                                              |  |  | FiledHerewith |
|               | 10 | .15 |        |  |  | Mortgage in favor of CommerceBank & Trust Company dated April  21,2005                                                                                        |  |  | L-6(a)(iii)   |
|               | 10 | .16 |        |  |  | SecurityAgreement between Boston Restaurant Associates, Inc. and Commerce Bank& Trust Company dated April  21,  2005                                          |  |  | FiledHerewith |
|               | 14 | .01 |        |  |  | Code ofEthics                                                                                                                                                     |  |  | H-14*         |
|               | 21 | .01 |        |  |  | Subsidiaries ofthe Registrant                                                                                                                                     |  |  | A-21*         |
|               | 23 | .01 |        |  |  | Consentof BDO Seidman, LLP                                                                                                                                        |  |  | Filedherewith |
|               | 31 | .01 |        |  |  | Certification of ChiefExecutive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of2002                                                                  |  |  | Filedherewith |
|               | 31 | .02 |        |  |  | Certification of ChiefFinancial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of2002                                                                  |  |  | Filedherewith |
|               | 32 | .01 |        |  |  | Certifications of ChiefExecutive Officer and Chief Financial Officer to 18 U.S.C. Section1350,as adopted pursuant to Section 906 of the Sarbanes-Oxley Actof 2002 |  |  | Filedherewith |
|               |

|  |
|--|
|  |  |
|  |

|   |                                                                                                                                                                                                                                          |
|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| * | In accordance withRule 12b-32 under the Securities Exchange Act of 1934, as amended,reference is made to the documents previously filed with the Securitiesand Exchange Commission, which documents are hereby incorporated byreference. |

|    |                                                         |
|----|---------------------------------------------------------|
| ** | Management Contract orCompensatory Plan or Arrangement. |

|   |                                                                                                                                                                                                         |
|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| A | Incorporatedby reference to the Company’s Registration Statement on FormSB-2 (Registration No. 33-81068). The number set forth herein is thenumber of the Exhibit in said registration statement. |

|   |                                                                                                                                                                                                                |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| B | Incorporated by reference to the Company’sproxy statement on Schedule 14A as filed with the SEC on July12,  1994. The number set forth herein is the number of theExhibit in said registrationstatement. |

|   |                                                                                                                                                                                              |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| C | Incorporated by reference to theCompany’s annual report on Form 10-K for the year endedApril  30,  1994. The number set forth herein is the numberof the Exhibit in said annualreport. |

|   |                                                                                                                                                                                                |
|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| D | Incorporated by reference to theCompany’s annual report on Form 10-KSB for the year endedApril  25,  1999. The number set forth herein is the numberof the Exhibit in said annualreport. |

|   |                                                                                                                                                                                                   |
|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| E | Incorporated by reference to theCompany’s quarterly report on Form 10-QSB for period endingJanuary, 2001. The number set forth herein is the number of the Exhibitin said quarterly report. |

|   |                                                                                                                                                                                             |
|---|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| F | Incorporate byreference to the Company’s annual report on Form 10-K for theyear ended April  28,  2002. The number set forth herein isthe number of the Exhibit in said annualreport. |

|   |                                                                                                                                                                                                 |
|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| G | Incorporated by reference to theCompany’s quarterly report on Form 10-Q for period endedJuly  28,  2002. The number set forth herein is the numberof the Exhibit in said quarterlyreport. |

|   |                                                                                                                                                                                                     |
|---|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| H | Incorporated by reference to theCompany’s quarterly report on Form 10-Q for period endedJanuary  25,  2004. The number set forth herein is thenumber of the Exhibit in said quarterly report. |

42

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Table of Contents

|   |                                                                                                                                                                                            |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| I | Incorporated by reference tothe Company’s annual report on Form 10-K for period endedApril  25,  2004. The number set forth herein is the numberof the Exhibit in said annualreport. |

|   |                                                                                                                                                                                |
|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| J | Incorporated by reference to theCompany’s current report on Form 8-K dated September16,  2004. The number set forth herein in the number of theExhibit in said schedule. |

|   |                                                                                                                                                                              |
|---|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| K | Incorporated byreference to the Company’s current report on Form 8-K datedJanuary  21,  2005. The number set forth herein in thenumber of the Exhibit in saidschedule. |

|   |                                                                                                                                                                                        |
|---|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| L | Incorporated by reference to theCompany’s annual Report on From 10-K for period endedApril  24,  2005. The number set forth herein in the numberof the Exhibit in said schedule. |

|   |                                                                                                   |
|---|---------------------------------------------------------------------------------------------------|
| M | Incorporatedby reference to the Company’s current report on From 8-K datedMarch  17,  2006. |

43

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Table of Contents

Signatures

Pursuantto the requirements of Section 13 or 15(d) of the Securities ExchangeAct of 1934, the registrant caused this report to be signed on itsbehalf by the undersigned, thereunto dulyauthorized.

|                     |  |  |                                  |  |  |                                 |
|---------------------|--|--|----------------------------------|--|--|---------------------------------|
|                |  |  | BOSTONRESTAURANT ASSOCIATES,INC. |
|                |  |  | By:                              |  |  | /s/George R. Chapdelaine        |
| Date: June  29,2006 |  |  |                             |  |  | George R. Chapdelaine,President |
|                     |

Pursuant to the requirements of theSecurities Exchange Act of 1934, this report has been signed below bythe following persons on behalf of the registrant and in the capacitiesand on the datesindicated.

|                          |  |                                                                              |  |                 |
|--------------------------|--|------------------------------------------------------------------------------|--|-----------------|
| SIGNATURES               |  | TITLE                                                                        |  | DATE            |
|                          |
| /s/ GeorgeR. Chapdelaine |  | Chief Executive Officer, President andDirector (principal executive officer) |  | June29,  2006   |
|                          |
| George R.Chapdelaine     |
|                          |
| /s/ Fran V.Ross          |  | Chief FinancialOfficer                                                       |  | June  29,2006   |
|                          |
| Fran V. Ross             |
|                          |
| /s/ Robert Fabrizio      |  | Chief Accounting Officer                                                     |  | June  29,  2006 |
|                          |
| RobertFabrizio           |
|                          |
| /s/ HughDevine           |  | Director                                                                     |  | June  29,  2006 |
|                          |
| Hugh Devine              |
|                          |
| /s/ EdwardP. Grace, III  |  | Director                                                                     |  | June  29,2006   |
|                          |
| Edward P. Grace,III      |
|                          |
| /s/ Roger Lipton         |  | Director                                                                     |  | June  29,2006   |
|                          |
| RogerLipton              |
|                          |
| /s/ John P. Polcari,Jr.  |  | Director                                                                     |  | June  29,2006   |
|                          |
| John P. Polcari,Jr.      |
|                          |
| /s/ Robert C. Taft       |  | Director                                                                     |  | June  29,2006   |
|                          |
| RobertC. Taft            |
|                          |

----

|                                                                                                                 |  |  |             |
|-----------------------------------------------------------------------------------------------------------------|--|--|-------------|
| Consolidatedfinancialstatements:                                                                                |  |  |        |
| Reportof Independent Registered Public Accounting Firm                                                          |  |  | F-2         |
| Balancesheets as of April 30, 2006 and April 24,2005                                                            |  |  | F-3 to F-4  |
| Statements ofoperations for each of the three years in the period ended April30, 2006                           |  |  | F-5         |
| Statements ofstockholders’ equity (deficit) for each of the three years inthe period ended April 30, 2006 |  |  | F-6         |
| Statements of cash flows foreach of the three years in the period ended April 30,2006                           |  |  | F-7         |
| Summary of accountingpolicies                                                                                   |  |  | F-8 to F-14 |
| Notes toconsolidated financial statements                                                                       |  |  | F-15 toF-32 |
|                                                                                                                 |

F-1

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Table of Contents

Reportof Independent Registered Public Accounting Firm

To theBoard of Directors and Stockholders ofBoston RestaurantAssociates, Inc.

We have audited the accompanying consolidatedbalance sheets of Boston Restaurant Associates, Inc. and subsidiariesas of April  30,  2006 and April  24,  2005,and the related consolidated statements of operations,stockholders’ equity (deficit), and cash flows for each of thethree years in the period ended April  30,  2006. Thesefinancial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on thesefinancial statements based on our audits.

We conducted our auditsin accordance with the standards of the Public Company AccountingOversight Board (United States). Those standards require that we planand perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement. The Company isnot required to have, nor were we engaged to perform an audit of itsinternal control over financial reporting. Our audits includedconsideration of internal control over financial reporting as a basisfor designing audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on theeffectiveness of the Company’s internal control over financialreporting. Accordingly, we express no such opinion. An audit alsoincludes examining, on a test basis, evidence supporting the amountsand disclosures in the financial statements, assessing the accountingprinciples used and significant estimates made by management, as wellas evaluating the overall financial statement presentation. We believethat our audits provide a reasonable basis for our opinion.

Inour opinion, the consolidated financial statements referred to abovepresent fairly, in all material respects, the financial position ofBoston Restaurant Associates, Inc. and subsidiaries at April30,  2006 and April  24,  2005, and the results ofits operations and its cash flows for each of the three years in theperiod ended April  30,  2006, in conformity withaccounting principles generally accepted in the United States ofAmerica.

BDO Seidman, LLP

Boston,MassachusettsJune  14,2006

F-2

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Table of Contents

Boston RestaurantAssociates, Inc.and SubsidiariesConsolidated BalanceSheets

|  |
|--|
|  |  |
|  |

|                                                      |  |  |               |   |            |               |  |  |  |   |            |  |
|------------------------------------------------------|--|--|---------------|---|------------|---------------|--|--|--|---|------------|--|
|                                                 |  |  | April30, 2006 |   |            | April 24,2005 |
| Assets (Note5)                                       |  |  |               |   |       |               |  |  |  |   |       |  |
| Current:                                             |  |  |               |   |       |               |  |  |  |   |       |  |
| Cashand cashequivalents                              |  |  |               | $ | 811,517    |               |  |  |  | $ | 687,207    |  |
| Accountsreceivable                                   |  |  |               |   | 127,370    |               |  |  |  |   | 111,404    |  |
| Inventories(Note1)                                   |  |  |               |   | 474,167    |               |  |  |  |   | 460,745    |  |
| Prepaidexpenses andother                             |  |  |               |   | 213,465    |               |  |  |  |   | 161,529    |  |
| Currentassets of discontinued operations (Note13)    |  |  |               |   | —    |               |  |  |  |   | 164,597    |  |
| Totalcurrentassets                                   |  |  |               |   | 1,626,519  |               |  |  |  |   | 1,585,482  |  |
| Propertyand equipment (Notes 9 and13):               |  |  |               |   |       |               |  |  |  |   |       |  |
| Building                                             |  |  |               |   | 512,500    |               |  |  |  |   | 512,500    |  |
| Leaseholdimprovements                                |  |  |               |   | 6,935,321  |               |  |  |  |   | 6,651,396  |  |
| Equipment,furniture andfixtures                      |  |  |               |   | 4,700,528  |               |  |  |  |   | 4,567,460  |  |
|                                                 |  |  |               |   | 12,148,349 |               |  |  |  |   | 11,731,356 |  |
| Lessaccumulated depreciation andamortization         |  |  |               |   | 8,838,098  |               |  |  |  |   | 7,598,139  |  |
| Netproperty andequipment                             |  |  |               |   | 3,310,251  |               |  |  |  |   | 4,133,217  |  |
| Otherassets, net (Note2)                             |  |  |               |   | 1,000,265  |               |  |  |  |   | 443,495    |  |
| Goodwill(Note3)                                      |  |  |               |   | 453,643    |               |  |  |  |   | 453,643    |  |
| Noncurrentassets of discontinued operations (Note13) |  |  |               |   | —    |               |  |  |  |   | 125,464    |  |
| TotalAssets                                          |  |  |               | $ | 6,390,678  |               |  |  |  | $ | 6,741,301  |  |
|                                                      |

Seeaccompanying summary of accounting policies and notes to consolidatedfinancial statements.

F-3

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Table of Contents

Boston RestaurantAssociates, Inc.and SubsidiariesConsolidated BalanceSheets

|  |
|--|
|  |  |
|  |

|                                                                                                                                                                                                                  |  |  |               |   |             |               |  |  |  |   |             |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|--|---------------|---|-------------|---------------|--|--|--|---|-------------|---|
|                                                                                                                                                                                                             |  |  | April30, 2006 |   |             | April 24,2005 |
| Liabilities andStockholders’ Equity(Deficit)                                                                                                                                                               |  |  |               |   |        |               |  |  |  |   |        |   |
| Currentliabilities:                                                                                                                                                                                              |  |  |               |   |        |               |  |  |  |   |        |   |
| Accountspayable                                                                                                                                                                                                  |  |  |               | $ | 997,659     |               |  |  |  | $ | 715,021     |   |
| Accruedexpenses (Note4)                                                                                                                                                                                          |  |  |               |   | 1,422,477   |               |  |  |  |   | 1,606,671   |   |
| Currentmaturities (Notes 5, 6 and9):                                                                                                                                                                             |  |  |               |   |        |               |  |  |  |   |        |   |
| Long-termdebt                                                                                                                                                                                                    |  |  |               |   | 374,754     |               |  |  |  |   | 353,396     |   |
| Notespayable –stockholder                                                                                                                                                                                  |  |  |               |   | 6,736       |               |  |  |  |   | 6,420       |   |
| Obligationsunder capital leases                                                                                                                                                                                  |  |  |               |   | —     |               |  |  |  |   | 31,152      |   |
| Currentliabilities of discontinued operations (Note13)                                                                                                                                                           |  |  |               |   | —     |               |  |  |  |   | 211,335     |   |
| Total currentliabilities                                                                                                                                                                                         |  |  |               |   | 2,801,626   |               |  |  |  |   | 2,923,995   |   |
| Long-termobligations:                                                                                                                                                                                            |  |  |               |   |        |               |  |  |  |   |        |   |
| Long-termdebt, less current maturities (Note5)                                                                                                                                                                   |  |  |               |   | 1,579,291   |               |  |  |  |   | 1,946,604   |   |
| Notespayable – stockholder, less current maturities (Note6)                                                                                                                                                |  |  |               |   | 75,695      |               |  |  |  |   | 82,430      |   |
| Deferredrent (Note9)                                                                                                                                                                                             |  |  |               |   | 351,559     |               |  |  |  |   | 367,206     |   |
| Subordinateddebentures (Notes 7 and10)                                                                                                                                                                           |  |  |               |   | 1,450,000   |               |  |  |  |   | 1,450,000   |   |
| Otherlong-term liabilities (Note 9)                                                                                                                                                                              |  |  |               |   | 77,095      |               |  |  |  |   | 135,046     |   |
| Totalliabilities                                                                                                                                                                                                 |  |  |               |   | 6,335,266   |               |  |  |  |   | 6,905,281   |   |
| Commitmentsand contingencies (Notes 9 and 10)                                                                                                                                                                    |  |  |               |   |        |               |  |  |  |   |        |   |
| Stockholders’equity (deficit) (Notes 7 and10):                                                                                                                                                             |  |  |               |   |        |               |  |  |  |   |        |   |
| Preferred stock,$.01 par value, 10,000,000 shares authorized; 1,147,056 shares issuedand outstanding at April  30,  2006 and April24,  2005 (liquidation preference of $974,998 plus accrued andunpaiddividends) |  |  |               |   | 946,278     |               |  |  |  |   | 946,278     |   |
| Commonstock, $.01 par value 25,000,000 shares authorized; issued 7,060,170shares; outstanding 7,035,170 shares as of April  30,  2006and April  24,  2005                                                        |  |  |               |   | 70,602      |               |  |  |  |   | 70,602      |   |
| Additionalpaid-incapital                                                                                                                                                                                         |  |  |               |   | 10,960,396  |               |  |  |  |   | 10,960,396  |   |
| Accumulateddeficit                                                                                                                                                                                               |  |  |               |   | (11,897,172 | )             |  |  |  |   | (12,116,564 | ) |
|                                                                                                                                                                                                             |  |  |               |   | 80,104      |               |  |  |  |   | (139,288    | ) |
| Less:treasury stock, 25,000 shares at cost as of April  30,2006 and April  24,  2005                                                                                                                             |  |  |               |   | (24,692     | )             |  |  |  |   | (24,692     | ) |
| Totalstockholder’s equity(deficit)                                                                                                                                                                         |  |  |               |   | 55,412      |               |  |  |  |   | (163,980    | ) |
| Totalliabilities and stockholders’ equity(deficit)                                                                                                                                                         |  |  |               | $ | 6,390,678   |               |  |  |  | $ | 6,741,301   |   |
|                                                                                                                                                                                                                  |

Seeaccompanying summary of accounting policies and notes to consolidatedfinancial statements.

F-4

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Table of Contents

Boston Restaurant Associates,Inc.and SubsidiariesConsolidated Statements ofOperations

|  |
|--|
|  |  |
|  |

|                                                                                                              |  |  |               |   |            |                |  |  |               |   |            |   |  |  |  |   |            |   |
|--------------------------------------------------------------------------------------------------------------|--|--|---------------|---|------------|----------------|--|--|---------------|---|------------|---|--|--|--|---|------------|---|
| Yearsended                                                                                                   |  |  | April 30,2006 |   |            | April 24, 2005 |  |  | April 25,2004 |
| Revenues:                                                                                                    |  |  |               |   |       |                |  |  |               |   |       |   |  |  |  |   |       |   |
| Restaurantsales                                                                                              |  |  |               | $ | 23,535,406 |                |  |  |               | $ | 22,628,783 |   |  |  |  | $ | 19,466,386 |   |
| Franchisefees (Note9)                                                                                        |  |  |               |   | —    |                |  |  |               |   | 269        |   |  |  |  |   | 16,600     |   |
| Totalrevenues                                                                                                |  |  |               |   | 23,535,406 |                |  |  |               |   | 22,629,052 |   |  |  |  |   | 19,482,986 |   |
| Costsandexpenses:                                                                                            |  |  |               |   |       |                |  |  |               |   |       |   |  |  |  |   |       |   |
| Costof food, beverages andliquor                                                                             |  |  |               |   | 4,477,172  |                |  |  |               |   | 4,628,052  |   |  |  |  |   | 3,769,034  |   |
| Otheroperatingexpenses                                                                                       |  |  |               |   | 14,735,338 |                |  |  |               |   | 13,912,348 |   |  |  |  |   | 12,044,045 |   |
| Generalandadministrative                                                                                     |  |  |               |   | 2,484,226  |                |  |  |               |   | 2,450,578  |   |  |  |  |   | 2,738,690  |   |
| Depreciationandamortization                                                                                  |  |  |               |   | 981,549    |                |  |  |               |   | 976,686    |   |  |  |  |   | 930,272    |   |
| Pre-openingcosts                                                                                             |  |  |               |   | 312        |                |  |  |               |   | 93,196     |   |  |  |  |   | 77,140     |   |
| Litigationand settlement credits (Note9)                                                                     |  |  |               |   | (28,805    | )              |  |  |               |   | (98,259    | ) |  |  |  |   | (246,228   | ) |
| Chargefor assetimpairment                                                                                    |  |  |               |   | 306,787    |                |  |  |               |   | —    |   |  |  |  |   | —    |   |
| Totalcosts andexpenses                                                                                       |  |  |               |   | 22,956,579 |                |  |  |               |   | 21,962,601 |   |  |  |  |   | 19,312,953 |   |
| Operatingincome                                                                                              |  |  |               |   | 578,827    |                |  |  |               |   | 666,451    |   |  |  |  |   | 170,033    |   |
| Interestexpense, net of interest income of $17,316, $2,905 and $2,890 andin 2006, 2005 and 2004,respectively |  |  |               |   | (372,941   | )              |  |  |               |   | (475,132   | ) |  |  |  |   | (493,200   | ) |
| OtherIncome,net                                                                                              |  |  |               |   | 21,936     |                |  |  |               |   | 8,418      |   |  |  |  |   | 221,630    |   |
| Income(loss) from continuing operations                                                                      |  |  |               |   | 227,822    |                |  |  |               |   | 199,737    |   |  |  |  |   | (101,537   | ) |
| DiscontinuedOperations (Note 13):                                                                            |  |  |               |   |       |                |  |  |               |   |       |   |  |  |  |   |       |   |
| Loss from operations                                                                                         |  |  |               |   | (61,568    | )              |  |  |               |   | (643,667   | ) |  |  |  |   | (3,335,741 | ) |
| Gainfrom disposal of discontinuedoperations                                                                  |  |  |               |   | 132,004    |                |  |  |               |   | 15,215     |   |  |  |  |   | —    |   |
| Income (loss) from discontinuedoperations                                                                    |  |  |               |   | 70,436     |                |  |  |               |   | (628,452   | ) |  |  |  |   | (3,335,741 | ) |
| NetIncome(loss)                                                                                              |  |  |               |   | 298,258    |                |  |  |               |   | (428,715   | ) |  |  |  |   | (3,437,278 | ) |
| Less:preferred stockdividends                                                                                |  |  |               |   | (78,866    | )              |  |  |               |   | (20,583    | ) |  |  |  |   | —    |   |
| Income(loss) available to commonshareholders                                                                 |  |  |               | $ | 219,392    |                |  |  |               | $ | (449,298   | ) |  |  |  | $ | (3,437,278 | ) |
| Income(loss) per share of common stock (Basic and Diluted) (Note12)                                          |  |  |               |   |       |                |  |  |               |   |       |   |  |  |  |   |       |   |
| ContinuingOperations                                                                                         |  |  |               | $ | .02        |                |  |  |               | $ | .03        |   |  |  |  | $ | (.01       | ) |
| DiscontinuedOperations                                                                                       |  |  |               |   | .01        |                |  |  |               |   | (.09       | ) |  |  |  |   | (.48       | ) |
| Income(loss) available to commonshareholders                                                                 |  |  |               | $ | .03        |                |  |  |               | $ | (.06       | ) |  |  |  | $ | (.49       | ) |
|                                                                                                              |

Seeaccompanying summary of accounting policies and notes to consolidatedfinancial statements.

F-5

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Table of Contents

Boston Restaurant Associates,Inc.and SubsidiariesConsolidated Statement ofStockholders' Equity(Deficit)

|  |
|--|
|  |  |
|  |

|                                                            |  |  |                               |  |           |                            |  |  |                           |   |         |                     |  |  |               |   |           |                                           |  |  |  |   |         |  |  |  |  |   |            |  |  |  |  |   |             |   |  |  |  |   |         |  |  |  |  |   |         |   |  |  |  |   |            |   |
|------------------------------------------------------------|--|--|-------------------------------|--|-----------|----------------------------|--|--|---------------------------|---|---------|---------------------|--|--|---------------|---|-----------|-------------------------------------------|--|--|--|---|---------|--|--|--|--|---|------------|--|--|--|--|---|-------------|---|--|--|--|---|---------|--|--|--|--|---|---------|---|--|--|--|---|------------|---|
|                                                       |  |  | PreferredStock $.01 Par Value |  |           | Common Stock $.01 ParValue |  |  | Additional Paid-inCapital |   |         | Accumulated Deficit |  |  | TreasuryStock |   |           | Total Stockholders’ Equity(Deficit) |
|                                                       |  |  | Shares                        |  |           | Amount                     |  |  | Shares                    |   |         | Amount              |  |  | Shares        |   |           | Amount                                    |
| Balance, April  27,2003                                    |  |  |                               |  | —   |                            |  |  |                           | $ | — |                     |  |  |               | $ | 7,060,170 |                                           |  |  |  | $ | 70,602  |  |  |  |  | $ | 10,922,636 |  |  |  |  | $ | (8,229,988  | ) |  |  |  | $ | 25,000  |  |  |  |  | $ | (24,692 | ) |  |  |  | $ | 2,738,558  |   |
| Issuanceof warrants in exchange for bankwaiver             |  |  |                               |  | —   |                            |  |  |                           |   | — |                     |  |  |               |   | —   |                                           |  |  |  |   | — |  |  |  |  |   | 29,999     |  |  |  |  |   | —     |   |  |  |  |   | — |  |  |  |  |   | — |   |  |  |  |   | 29,999     |   |
| Netloss for theyear                                        |  |  |                               |  | —   |                            |  |  |                           |   | — |                     |  |  |               |   | —   |                                           |  |  |  |   | — |  |  |  |  |   | —    |  |  |  |  |   | (3,437,278  | ) |  |  |  |   | — |  |  |  |  |   | — |   |  |  |  |   | (3,437,278 | ) |
| Balance,April  25,2004                                     |  |  |                               |  |      |                            |  |  |                           |   |    |                     |  |  |               |   | 7,060,170 |                                           |  |  |  |   | 70,602  |  |  |  |  |   | 10,952,635 |  |  |  |  |   | (11,667,266 | ) |  |  |  |   | 25,000  |  |  |  |  |   | (24,692 | ) |  |  |  |   | (668,721   | ) |
| Issuanceof warrants                                        |  |  |                               |  | —   |                            |  |  |                           |   | — |                     |  |  |               |   | —   |                                           |  |  |  |   | — |  |  |  |  |   | 7,761      |  |  |  |  |   | —     |   |  |  |  |   | — |  |  |  |  |   | — |   |  |  |  |   | 7,761      |   |
| Issuanceof Preferred Stock net of issuance costs of$29,000 |  |  |                               |  | 1,147,056 |                            |  |  |                           |   | 946,278 |                     |  |  |               |   | —   |                                           |  |  |  |   | — |  |  |  |  |   | —    |  |  |  |  |   | —     |   |  |  |  |   | — |  |  |  |  |   | — |   |  |  |  |   | 946,278    |   |
| PreferredStockDividends                                    |  |  |                               |  | —   |                            |  |  |                           |   | — |                     |  |  |               |   | —   |                                           |  |  |  |   | — |  |  |  |  |   | —    |  |  |  |  |   | (20,583     | ) |  |  |  |   | — |  |  |  |  |   | — |   |  |  |  |   | (20,583    | ) |
| Netloss for theyear                                        |  |  |                               |  | —   |                            |  |  |                           |   | — |                     |  |  |               |   | —   |                                           |  |  |  |   | — |  |  |  |  |   | —    |  |  |  |  |   | (428,715    | ) |  |  |  |   | — |  |  |  |  |   | — |   |  |  |  |   | (428,715   | ) |
| Balance,April  24,2005                                     |  |  |                               |  | 1,147,056 |                            |  |  |                           |   | 946,278 |                     |  |  |               |   | 7,060,170 |                                           |  |  |  |   | 70,062  |  |  |  |  |   | 10,960,396 |  |  |  |  |   | (12,116,564 | ) |  |  |  |   | 25,000  |  |  |  |  |   | (24,692 | ) |  |  |  |   | (163,980   | ) |
| PreferredStockDividends                                    |  |  |                               |  | —   |                            |  |  |                           |   | — |                     |  |  |               |   | —   |                                           |  |  |  |   | — |  |  |  |  |   | —    |  |  |  |  |   | (78,866     | ) |  |  |  |   | — |  |  |  |  |   | — |   |  |  |  |   | (78,866    | ) |
| Netincome for theyear                                      |  |  |                               |  | —   |                            |  |  |                           |   | — |                     |  |  |               |   | —   |                                           |  |  |  |   | — |  |  |  |  |   | —    |  |  |  |  |   | 298,258     |   |  |  |  |   | — |  |  |  |  |   | — |   |  |  |  |   | 298,258    |   |
| Balance,April  30,2006                                     |  |  |                               |  | 1,147,056 |                            |  |  |                           | $ | 946,278 |                     |  |  |               | $ | 7,060,170 |                                           |  |  |  | $ | 70,062  |  |  |  |  | $ | 10,960,396 |  |  |  |  | $ | (11,897,172 | ) |  |  |  |   | 25,000  |  |  |  |  | $ | (24,692 | ) |  |  |  | $ | 55,412     |   |
|                                                            |

Seeaccompanying summary of accounting policies and notes to consolidatedfinancial statements.

F-6

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Table of Contents

Boston Restaurant Associates,Inc.and SubsidiariesConsolidated Statements of CashFlows

|  |
|--|
|  |  |
|  |

|                                                                                        |  |  |                |   |          |               |  |  |                |   |            |   |  |  |  |   |            |   |
|----------------------------------------------------------------------------------------|--|--|----------------|---|----------|---------------|--|--|----------------|---|------------|---|--|--|--|---|------------|---|
| Yearsended                                                                             |  |  | April 30, 2006 |   |          | April24, 2005 |  |  | April 25, 2004 |
| Cashflows from operatingactivities:                                                    |  |  |                |   |     |               |  |  |                |   |       |   |  |  |  |   |       |   |
| Income(loss) from operations (Note11)                                                  |  |  |                | $ | 227,822  |               |  |  |                | $ | 199,737    |   |  |  |  | $ | (101,537   | ) |
| Income (loss) from discontinuedoperations                                              |  |  |                |   | 70,436   |               |  |  |                |   | (628,452   | ) |  |  |  |   | (3,335,741 | ) |
| Net Income(loss)                                                                       |  |  |                |   | 298,258  |               |  |  |                |   | (428,715   | ) |  |  |  |   | (3,437,278 | ) |
| Adjustmentsto reconcile net income (loss) to net cash provided by operatingactivities: |  |  |                |   |     |               |  |  |                |   |       |   |  |  |  |   |       |   |
| Gain(loss) from disposal of discontinued operations                                    |  |  |                |   | (132,004 | )             |  |  |                |   | —    |   |  |  |  |   | —    |   |
| Depreciation andamortization                                                           |  |  |                |   | 981,549  |               |  |  |                |   | 1,102,927  |   |  |  |  |   | 1,231,399  |   |
| Litigationand settlementcredits                                                        |  |  |                |   | (28,805  | )             |  |  |                |   | (98,259    | ) |  |  |  |   | (246,228   | ) |
| Warrantsin consideration of loanagreement                                              |  |  |                |   | —  |               |  |  |                |   | 7,761      |   |  |  |  |   | 29,999     |   |
| Chargefor assetimpairment                                                              |  |  |                |   | 306,787  |               |  |  |                |   | —    |   |  |  |  |   | 2,162,584  |   |
| Changesin operating assets andliabilities:                                             |  |  |                |   |     |               |  |  |                |   |       |   |  |  |  |   |       |   |
| Accountsreceivable                                                                     |  |  |                |   | 13,061   |               |  |  |                |   | 29,544     |   |  |  |  |   | (32,852    | ) |
| Inventories                                                                            |  |  |                |   | 122,148  |               |  |  |                |   | 139,595    |   |  |  |  |   | (194,880   | ) |
| Prepaidexpenses andother                                                               |  |  |                |   | (51,936  | )             |  |  |                |   | 32,774     |   |  |  |  |   | (29,693    | ) |
| Otherassets                                                                            |  |  |                |   | (561,398 | )             |  |  |                |   | (20,330    | ) |  |  |  |   | (18,429    | ) |
| Accountspayable                                                                        |  |  |                |   | 216,014  |               |  |  |                |   | (276,824   | ) |  |  |  |   | 478,399    |   |
| Accruedexpenses                                                                        |  |  |                |   | (324,139 | )             |  |  |                |   | 314,034    |   |  |  |  |   | 96,960     |   |
| Deferredrent                                                                           |  |  |                |   | (15,647  | )             |  |  |                |   | (134,263   | ) |  |  |  |   | 105,198    |   |
| Otherlong-termliabilities                                                              |  |  |                |   | (29,146  | )             |  |  |                |   | (17,711    | ) |  |  |  |   | (9,454     | ) |
| Netcash provided by operatingactivities                                                |  |  |                |   | 794,742  |               |  |  |                |   | 650,533    |   |  |  |  |   | 135,725    |   |
| Cash flows from investing activities                                                   |  |  |                |   |     |               |  |  |                |   |       |   |  |  |  |   |       |   |
| Capitalexpenditures                                                                    |  |  |                |   | (416,992 | )             |  |  |                |   | (801,883   | ) |  |  |  |   | (3,040,138 | ) |
| Proceedsfrom sale of assets of discontinuedoperations                                  |  |  |                |   | 213,718  |               |  |  |                |   | 552,332    |   |  |  |  |   | —    |   |
| Net cash used for investingactivities                                                  |  |  |                |   | (203,274 | )             |  |  |                |   | (249,551   | ) |  |  |  |   | (3,040,138 | ) |
| Cashflows from financingactivities:                                                    |  |  |                |   |     |               |  |  |                |   |       |   |  |  |  |   |       |   |
| Repaymentsof long-termdebt                                                             |  |  |                |   | (345,955 | )             |  |  |                |   | (3,383,158 | ) |  |  |  |   | (384,348   | ) |
| Repaymentsof capital leaseobligations                                                  |  |  |                |   | (31,152  | )             |  |  |                |   | (222,535   | ) |  |  |  |   | (195,366   | ) |
| Repaymentsof stockholderloans                                                          |  |  |                |   | (6,419   | )             |  |  |                |   | (6,114     | ) |  |  |  |   | (5,820     | ) |
| Repaymentsof subordinated convertibledebentures                                        |  |  |                |   | —  |               |  |  |                |   | —    |   |  |  |  |   | —    |   |
| Proceedsfrom preferred stock net of Issuance costs of$29,000                           |  |  |                |   |     |               |  |  |                |   | 946,278    |   |  |  |  |   | —    |   |
| Paymentsof preferreddividends                                                          |  |  |                |   | (83,632  | )             |  |  |                |   | —    |   |  |  |  |   | —    |   |
| Proceedsfrom issuance of long-termdebt                                                 |  |  |                |   | —  |               |  |  |                |   | 2,300,000  |   |  |  |  |   | 3,035,000  |   |
| Netcash provided by (used for) financingactivities                                     |  |  |                |   | (467,158 | )             |  |  |                |   | (365,529   | ) |  |  |  |   | 2,449,466  |   |
| Net increase (decrease) in cash and cashEquivalents                                    |  |  |                |   | 124,310  |               |  |  |                |   | 35,453     |   |  |  |  |   | (454,947   | ) |
| Cashand cash equivalents, beginning ofyear                                             |  |  |                |   | 687,207  |               |  |  |                |   | 651,754    |   |  |  |  |   | 1,106,701  |   |
| Cash and cash equivalents, end ofyear                                                  |  |  |                | $ | 811,517  |               |  |  |                | $ | 687,207    |   |  |  |  | $ | 651,754    |   |
|                                                                                        |

Seeaccompanying summary of accounting policies and notes to consolidatedfinancial statements.

F-7

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Table of Contents

BostonRestaurant Associates, Inc.and SubsidiariesSummary ofAccountingPolicies

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|                                                               |  |                                                                                                                                                                                                                                                                                                                                                                                                          |
|---------------------------------------------------------------|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Natureof Business and Basis of Presentation (see also Note 1) |  | The Company is engaged in the restaurant business. Asof April  30,  2006 the Company operated thirteen pizzarestaurants and three casual Italian dining restaurants. As ofApril  24,  2005, the Company operated thirteen pizzarestaurants and four casual Italian dining restaurants. As ofApril  25,  2004, the Company operated thirteen pizzarestaurants and five casual Italian dining restaurants. |
|                                                               |  |                                                                                                                                                                                                                                                                                                                                                                                                          |

|  |  |                                                                                                                                                                                          |
|--|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | Theconsolidated financial statements include the accounts of the Companyand its majority-owned subsidiaries. All significant intercompanybalances and transactions have been eliminated. |
|  |  |                                                                                                                                                                                          |

|            |  |                                                                                                                                                    |
|------------|--|----------------------------------------------------------------------------------------------------------------------------------------------------|
| FiscalYear |  | The Company’s fiscal year ends on the lastSunday in April. Fiscal years 2005, and 2004 included 52 weeks, fiscalyear 2006 included 53 weeks. |
|            |  |                                                                                                                                                    |

|                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|-----------------|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Use ofEstimates |  | The preparation of financial statements inconformity with generally accepted accounting principles of the UnitedStates of America requires management to make estimates and assumptionsthat affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of thefinancial statements and reported amounts of revenues and expensesduring the reporting period. Actual results could differ from thoseestimates. |
|                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |

|                  |  |                                                                                                                                                                                                                |
|------------------|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Cash Equivalents |  | The Companyconsiders all highly liquid debt instruments purchased with maturitiesof three months or less to be cash equivalents. As of April30,  2006 and April  24,  2005, cash equivalents werenot material. |
|                  |  |                                                                                                                                                                                                                |

|                       |  |                                                                                                                                                                                                                                                                                                                 |
|-----------------------|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Financial Instruments |  | Theestimated fair values of the Company’s financial instruments,which consist of cash and cash equivalents, accounts receivable,accounts payable, accrued expenses, and certain long-term obligations,approximate their carrying values based on their maturity dates andprevailing market interestrates. |
|                       |  |                                                                                                                                                                                                                                                                                                                 |

|             |  |                                                                            |
|-------------|--|----------------------------------------------------------------------------|
| Inventories |  | Inventories arevalued at the lower of cost (first-in, first-out) ormarket. |
|             |  |                                                                            |

|                        |  |                                                                                                                                                                                                                        |
|------------------------|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Property and Equipment |  | Propertyand equipment are stated at cost. Depreciation is computed usingstraight-line methods over the estimated useful lives of the assets.Leasehold improvements are amortized over the estimated useful lives ofthe |
|                        |  |                                                                                                                                                                                                                        |

F-8

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Table of Contents

BostonRestaurant Associates, Inc.and SubsidiariesSummary ofAccountingPolicies

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|  |  |                                                                                                           |
|--|--|-----------------------------------------------------------------------------------------------------------|
|  |  | improvements or the length of the relatedlease excluding renewal option periods, whichever one isshorter. |
|  |  |                                                                                                           |

|             |  |  |
|-------------|--|--|
| OtherAssets |  |  |
|             |  |  |

|                         |  |                                                                                                       |
|-------------------------|--|-------------------------------------------------------------------------------------------------------|
| Deferred FinancingCosts |  | Costs incurred in connection with obtainingfinancing are amortized over the terms of the relateddebt. |
|                         |  |                                                                                                       |

|                          |  |                                                                                                                                                        |
|--------------------------|--|--------------------------------------------------------------------------------------------------------------------------------------------------------|
| Lease Acquisition Rights |  | Costsincurred in connection with the purchases of leases are being amortizedover the shorter of the term of the leases or the expected benefitperiods. |
|                          |  |                                                                                                                                                        |

|          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|----------|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Goodwill |  | Effective April29,  2002 the Company adopted FASB Statement No. 141,BusinessCombinations (‘‘SFAS 141’’) and No. 142,Goodwill and Other Intangible Assets (‘‘SFAS142’’). SFAS 141 requires the use of the purchase methodof accounting and prohibits the use of the pooling-of-interest methodof accounting for business combinations initiated after June 30, 2001.SFAS 141 also requires that the Company recognize acquired intangibleassets apart from goodwill if the acquired intangible assets meetcertain criteria. SFAS 141 applies to all business combinationsinitiated after June  30,  2001 and for purchase businesscombinations completed on or after July  1,  2001. It alsorequires, upon adoption of SFAS 142, that the Company reclassify thecarrying amounts of intangible assets and goodwill based on thecriteria in SFAS 141. |
|          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |

|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | SFAS 142 also requires that companiesno longer amortize goodwill, but test goodwill for impairment at leastannually. In addition, SFAS 142, requires that the Company identifyreporting units for the purpose of assessing potential futureimpairments of goodwill, reassess the useful lives of other existingrecognized intangible assets, and cease amortization of intangibleassets with an indefinite usefullife. |
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                        |

|                    |  |  |
|--------------------|--|--|
| RevenueRecognition |  |  |
|                    |  |  |

|                 |  |                                                                                                                                                                              |
|-----------------|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| RestaurantSales |  | Substantially all restaurant sales representretail sales to the general public through Company-owned restaurants.Such amounts are recognized as revenue at the point ofsale. |
|                 |  |                                                                                                                                                                              |

|                |  |                                                                                                                                                                                                                                                                              |
|----------------|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Franchise Fees |  | Franchise feesresulting from the sale of individual franchise locations arerecognized as revenue upon the commencement of franchise operations.Revenues from the sale of area development rights are recognizedproportionately as the franchised restaurants, subject to the |
|                |  |                                                                                                                                                                                                                                                                              |

F-9

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Table of Contents

BostonRestaurant Associates, Inc.and SubsidiariesSummary ofAccountingPolicies

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|  |  |                                                                                                                                                                       |
|--|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | area development agreements, commenceoperations. Franchise royalties, which are based on a percentage offranchised restaurants’ sales, are recognized asearned. |
|  |  |                                                                                                                                                                       |

|                   |  |                                                                                                                                                                |
|-------------------|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Advertising Costs |  | Advertisingcosts are expensed when incurred. Advertising expense amounted toapproximately $413,000 $411,000, and $507,000 in 2006, 2005 and 2004,respectively. |
|                   |  |                                                                                                                                                                |

|                   |  |                                                                                                                                                                                                       |
|-------------------|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Pre-Opening Costs |  | Allnonrecurring costs, such as recruiting, training pre-opening rent andother initial direct administrative expenses associated with theopening of new restaurant locations, are expensed asincurred. |
|                   |  |                                                                                                                                                                                                       |

|                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|-----------------|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Taxes on Income |  | The Companyaccounts for income taxes under the asset and liability method pursuantto Statement of Financial Accounting Standards No. 109(‘‘SFAS No. 109’’),‘‘Accounting for Income Taxes.’’ Under SFASNo. 109, deferred income taxes are recognized for the future taxconsequences attributable to differences between the financialstatement carrying amounts of existing assets and liabilities and theirrespective tax basis. Deferred tax assets and liabilities are measuredusing enacted tax rates expected to apply to taxable income in theyears in which those temporary differences are expected to be recoveredor settled. The effect of any tax rate change on deferred taxes isrecognized in income in the period that includes the enactment date ofthe tax rate change. Realizability of deferred tax assets is assessedand if not more likely than not, a valuation allowance is recorded towrite down the deferred tax assets to their net realizablevalue. |
|                 |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|---------------|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Stock Options |  | The Companyaccounts for stock options using the intrinsic value method inaccordance with Accounting Principles Board Opinion No. 25,‘‘Accounting for Stock Issued toEmployees,’’ (‘‘APB 25’’) andrelated interpretations. Accordingly, the Company has recognized nocompensation cost for its stock option plans.    The Company issuesstock options with exercise prices equal to or above the prevailingmarket rate on the grant date and specifically at a 110% ofmarket rate to holders of 10% or more of common stock. TheCompany follows the disclosure provisions of Statement of FinancialAccounting Standards No. 123 (‘‘SFAS No.123’’), ‘‘Accounting for Stock-BasedCompensation,’’ as amended by SFAS No. 148 which requirethe prominent disclosure of the effects of fair value accounting onearnings and earnings per share of common stock on a pro formabasis. |
|               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

F-10

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Table of Contents

BostonRestaurant Associates, Inc.and SubsidiariesSummary ofAccountingPolicies

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|  |  |                                                                                                                                                                                                                                                                                                                                                                                                   |
|--|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | Had compensation cost for theCompany’s stock options been determined based upon the fairvalue at the grant date for awards under the plans consistent with themethodology prescribed under SFAS No. 123, the Company’s netincome (loss) would have been adjusted to the pro forma amountsindicated below along with the additional disclosures required by SFASNo. 148 are asfollows: |
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                   |

|                                                                               |  |  |      |   |         |      |  |  |      |   |          |   |  |  |  |   |            |   |
|-------------------------------------------------------------------------------|--|--|------|---|---------|------|--|--|------|---|----------|---|--|--|--|---|------------|---|
| YearsendedApril                                                               |  |  | 2006 |   |         | 2005 |  |  | 2004 |
| NetIncome (loss)                                                              |  |  |      | $ | 298,258 |      |  |  |      | $ | (428,715 | ) |  |  |  | $ | (3,437,278 | ) |
| Less:dividends                                                                |  |  |      |   | (78,866 | )    |  |  |      |   | (20,853  | ) |  |  |  |   | —    |   |
| Income (loss) available to common stockholders asreported                     |  |  |      |   | 219,392 |      |  |  |      |   | (449,298 | ) |  |  |  |   | (3,437,278 | ) |
| Deduct:                                                                       |  |  |      |   |    |      |  |  |      |   |     |   |  |  |  |   |       |   |
| Totalstock-based compensation expense determined under fair value basedmethod |  |  |      |   | 3,709   |      |  |  |      |   | 201,330  |   |  |  |  |   | 11,429     |   |
| Income(loss) available to common stockholders-proforma                        |  |  |      | $ | 215,683 |      |  |  |      | $ | (650,628 | ) |  |  |  | $ | (3,448,707 | ) |
| Basicand diluted earnings pershare:                                           |  |  |      |   |    |      |  |  |      |   |     |   |  |  |  |   |       |   |
| Asreported                                                                    |  |  |      | $ | .03     |      |  |  |      | $ | (.06     | ) |  |  |  | $ | (.49       | ) |
| Proforma                                                                      |  |  |      | $ | .03     |      |  |  |      | $ | (.09     | ) |  |  |  | $ | (.49       | ) |
|                                                                               |

|                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|--------------------------------------------|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| NetIncome (Loss) Per Share of Common Stock |  | The Companyfollows Statement of Financial Accounting Standards No. 128(‘‘SFAS No. 128’), ‘‘Earnings perShare.’’ Under SFAS No. 128, basic earnings per shareexcludes the effect of any dilutive options, warrants or convertiblesecurities and is computed by dividing the net income (loss) availableto common shareholders by the weighted average number of common sharesoutstanding for the period. Diluted earnings per share is computed bydividing the net income (loss) available to common shareholders by thesum of the weighted average number of common shares and common shareequivalents computed using the average market price for the periodunder the treasury stock method. |
|                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

|                  |  |                                                                                                                                                                                                                                                                                                                                                                             |
|------------------|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Long-LivedAssets |  | The Company follows Statement of FinancialAccounting Standards No 144 (‘‘SFAS 144’’)‘‘Accounting for the Impairment or Disposal of Long-LivedAssets’’, which addresses financial accounting andreporting for the impairment or disposal of long-lived assets. AlthoughSFAS 144 supersedes Statement of Financial Accounting |
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Table of Contents

BostonRestaurant Associates, Inc.and SubsidiariesSummary ofAccountingPolicies

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|  |  | Standard No. 121 (‘‘SFAS121’’), ‘‘Accounting for the Impairment ofLong-Lived Assets To Be Disposed Of’’, it retains many ofthe fundamental provisions of SFAS 121. SFAS 144 also supersedes theaccounting and reporting provisions of Accounting Principles BoardOpinion No. 30 (‘‘APB 30’’),‘‘Reporting the Results of Operations-Reporting theEffects of Disposal of a Segment of a Business, and Extraordinary,Unusual and Infrequently Occurring Events andTransactions’’ for the disposal of a segment of abusiness. However, it retains the requirement of ABP 30 to reportseparately discontinued operations and extends that reporting to acomponent of an entity that either has been disposed of, by sale,abandonment, or in a distribution to owners, or is classified as heldfor sale. In fiscal 2005, the Company discontinued certain of itsrestaurant locations (see Note 13). |
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|--|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | The Company reviews thecarrying values of its long-lived and identifiable intangible assetsfor possible impairment whenever events or changes in circumstancesindicate that the carrying amounts of the assets may not berecoverable. In fiscal 2006, the Company recorded an impairment chargeof approximately $307,000 related to the write-down of certainlong-lived assets to fair value. In fiscal 2004, the Company recordedan impairment charge of approximately $2,163,000 related to thewrite-down of certain long-lived assets to fair value. |
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | TheCompany recorded an impairment charge of $307,000 in the fourth quarterof fiscal 2006 which is included in the consolidated statements ofoperations related to the write-down of certain long-lived assets. TheCompany reviewed the carrying value of its long-lived assets and notedthat the expected future cash flows for its Polcari’s bistrorestaurant in Salem, New Hampshire are not sufficient to recover therecorded carrying value of long-lived assets at this location. TheCompany then reviewed the revenue and income trends at this locationand determined that cash flow would not improve. Subsequent to thisanalysis the Company reviewed various scenarios and weighed theprobability of each scenario. Accordingly, the Company recognized animpairment charge to reduce the carrying value of leaseholdimprovements to zero and restaurant equipment to a fair value of$161,000. The Company currently plans to continue to operate thisrestaurant for its remaining lease term. |
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F-12

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Table of Contents

BostonRestaurant Associates, Inc.and SubsidiariesSummary ofAccountingPolicies

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|------------------------------|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| New AccountingPronouncements |  | In May  2005, the FASB issued SFASNo. 154, ‘‘Accounting Changes and ErrorCorrection’’, replaces ABP Opinion 20,‘‘Accounting Changes,’’ and FASBStatement No. 3, ‘‘Reporting Accounting Changes inInterim Financial Statements,’’ and changes therequirements for the accounting for and reporting of a change inaccounting principle. SFAS No. 154 requires retrospective applicationto prior period’s financial statements of changes in accountingprinciple, unless it is impracticable to determine either theperiod-specific effects or the cumulative effect of the change. SFASNo. 154 shall be effective for accounting changes and corrections oferrors made in fiscal years beginning after December  15,2005. Early adoption is permitted for accounting changes andcorrections of error made in fiscal years beginning after the date SFASNo. 154 was issued. At the present time, we do not believe thatadoption of SFAS No. 154 will have a material effect on our financialposition, results of operations or cash flows. |
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|--|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | InDecember 2004, the FASB issued SFAS No. 123R whichaddresses the accounting for transactions in which a company receivesemployee services in exchange for (a) equity instruments of thecompany or (b) liabilities that are based on the fair value ofthe company's equity instruments or that may be settled by theissuance of such equity instruments. It eliminates the ability toaccount for share-based compensation transactions using APB OpinionNo. 25, and generally requires that such transactions beaccounted for using a fair-value-based method. As permitted by thecurrent SFAS No. 123, Accounting for Stock-BasedCompensation, we have been accounting for share-based compensationto employees using APB Opinion No. 25's intrinsic valuemethod and, as such, we generally recognize no compensation cost foremployee stock options. Under the original guidance of SFASNo. 123R, we were to adopt the statement's provisions forthe interim period beginning after June 15, 2005. However, inApril 2005, as a result of an action by the Securities andExchange Commission, companies were allowed to adopt the provisions ofSFAS No. 123R at the beginning of their fiscal year that beginsafter June 15, 2005. Consequently, we adopted SFASNo. 123R on May 1, 2006. While we expect that therequirement to expense stock options and other equity interests thathave been or will be granted pursuant to our equity incentive programwill significantly increase our operating expenses and result in lowerearnings per share, the amount of the increase in operating |
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F-13

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Table of Contents

BostonRestaurant Associates, Inc.and SubsidiariesSummary ofAccountingPolicies

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|--|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | expenses will depend on the level of futuregrants, the terms and fair values of such grants, and expectedvolatilities, among other factors, present at the grant dates. Theadoption of SFAS No. 123R will have no impact on our cashflows. |
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F-14

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Table of Contents

BostonRestaurant Associates, Inc.and SubsidiariesNotes toConsolidated FinancialStatement    

|  |
|--|
|  |  |
|  |

|                                       |  |  |
|---------------------------------------|--|--|
| 1.    Inventories |  |  |
|                                       |  |  |

|                             |
|-----------------------------|
|                             |  |  |  |  |  |  |  |  |  |  |  |  |
|                        |  |  | April30,2006 |  |  | April  24,2005 |
| Food, beverages, and liquor |  |  |  | $ | 198,770 |  |  |  |  | $ | 204,291 |  |
| Paper goods andsupplies     |  |  |  |  | 275,397 |  |  |  |  |  | 256,454 |  |
| Total                       |  |  |  | $ | 474,167 |  |  |  |  | $ | 460,745 |  |
|                             |

|                                            |  |                                            |
|--------------------------------------------|--|--------------------------------------------|
| 2.    OtherAssets, Net |  | Other assets net, consist of thefollowing: |
|                                            |  |                                            |

|                              |
|------------------------------|
|                              |  |  |  |  |  |  |  |  |  |  |  |  |
|                         |  |  | April30,2006 |  |  | April 24,2005 |
| Deposits andother            |  |  |  | $ | 476,501 |  |  |  |  | $ | 397,069 |  |
| Leaseacquisitionrights       |  |  |  |  | 290,700 |  |  |  |  |  | 290,700 |  |
| Deferredfinancingcosts       |  |  |  |  | 409,577 |  |  |  |  |  | 398,436 |  |
| Deferredcosts                |  |  |  |  | 514,575 |  |  |  |  |  | — |  |
|                         |  |  |  |  | 1,691,353 |  |  |  |  |  | 1,086,205 |  |
| Less:accumulatedamortization |  |  |  |  | 691,088 |  |  |  |  |  | 642,710 |  |
| Otherassets,net              |  |  |  | $ | 1,000,265 |  |  |  |  | $ | 443,495 |  |
|                              |

|                                    |  |                                                                                                                                                                                                                                                                                                      |
|------------------------------------|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 3.    Goodwill |  | In accordance with SFAS 142, an intangibleasset with an indefinite useful life should be tested for impairment inaccordance with the guidelines in SFAS 142. SFAS 142 is required to beapplied to all goodwill and other intangible assets regardless of whenthose assets were initially recognized. |
|                                    |  |                                                                                                                                                                                                                                                                                                      |

|  |  |                                                                                                                                                                                                                                                                                  |
|--|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | As of April29,  2002, theCompany’s goodwill of $453,643 wasassociated with the acquisition of Capucino’s, Inc. in 1994. TheCompany performed its annual impairment test on April  30,2006 and no adjustment to the $453,643 balance of goodwill was deemednecessary. |
|  |  |                                                                                                                                                                                                                                                                                  |

|                                           |  |                                           |
|-------------------------------------------|--|-------------------------------------------|
| 4.    AccruedExpenses |  | Accrued expenses consist of thefollowing: |
|                                           |  |                                           |

|                              |
|------------------------------|
|                              |  |  |  |  |  |  |  |  |  |  |  |  |
|                         |  |  | April30, 2006 |  |  | April 24,2005 |
| Professionalfees             |  |  |  | $ | 172,360 |  |  |  |  | $ | 183,954 |  |
| Compensation                 |  |  |  |  | 669,687 |  |  |  |  |  | 688,289 |  |
| Interest                     |  |  |  |  | 124,465 |  |  |  |  |  | 132,961 |  |
| Accruedrent                  |  |  |  |  | 30,011 |  |  |  |  |  | 48,979 |  |
| Accrueddividends             |  |  |  |  | 15,817 |  |  |  |  |  | 20,583 |  |
| Giftcertificates             |  |  |  |  | 183,624 |  |  |  |  |  | 177,163 |  |
| Other                        |  |  |  |  | 122,221 |  |  |  |  |  | 271,725 |  |
| Taxesother than income taxes |  |  |  |  | 104,292 |  |  |  |  |  | 83,017 |  |
| Total                        |  |  |  | $ | 1,422,477 |  |  |  |  | $ | 1,606,671 |  |
|                              |

F-15

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Table of Contents

BostonRestaurant Associates, Inc.and SubsidiariesNotes toConsolidated FinancialStatement    

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|                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|-------------------------------------------------------------|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 5.    CreditFacility and Long-Term Debt |  | On April21,  2005 the Company refinanced its debt with Commerce Bank andTrust Company and a new $2,300,000 Credit Facility was established.This Credit Facility consists of a $1,500,000 4 year term note bearinginterest at the bank base rate plus 2% and an $800,000 mortgagein favor of Commerce Bank and Trust Company at a fixed rate of7%. The mortgage has a twenty year amortization schedule with acomplete payment of principal due at the end of five years. Allborrowing under the Credit Facility are collateralized by substantiallyall of the assets of the Company and are subject to various financialcovenants.     |
|                                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |

|                                                                                                                                                                                                                                                                                                              |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                                                                                                                                              |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                                                                                                                                                                                                                                                                         |  |  | April30,2006 |  |  | April 24,2005 |
| Note payableto a bank bearing interest at 9.75% (subject to adjustments tothe bank's base rate plus 2%) representing $1,500,000borrowings, payable in aggregate monthly installments of principal andinterest of $37,709 through April,2009                                                                  |  |  |  | $ | 1,172,900 |  |  |  |  | $ | 1,500,000 |  |
| Mortgagein favor of Commerce Bank and Trust Company, bearing interest at7%, representing borrowing against the Company's propertyin Boston's North End payable in aggregate monthly installmentsof principal and interest of $6,253 through April, 2010 with the thenoutstanding principal due in April,2010 |  |  |  |  | 781,145 |  |  |  |  |  | 800,000 |  |
| Total                                                                                                                                                                                                                                                                                                        |  |  |  |  | 1,954,045 |  |  |  |  |  | 2,300,000 |  |
| Lesscurrentmaturities                                                                                                                                                                                                                                                                                        |  |  |  |  | 374,754 |  |  |  |  |  | 353,396 |  |
| Long-termdebt                                                                                                                                                                                                                                                                                                |  |  |  | $ | 1,579,291 |  |  |  |  | $ | 1,946,604 |  |
|                                                                                                                                                                                                                                                                                                              |

F-16

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Table of Contents

BostonRestaurant Associates, Inc.and SubsidiariesNotes toConsolidated FinancialStatement    

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|                                                                                                                          |  |                                            |
|--------------------------------------------------------------------------------------------------------------------------|--|--------------------------------------------|
| 5.    CreditFacility and Long-Term Debt        (Continued) |  | Maturities oflong-term debt are asfollows: |
|                                                                                                                          |  |                                            |

|                  |
|------------------|
|                  |  |  |  |  |  |  |
| Fiscalyearending |  |  | Amount |
| 2007             |  |  |  | $ | 374,754 |  |
| 2008             |  |  |  |  | 412,345 |  |
| 2009             |  |  |  |  | 453,723 |  |
| 2010             |  |  |  |  | 713,223 |  |
| 2011             |  |  |  |  | — |  |
| Total            |  |  |  | $ | 1,954,045 |  |
|                  |

|                                                            |  |                                                                                                                                                                                                                                                                                                     |
|------------------------------------------------------------|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 6.    NotesPayable — Stockholder |  | Notes payable— stockholder consists of two notes, with an aggregate principalamount of $82,431 and interest at 7.18% and 8%, payablein aggregate monthly installments of principal and interest of $810,maturing January  2017. Maturities of notes payable —stockholder are asfollows: |
|                                                            |  |                                                                                                                                                                                                                                                                                                     |

|                  |
|------------------|
|                  |  |  |  |  |  |  |
| Fiscalyearending |  |  | Amount |
| 2007             |  |  |  | $ | 6,736 |  |
| 2008             |  |  |  |  | 7,059 |  |
| 2009             |  |  |  |  | 7,389 |  |
| 2010             |  |  |  |  | 7,732 |  |
| 2011             |  |  |  |  | 8,085 |  |
| Thereafter       |  |  |  |  | 45,430 |  |
| Total            |  |  |  | $ | 82,431 |  |
|                  |

|                                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--------------------------------------------------|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 7.    SubordinatedDebentures |  | Subordinated debentures with anoutstanding balance of $1,450,000 at April  30,  2006 andApril  24,  2005 consist of convertible debentures bearinginterest at variable rates of 8% through December31,  1997, 10% through December  31,  1998,12% through December  31,  1999 and 14%through December  31,  2011, payable semi-annually andconvertible into the Company’s common stock at a conversion rateof $1.25 per share. The Company has recorded interest costs related tothese debentures at a straight-lined rate of 13.2%. Theconvertible debentures are convertible at the option of the holder, atany time, and automatically convertible into shares of common stock atthe conversion rate if the average bid price of the Company’scommon stock for any sixty consecutive trading days is equal to orgreater than $3.00. The debentures are due on December31,  2011. A member of the Board of Directors of the Companyreceived a fee equal to 5% of the proceeds as compensation forservices in fiscal 1997 in connection with thistransaction. |
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F-17

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Table of Contents

BostonRestaurant Associates, Inc.and SubsidiariesNotes toConsolidated FinancialStatement    

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|                                          |  |                                                                                                                                                                                       |
|------------------------------------------|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 8.    Taxes onIncome |  | At April  30,  2006 theCompany has the following net operating loss carryforwards, subject toreview by the Internal Revenue Service, available to offset futurefederal taxableincome: |
|                                          |  |                                                                                                                                                                                       |

|                                                                                                                    |
|--------------------------------------------------------------------------------------------------------------------|
|                                                                                                                    |  |  |  |  |  |  |  |  |  |
|                                                                                                               |  |  | Amount |  |  | ExpirationDates |
| Net operating losses purchased in a 1994acquisition, whose use islimited                                           |  |  |  | $ | 547,000 |  |  |  | 2005- 2009 |
| Net operating losses incurred before andafter acquisition and available for immediate offset against taxableincome |  |  |  | $ | 5,615,000 |  |  |  | 2008 -2024 |
|                                                                                                                    |

|  |  |                                                   |
|--|--|---------------------------------------------------|
|  |  | Deferred tax assetsare comprised of thefollowing: |
|  |  |                                                   |

|                                 |
|---------------------------------|
|                                 |  |  |  |  |  |  |  |  |  |  |  |  |
|                            |  |  | April30, 2006 |  |  | April 24,2005 |
| Deferred taxassets:             |  |  |  |  |   |  |  |  |  |  |   |  |
| Net operating losscarryforwards |  |  |  | $ | 1,344,000 |  |  |  |  | $ | 1,976,000 |  |
| Fixedassets                     |  |  |  |  | 1,236,000 |  |  |  |  |  | 1,595,000 |  |
| Pre-openingcosts                |  |  |  |  | 107,000 |  |  |  |  |  | 161,000 |  |
| Accrualsand otherreserves       |  |  |  |  | 28,000 |  |  |  |  |  | 50,000 |  |
| Valuationallowance              |  |  |  |  | (2,715,000 | ) |  |  |  |  | (3,782,000 | ) |
| Netdeferred taxassets           |  |  |  | $ | — |  |  |  |  | $ | — |  |
|                                 |

|  |  |                                                                                                                                                                                                                                                                                                            |
|--|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | TheCompany has provided a valuation allowance equal to 100% of itstotal deferred tax assets in recognition of the uncertainty regardingthe ultimate amount of the deferred tax assets that will be realized.Pre-opening costs have been capitalized and amortized over a five yearperiod for tax purposes. |
|  |  |                                                                                                                                                                                                                                                                                                            |

|  |  |                                                                                                                                                                 |
|--|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | A reconciliation of thestatutory federal income tax rate and the effective tax rate as apercentage of income (loss) before taxes on income (loss) is asfollows: |
|  |  |                                                                                                                                                                 |

|                             |
|-----------------------------|
|                             |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                        |  |  | April30,2006 |  |  | April 24,2005 |  |  | April 25,2004 |
| Statutoryrate               |  |  |  |  | 34.0 | % |  |  |  |  | 34.0 | % |  |  |  |  | (34.0 | %) |
| Changein valuationallowance |  |  |  |  | (34.0 | ) |  |  |  |  | (34.0 | ) |  |  |  |  | 34.0 |  |
| Effectivetaxrate            |  |  |  |  | — | % |  |  |  |  | — | % |  |  |  |  | — | % |
|                             |

F-18

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Table of Contents

BostonRestaurant Associates, Inc.and SubsidiariesNotes toConsolidated FinancialStatement    

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|                                                         |  |  |
|---------------------------------------------------------|--|--|
| 9.    Commitments and Contingencies |  |  |
|                                                         |  |  |

|                                                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
|----------------------------------------------------------|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         Leases |  | TheCompany is obligated under noncancellable operating leases for itsleased restaurant locations, office, commissary and warehouse space.Lease terms range from five to twenty years and, in certain instances,include options to extend the original terms. Generally, the Company isrequired to pay its proportionate share of real estate taxes,insurance, common area, and other operating costs in addition to annualbase rent. Substantially all restaurant leases provide for contingentrent based on sales in excess of specified amounts. The Company alsoleases equipment under capital leases. |
|                                                          |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |

|  |  |                                                                                                                                                      |
|--|--|------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | Thefollowing is an analysis of equipment held under capital leases,included in property and equipment in the accompanying consolidatedbalancesheets: |
|  |  |                                                                                                                                                      |

|                                        |
|----------------------------------------|
|                                        |  |  |  |  |  |  |  |  |  |  |  |  |
|                                   |  |  | April30, 2006 |  |  | April 24,2005 |
| Equipment                              |  |  |  |  |     — |  |  |  |  | $ | 424,761 |  |
| Lessaccumulatedamortization            |  |  |  |  | — |  |  |  |  |  | 303,401 |  |
| Netleased property under capitalleases |  |  |  |  | — |  |  |  |  | $ | 121,360 |  |
|                                        |

|  |  |                                                                                                                |
|--|--|----------------------------------------------------------------------------------------------------------------|
|  |  | Aggregateminimum rental requirements under operating leases as of April30,  2006, are approximately asfollows: |
|  |  |                                                                                                                |

|                            |
|----------------------------|
|                            |  |  |  |  |  |  |
| Fiscalyear ending          |  |  | OperatingLeases |
| 2007                       |  |  |  |  | 3,107,683 |  |
| 2008                       |  |  |  |  | 2,952,500 |  |
| 2009                       |  |  |  |  | 2,648,900 |  |
| 2010                       |  |  |  |  | 2,125,900 |  |
| 2011                       |  |  |  |  | 1,638,300 |  |
| Thereafter                 |  |  |  |  | 6,742,700 |  |
| Totalminimum leasepayments |  |  |  | $ | 19,215,983 |  |
|                            |

|  |  |                                                                                                                                                                                                                                 |
|--|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | Deferredrent liabilities of $351,559 and $367,206 as of April  30,2006 and April  24,  2005, respectively, were recorded inorder to recognize lease escalation provisions on a straight-line basisfor certain operating leases. |
|  |  |                                                                                                                                                                                                                                 |

|  |  |                                                                                                                                                                                                                                                   |
|--|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | Rent expense underall operating leases amounted to approximately $3,022,000, $3,079,000and, $3,015,000 during fiscal 2006, 2005 and 2004, respectively, whichincluded contingent rent of approximately $92,000, $97,000, and $60,000respectively. |
|  |  |                                                                                                                                                                                                                                                   |

F-19

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Table of Contents

BostonRestaurant Associates, Inc.and SubsidiariesNotes toConsolidated FinancialStatement    

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|                                                                                                                     |  |  |
|---------------------------------------------------------------------------------------------------------------------|--|--|
| 9.    Commitments andContingencies        (Continued) |  |  |
|                                                                                                                     |  |  |

|                                                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|---------------------------------------------------------------|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         Franchising |  | InDecember  1997, the Company formed Boston Restaurant AssociatesInternational, Inc. (‘‘BRAII’’), awholly-owned subsidiary, for the purpose of offering Pizzeria Reginaand Polcari’s franchise opportunities both domestically andinternationally. During fiscal 2006 the Company did not recognize anyroyalties. During fiscal 2005 the Company recognized approximately $269in royalties. During fiscal 2004, the Company recognized approximately$17,000 in royalties. |
|                                                               |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

|                                                                                                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--------------------------------------------------------------------------------------------------------------------------------------------|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         Joint Ventureand Development        Agreements |  | InDecember  1998, the Company formed a joint venture with ItalianVentures, LLC (‘‘Italian Ventures’’), aKentucky corporation controlled by two then Company directors, andentered into a Development Agreement (the‘‘Agreement’’) for the purpose ofdeveloping domestic casual Italian dining restaurants. The Company hada 51% equity interest in the joint venture entity, ReginaVentures, LLC (‘‘ReginaVentures’’). |
|                                                                                                                                            |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|--|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | The relationship fellapart shortly after formation of the joint venture. Despite the factthat no restaurant development ever took place, Italian Ventures made aseries of claims against the Company. During fiscal 2000, the Companybecame involved in legal proceedings with Italian Ventures, LLC. OnMay  10,  2001 the parties entered into a settlementagreement resolving their disputes. As part of the settlement, theCompany and Italian Ventures terminated the development agreement andoperating agreement among the parties and also terminated the lawsuitand arbitration proceeding between them. |
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |

|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
|--|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | Under theterms of the settlement agreement, commencing with the month ofMay  2001 and ending with the month of April  2008, ItalianVentures was entitled to receive from the Company, in exchange for anyand all ownership interest held by Italian Ventures, a royalty equal toseven tenths of one percent (0.7%) of the monthly gross sales ofeach Polcari’s Bistro restaurant (as specifically definedtherein); provided, however, that Italian Ventures would not beentitled to receive any additional royalties from the Company once thetotal of all royalties paid to Italian Ventures by the Company on acumulative basis during the seven year period equaled $1,700,000. Thesettlement payments do not reflect any transfer of rights from ItalianVentures to the Company nor did the Company deriveor |
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |

F-20

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Table of Contents

BostonRestaurant Associates, Inc.and SubsidiariesNotes toConsolidated FinancialStatement    

|  |
|--|
|  |  |
|  |

|                                                                                                                     |  |  |
|---------------------------------------------------------------------------------------------------------------------|--|--|
| 9.    Commitments andContingencies        (Continued) |  |  |
|                                                                                                                     |  |  |

|                                                                                                                                                        |  |                                                                                                                                                              |
|--------------------------------------------------------------------------------------------------------------------------------------------------------|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         JointVenture and Development         Agreements(Continued) |  | receive any on-going benefit to itsoperations as a result of the settlement. The Company determined that aloss had been incurred in settlement oflitigation. |
|                                                                                                                                                        |  |                                                                                                                                                              |

|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|--|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | Accordingly, the Company recorded anon-recurring charge of approximately $955,000 in the fourth quarter offiscal 2001. The corresponding settlement liability was recorded on theCompany’s balance sheet for $955,000 at April  29,2001. The settlement liability represented the Company’s bestestimate of the total royalty payments expected to be made during theseven year settlement period. This estimate was based on 0.7% ofthe projected sales of current and future Polcari’s BistroRestaurants of approximately $1,250,000 discounted to reflect thepresent value of $955,000. |
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|--|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | During fiscal 2006 theCompany made royalty payments of approximately $34,000 and recordedinterest expense of approximately $6,000. The Company also reduced theaccrual by $29,000 to reflect the Company’s revised estimate ofits remaining obligations under the settlement agreement with ItalianVentures, which is reflected in the consolidated statement ofoperations in fiscal 2006. During fiscal 2005, the Company made royaltypayments of approximately $49,000 and recorded interest expense ofapproximately $15,000 related to the amortization of the discount topresent value. In the fourth quarter of fiscal 2005, the Companyreviewed the estimate of future royalties based upon the sale of abistro in Hyannis. As a result, the accrual related to the settlementliability was reduced by approximately $98,000 to reflect theCompany’s revised estimate of its remaining obligation under thesettlement agreement with Italian Ventures. The $98,000 reduction inthe settlement liability is reflected in the consolidated statements ofoperations for fiscal 2005. During fiscal 2004, the Company maderoyalty payments of approximately $48,000 and recorded interest expenseof $28,000 related to the amortization of the discount to presentvalue. The Company also reduced the settlement reserve by approximately$246,000 based on a revised expansion plan which is reflected in theconsolidated statement of operations in fiscal2004. |
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |

|                                                                |  |                                                                                                                                                                  |
|----------------------------------------------------------------|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         LegalMatters |  | The Company is not party to anymaterial litigation. On March  6,  2006 a Charge ofDiscrimination was filed by a former employee with the MassachusettsCommission |
|                                                                |  |                                                                                                                                                                  |

F-21

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Table of Contents

BostonRestaurant Associates, Inc.and SubsidiariesNotes toConsolidated FinancialStatement    

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|--|
|  |  |
|  |

|                                                                                                                     |  |  |
|---------------------------------------------------------------------------------------------------------------------|--|--|
| 9.    Commitments andContingencies        (Continued) |  |  |
|                                                                                                                     |  |  |

|                                                                            |  |                                                                                                                                                                                   |
|----------------------------------------------------------------------------|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         LegalMatters (Continued) |  | Against Discrimination andwith the Equal Opportunity Commission. The Company intends tovigorously defend this action however, the Company cannot predict theoutcome at this time. |
|                                                                            |  |                                                                                                                                                                                   |

|  |  |                                                                                                                                                                                                                                                                            |
|--|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | From time to time theCompany has been, and expects to continue to be, subject to legalproceedings and claims in the ordinary course of its business. Suchclaims, even if not meritorious, could result in the expenditure ofsignificant financial and managerialresources. |
|  |  |                                                                                                                                                                                                                                                                            |

|                                                                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|---------------------------------------------------------------------|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         Interest RateRisk |  | The Company has exposure to interest raterisk related to certain instruments entered into for other than tradingpurposes. Specifically, borrowings under the Credit Facility bearinterest at a variable rate based on the bank’s prime rate. A100 basis point change in the Credit    Facility interest rate(approximately 9.75% at April  30,  2006) wouldcause the interest expense for fiscal 2007 to change by approximately$13,000. This computation is determined by considering the impact ofhypothetical interest rates on our variable long-term debt atApril  30,  2006. However, the nature and amount of ourborrowings under the Credit Facility may vary as a result of futurebusiness requirements, market conditions covenant compliance and otherfactors. |
|                                                                     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |

|  |  |                                                                                                                                                                                                                                          |
|--|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | The Company’s otheroutstandinglong-term debt bears fixed rates of interest. The Company believesthere is no material exposure to a market interest rate risk that couldaffect future results of operations or financialconditions. |
|  |  |                                                                                                                                                                                                                                          |

|                                                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |
|------------------------------------------------------------------|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         CommodityPrice |  | Many of the food products and otheroperating essentials Risk purchased by us are affected by commoditypricing and are, therefore, subject to price volatility caused byweather, production problems, delivery difficulties and other factorsthat are beyond the Company’s control. The Company’ssupplies and raw materials are available from several sources and weare not dependent upon any single source for these items. The Companynegotiates directly with wholesale suppliers of certain high volumefood ingredients such as cheese, tomato sauce, and flour to ensureconsistent quality and competitive pricing. These ingredients are thenpurchased for the Company by a third party independent distributor atthe negotiated price and redistributed to the Company’srestaurants. All other food ingredients and beverage products arepurchased directly by the general manager of each restaurant inaccordance |
|                                                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |

F-22

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Table of Contents

BostonRestaurant Associates, Inc.and SubsidiariesNotes toConsolidated FinancialStatement    

|  |
|--|
|  |  |
|  |

|                                                                                                                     |  |  |
|---------------------------------------------------------------------------------------------------------------------|--|--|
| 9.    Commitments andContingencies        (Continued) |  |  |
|                                                                                                                     |  |  |

|                                                                              |  |                                                                                                                              |
|------------------------------------------------------------------------------|--|------------------------------------------------------------------------------------------------------------------------------|
|         CommodityPrice (Continued) |  | with corporate guidelines.Certain significant items that could be subject to price fluctuationsare cheese and flourproducts. |
|                                                                              |  |                                                                                                                              |

|                                                          |  |  |
|----------------------------------------------------------|--|--|
| 10.   Stockholders’ Equity(Deficit) |  |  |
|                                                          |  |  |

|                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
|---------------------------------------------------------------------------|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         Series A PreferredStock |  | On January  20,  2005, theCompany sold 1,147,056 shares of its Series A Preferred Stock, $.01 parvalue per share, to 11 accredited investors in a private transactionpursuant to subscription agreements between each such investor and theCompany. Each share of Series A Preferred Stock may be converted at anytime at the option of the holder    of such share into one share ofits Common Stock, $.01 par value per share at a conversion price of$.85 and pays an 8% annual dividend payable quarterly. Theinvestors paid $0.85 per share, for aggregate gross proceeds of$975,000 and shall have the right to vote in all matters, the number ofvotes equal at any time to the number of shares of Common Stock towhich Series A Preferred Stock would be convertible at the thenapplicable conversion price. The holders of Series A Preferred Stock,prior to any distribution to holders of Common Stock, shall be entitledto receive pro rata a preferential amount equal to $0.85 per share ofSeries A Preferred Stock held by them plus all accrued but unpaiddividends. Directors of the Company, together with their affiliates,own 617,646 shares of this stock. |
|                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |

|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | The Companyagreed pursuant to a rights agreement between the Company and theinvestors to use commercially reasonable efforts to (i) register theresale of the shares of Common Stock issuable upon the conversion ofthe shares of Series A Preferred Stock upon demand of a sufficientnumber of the holders of the Series A Preferred Stock and (ii) includesuch shares of Common Stock in any registration statement for thebenefit of the Company or any third party upon request of a sufficientnumber of the holders of the Series A PreferredStock. |
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |

|  |  |                                                                                                                                                                                                        |
|--|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | The Company sold the shares of Series APreferred Stock pursuant to certain exemptions from registrationprovided by Rule 506 of Regulation D and Section 4(2) of the SecuritiesAct of 1933, as amended. |
|  |  |                                                                                                                                                                                                        |

F-23

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Table of Contents

BostonRestaurant Associates, Inc.and SubsidiariesNotes toConsolidated FinancialStatement    

|  |
|--|
|  |  |
|  |

|                                                                                                                  |  |  |
|------------------------------------------------------------------------------------------------------------------|--|--|
| 10.   Stockholders'Equity (Deficit)         (Continued) |  |  |
|                                                                                                                  |  |  |

|                                                                             |  |                                                                                                                                                                                                                             |
|-----------------------------------------------------------------------------|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         Stock Options andWarrants |  | In September  2002, theCompany’s stockholders approved the 2002 Combination StockOption and Share Award Plan. In September  2005 theCompany’s stockholders approved an addition 300,000 incentivestock options. |
|                                                                             |  |                                                                                                                                                                                                                             |

|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | The 2002 Combination Plan providesfor the granting of incentive stock options intended to qualify underthe requirements of the Internal Revenue Code and options not qualifiedas incentive stock options. Incentive stock options may only be grantedto employees of the Company. Non-employees contributing to the successof the Company are eligible to receive non-qualified stock options. The2002 Combination Plan is administered by a committee designated by theBoard of Directors. Options under the 2002 Combination Plan may not begranted after September  19,  2012 and the exercise priceshall be at least equal to the fair market value of the common stock atthe grant date. |
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |

|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|--|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | Incentive stock options may begranted to holders of more than 10% of the Company’scommon stock at an exercise price of at least 110% of the fairmarket value of the Company’s common stock at the grant date.The terms of the options granted are to be determined by the committee,but in no event shall the term of any incentive stock option extendbeyond three months after the time a participant ceases to be anemployee of the Company. No options may be exercised more than fiveyears after the date of the grant for 10% stockholders, or tenyears after the date of grant for all other participants. A total of800,000 shares of common stock have been reserved for issuance underthe 2002 Combination Plan of which, 300,000 are available for futuregrants. |
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |

|  |  |                                                                                                                                                                                                                                             |
|--|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | Changes in options outstanding under the2002 Plan, options issued in connection with the guarantees of certainleases and debt by the Company’s President and Treasurer, andoptions issued under prior plans are summarized asfollows: |
|  |  |                                                                                                                                                                                                                                             |

F-24

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Table of Contents

BostonRestaurant Associates, Inc.and SubsidiariesNotes toConsolidated FinancialStatement    

|  |
|--|
|  |  |
|  |

|                                                                                                                  |  |  |
|------------------------------------------------------------------------------------------------------------------|--|--|
| 10.   Stockholders'Equity (Deficit)         (Continued) |  |  |
|                                                                                                                  |  |  |

|                                                                                                                                           |  |  |
|-------------------------------------------------------------------------------------------------------------------------------------------|--|--|
|         Stock Options and Warrants        (Continued) |  |  |
|                                                                                                                                           |  |  |

|                        |
|------------------------|
|                        |  |  |  |  |  |  |  |  |  |  |  |  |
|                   |  |  | Shares |  |  | Weighted-AverageExercisePrice |
| Balance, April 27,2003 |  |  |  |  | 773,800 |  |  |  |  | $ | 1.00 |  |
| Granted                |  |  |  |  | 100,000 |  |  |  |  |  | 0.70 |  |
| Expired                |  |  |  |  | — |  |  |  |  |  | — |  |
| Balance,April 25,2004  |  |  |  |  | 873,800 |  |  |  |  | $ | 0.96 |  |
| Granted                |  |  |  |  | 440,000 |  |  |  |  |  | .39 |  |
| Expired                |  |  |  |  | (39,000 | ) |  |  |  |  | 1.00 |  |
| Balance,April 24,2005  |  |  |  |  | 1,274,800 |  |  |  |  |  | .77 |  |
| Granted                |  |  |  |  | — |  |  |  |  |  | — |  |
| Expired                |  |  |  |  | (64,800 | ) |  |  |  |  | 1.15 |  |
| Balance,April 30, 2006 |  |  |  |  | 1,210,000 |  |  |  |  | $ | ..75 |  |
|                        |

|  |  |                                                                                                          |
|--|--|----------------------------------------------------------------------------------------------------------|
|  |  | As ofApril  30,  2006, options for 1,210,000 shares wereexercisable at prices ranging from $.37 to$1.88. |
|  |  |                                                                                                          |

|  |  |                                                                                             |
|--|--|---------------------------------------------------------------------------------------------|
|  |  | The following tables summarizes stockoptions outstanding and exercisable at April  30,2006: |
|  |  |                                                                                             |

|                        |
|------------------------|
|                        |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                   |  |  | OptionsOutstanding |
| Rangeof ExercisePrices |  |  | NumberOutstanding |  |  | Weighted-AverageRemainingContractualLife(years) |  |  | Weighted-AverageExercisePrice |
| $0.37 -$1.17           |  |  |  |  | 1,150,000 |  |  |  |  |  | 5.2 |  |  |  |  | $ | .70 |  |
| 1.24                   |  |  |  |  | 30,000 |  |  |  |  |  | 1.9 |  |  |  |  |  | 1.24 |  |
| 1.88                   |  |  |  |  | 30,000 |  |  |  |  |  | 1.3 |  |  |  |  |  | 1.88 |  |
| $0.37-$1.88            |  |  |  |  | 1,210,000 |  |  |  |  |  | 5.0 |  |  |  |  | $ | .75 |  |
|                        |

|                         |
|-------------------------|
|                         |  |  |  |  |  |  |  |  |  |  |  |  |
|                    |  |  | OptionsExercisable |
| Rangeof Exercise Prices |  |  | NumberExercisable |  |  | Weighted-AverageExercisePrice |
| $0.37-$1.17             |  |  |  |  | 1,150,000 |  |  |  |  | $ | .70 |  |
| 1.24                    |  |  |  |  | 30,000 |  |  |  |  |  | 1.24 |  |
| 1.88                    |  |  |  |  | 30,000 |  |  |  |  |  | 1.88 |  |
| $0.37-$1.88             |  |  |  |  | 1,210,000 |  |  |  |  | $ | .75 |  |
|                         |

F-25

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Table of Contents

BostonRestaurant Associates, Inc.and SubsidiariesNotes toConsolidated FinancialStatement    

|  |
|--|
|  |  |
|  |

|                                                                                                                  |  |  |
|------------------------------------------------------------------------------------------------------------------|--|--|
| 10.   Stockholders'Equity (Deficit)         (Continued) |  |  |
|                                                                                                                  |  |  |

|                                                                                                                                           |  |                          |
|-------------------------------------------------------------------------------------------------------------------------------------------|--|--------------------------|
|         Stock Options and Warrants        (Continued) |  |      |
|                                                                                                                                           |  |                          |

|  |  |                                                                                                                                                                                             |
|--|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | Indetermining the pro forma amounts, the Company estimated the fair valueof each option granted using the Black-Scholes option pricing modelwith the following weighted-averageassumptions: |
|  |  |                                                                                                                                                                                             |

|                             |
|-----------------------------|
|                             |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                        |  |  | April30,2006 |  |  | April 24, 2005 |  |  | April 25,2004 |
| Risk free interestrate      |  |  |  |  | — |  |  |  |  |  | 2.0 | % |  |  |  |  | 1.0 | % |
| Expecteddividendyield       |  |  |  |  | — |  |  |  |  |  | — |  |  |  |  |  | — |  |
| Expectedlives               |  |  |  |  | — |  |  |  | 9.0years |  |  | 10.0years |
| Expectedvolatility          |  |  |  |  | — |  |  |  |  |  | 75 | % |  |  |  |  | 75 | % |
| Fairvalue of optionsgranted |  |  |  |  | — |  |  |  |  | $ | 0.29 |  |  |  |  | $ | 0.54 |  |
|                             |

|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|--|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | AtApril  30,  2006, warrants outstanding, consist of warrantsto purchase 350,000 and 150,000 shares of common stock at an exerciseprice of $3.00 per share, expiring December  31,  2006 andJanuary  25,  2008, respectively, granted in considerationfor brokerage services related to the issuance of convertiblesubordinated debentures, warrants to purchase 76,000 shares of commonstock at an exercise price of $.50 per share, expiring February13,  2010, granted in consideration of covenant waiver fees byCommerce Bank & Trust Company, and warrants to purchase 25,000shares of common stock at an exercise price of $.70 per share, expiringAugust  19,  2009, granted to a spouse of a director inconsideration for a short-term promissory note which was repaid inDecember  2004. Interest expense for this related party note was$15,000 in fiscal 2005. All warrants are exercisable except warrantsissued in fiscal 2005. |
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

|  |  |                                                                                                                                                                                                                                                             |
|--|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | The convertiblesubordinated debentures with an outstanding balance of $1,450,000 as ofApril  25,  2004 are convertible into common shares at$1.25 per share. Accordingly, 1,160,000 shares have been reserved forconversion of the subordinated debentures. |
|  |  |                                                                                                                                                                                                                                                             |

|  |  |                                                                                                                                                                         |
|--|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | AtApril  30,  2006, 4,118,056 shares of common stock werereserved with respect to outstanding options, warrants, convertibledebentures and convertible preferred stock. |
|  |  |                                                                                                                                                                         |

|  |  |                                                                                                                                                                    |
|--|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | Duringfiscal 2006 no warrants were granted or expired. During fiscal 2005warrants to purchase 25,000 shares of common stock at an exercise priceof $0.70 per share |
|  |  |                                                                                                                                                                    |

F-26

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Table of Contents

BostonRestaurant Associates, Inc.and SubsidiariesNotes toConsolidated FinancialStatement    

|  |
|--|
|  |  |
|  |

|                                                                                                                  |  |  |
|------------------------------------------------------------------------------------------------------------------|--|--|
| 10.   Stockholders'Equity (Deficit)         (Continued) |  |  |
|                                                                                                                  |  |  |

|                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|-------------------------------------------------------------------------------------------------------------------------------------------|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         Stock Options and Warrants        (Continued) |  | expiringAugust  19,  2009 were granted to a spouse of a director inconsideration for a short-term promissory note which was repaid inDecember  2004. These warrants were valued using theBlack-Scholes option pricing model which resulted in a fair value ofapproximately $7,761 recorded in interest expense in the consolidatedstatement of operations for fiscal 2005. During fiscal 2004, nowarrants expired and warrants to purchase 76,000 shares of common stockat an exercise price of $.50 per share expiring February12,  2011 were granted in consideration of covenant waiver feesby Commerce Bank and TrustCompany. |
|                                                                                                                                           |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |

|                                                                                                          |  |      |                                                 |
|----------------------------------------------------------------------------------------------------------|--|------|-------------------------------------------------|
| 11.   Supplemental Cash Flow        Information |  | Cash | paidfor interest and income taxes is asfollows: |
|                                                                                                          |  |      |

|             |
|-------------|
|             |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|        |  |  | April30, 2006 |  |  | April 24, 2005 |  |  | April 25,2004 |
| Interest    |  |  |  | $ | 394,190 |  |  |  |  | $ | 508,282 |  |  |  |  | $ | 453,957 |  |
| Incometaxes |  |  |  | $ | — |  |  |  |  | $ | — |  |  |  |  | $ | — |  |
|             |

|  |  |                                                          |
|--|--|----------------------------------------------------------|
|  |  | Noncashinvesting and financing activities are asfollows: |
|  |  |                                                          |

|                         |
|-------------------------|
|                         |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                    |  |  | April30, 2006 |  |  | April  24,2005 |  |  | April  25, 2004 |
| Cashdividends to bepaid |  |  |  | $ | 15,817 |  |  |  |  |  | — |  |  |  |  |  | — |  |
|                         |

|                                                                                                                  |  |                                                                                                                                                                                                           |
|------------------------------------------------------------------------------------------------------------------|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 12.   NetIncome (Loss) Per Share of         CommonStock |  | The following is a reconciliation of thedenominator (number of shares) used in the computation of earnings pershare. The numerator (net income or loss) is the same for the basic anddilutedcomputations. |
|                                                                                                                  |  |                                                                                                                                                                                                           |

|                                 |
|---------------------------------|
|                                 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                            |  |  | April30,2006 |  |  | April 24, 2005 |  |  | April25,2004 |
| Basicshares                     |  |  |  |  | 7,035,170 |  |  |  |  |  | 7,035,170 |  |  |  |  |  | 7,035,170 |  |
| Effectiveof dilutivesecurities: |  |  |  |  |   |  |  |  |  |  |   |  |  |  |  |  |   |  |
| Options                         |  |  |  |  | 135,779 |  |  |  |  |  | 58,294 |  |  |  |  |  | — |  |
| Warrants                        |  |  |  |  | — |  |  |  |  |  | — |  |  |  |  |  | — |  |
| Dilutedshares                   |  |  |  |  | 7,170,949 |  |  |  |  |  | 7,093,464 |  |  |  |  |  | 7,035,170 |  |
|                                 |

F-27

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Table of Contents

BostonRestaurant Associates, Inc.and SubsidiariesNotes toConsolidated FinancialStatement    

|  |
|--|
|  |  |
|  |

|                                                                                                                              |  |  |
|------------------------------------------------------------------------------------------------------------------------------|--|--|
| 12.   NetIncome (Loss) Per Share of         Common Stock(Continued) |  |  |
|                                                                                                                              |  |  |

|                                                                                                                                          |  |                                                                                                                                                                                                                                       |
|------------------------------------------------------------------------------------------------------------------------------------------|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         Stock Options andWarrants        (Continued) |  | The following tablesummarizes securities that were outstanding as of April30,  2006, April  24,  2005 and April25,  2004, but not included in the calculations of net income(loss) per share because such securities areantidilutive: |
|                                                                                                                                          |  |                                                                                                                                                                                                                                       |

|                       |
|-----------------------|
|                       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                  |  |  | April30, 2006 |  |  | April  24,2005 |  |  | April  25,2004 |
| Options               |  |  |  |  | 770,000 |  |  |  |  |  | 834,800 |  |  |  |  |  | 873,800 |  |
| Warrants              |  |  |  |  | 601,000 |  |  |  |  |  | 601,000 |  |  |  |  |  | 576,000 |  |
| Convertibledebentures |  |  |  |  | 1,160,000 |  |  |  |  |  | 1,160,000 |  |  |  |  |  | 1,160,000 |  |
| PreferredStock        |  |  |  |  | 1,147,056 |  |  |  |  |  | 1,147,056 |  |  |  |  |  | — |  |
|                       |

|  |  |                                                                                                                                                                                           |
|--|--|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | Thefollowing table is a reconciliation of Income (loss) from continuingoperations available to common stockholders for the years ofApril  30,  2006, April  24,  2005, andApril  25,2004. |
|  |  |                                                                                                                                                                                           |

|                                                                         |
|-------------------------------------------------------------------------|
|                                                                         |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                                                    |  |  | April30,2006 |  |  | April24,2005 |  |  | April25, 2004 |
| Income (loss) from continuingoperations                                 |  |  |  | $ | 227,822 |  |  |  |  | $ | 199,737 |  |  |  |  | $ | (101,537 | ) |
| Less:Preferreddividends                                                 |  |  |  |  | (78,866 | ) |  |  |  |  | (20,583 | ) |  |  |  |  | — |  |
| Income(loss) from continuing operations available to commonstockholders |  |  |  | $ | 148,956 |  |  |  |  | $ | 179,154 |  |  |  |  | $ | (101,537 | ) |
|                                                                         |

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

|  |  |                                                                                                                                                                  |
|--|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | Thefollowing table is a reconciliation of net income (loss) available tocommon stockholders for the years of April  30, 2006,April  24, 2005 and April  25,2004. |
|  |  |                                                                                                                                                                  |

|                                                  |
|--------------------------------------------------|
|                                                  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|                                             |  |  | April30, 2006 |  |  | April  24, 2005 |  |  | April25, 2004 |
| Income (loss)                                    |  |  |  | $ | 298,258 |  |  |  |  | $ | (428,715 | ) |  |  |  | $ | (3,437,278 | ) |
| Less:Preferreddividends                          |  |  |  |  | (78,866 | ) |  |  |  |  | (20,583 | ) |  |  |  |  | — |  |
| Netincome (loss) available to commonstockholders |  |  |  | $ | 219,392 |  |  |  |  | $ | (449,298 | ) |  |  |  | $ | (3,437,278 | ) |
|                                                  |

F-28

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Table of Contents

BostonRestaurant Associates, Inc.and SubsidiariesNotes toConsolidated FinancialStatement    

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|--|
|  |  |
|  |

|                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|---------------------------------------------|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 13.   DiscontinuedOperations |  | Fiscal 2006 the Company completedthe asset sale of Polcari’s of Cambridge, Inc. The Companyreceived approximately $82,000 of net proceeds form this sale. Infiscal 2005, the Company completed the asset sale of Polcari’sof Hyannis, Inc. and entered into and agreement for the asset sale ofPolcari’s of Cambridge, Inc, and closed the Pizzeria Regina inRichmond, Virginia at the end of the lease term. The Company receivedapproximately $552,000 of net proceeds from the sale ofPolcari’s of Hyannis, Inc. to Not Your Average Joe’s. Amember of the board of directors of Boston Restaurant Associates, Inc.is also a member of the board of directors of Not Your AverageJoe’s and abstained from voting and did not participate in thenegotiations. The accompanying financial statements have beenreclassified to reflect both Polcari’s of Hyannis, Inc. andPolcari’s of Cambridge, Inc. and Pizzeria Regina at Richmond,Virginia as discontinued operations. |
|                                             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |

|  |  |                                                                                  |
|--|--|----------------------------------------------------------------------------------|
|  |  | The followingsummarizes the results of operations of the discontinuedoperations. |
|  |  |                                                                                  |

|                                              |
|----------------------------------------------|
|                                              |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| YearsEnded                                   |  |  | April  30,2006 |  |  | April  24, 2005 |  |  | April 25,2004 |
| Revenue                                      |  |  |  | $ | 421,993 |  |  |  |  | $ | 3,995,006 |  |  |  |  | $ | 3,807,270 |  |
| OperatingExpenses                            |  |  |  |  | (485,309 | ) |  |  |  |  | (4,599,761 | ) |  |  |  |  | (7,123,870 | ) |
| OtherIncome(Expenses)                        |  |  |  |  | 1,748 |  |  |  |  |  | (38,912 | ) |  |  |  |  | (19,141 | ) |
| Gainsfrom disposal of discontinuedoperations |  |  |  |  | 132,004 |  |  |  |  |  | 15,215 |  |  |  |  |  | — |  |
| Income(loss)from DiscontinuedOperations      |  |  |  | $ | 70,436 |  |  |  |  | $ | (628,452 | ) |  |  |  | $ | (3,335,741 | ) |
|                                              |

|  |  |                                                                                                                          |
|--|--|--------------------------------------------------------------------------------------------------------------------------|
|  |  | Discontinuedoperations in 2006 included a gain of $132,004 from the disposal ofPolcari’s of Cambridge, Inc.assets. |
|  |  |                                                                                                                          |

|  |  |                                                                                                                                |
|--|--|--------------------------------------------------------------------------------------------------------------------------------|
|  |  | Discontinued operations in 2005 includes again of $15,215 from the disposal of Polcari’s of Hyannis,Inc.’s assets. |
|  |  |                                                                                                                                |

|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |
|--|--|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | The discontinued operatingexpense for 2004 included an impairment charge of $2,162,584. In 2004the Company reviewed the carrying value of its long-lived asset andnoted that the expected future cash flows for Polcari’s inCambridge, Massachusetts was not sufficient to recover the recordedcarrying value of long-lived asset at this location. Accordingly, theCompany recognized an impairment charge to reduce the carrying value ofleasehold |
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                            |

F-29

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Table of Contents

BostonRestaurant Associates, Inc.and SubsidiariesNotes toConsolidated FinancialStatement    

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|--|
|  |  |
|  |

|                                                                                                          |  |                                                                                                                                                               |
|----------------------------------------------------------------------------------------------------------|--|---------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 13.   DiscontinuedOperations        (Continued) |  | improvement tozero and restaurant equipment to the fair market value based on theestimated residual value of the equipment which was determined to be$81,714. |
|                                                                                                          |  |                                                                                                                                                               |

|  |  |                                                                     |
|--|--|---------------------------------------------------------------------|
|  |  | Assets and liabilities of thediscontinued operations are asfollows: |
|  |  |                                                                     |

|                                              |
|----------------------------------------------|
|                                              |  |  |  |  |  |  |  |  |  |  |  |  |
|                                         |  |  | April30, 2006 |  |  | April 24, 2005 |
| Accountsreceivable                           |  |  |  |  |     — |  |  |  |  | $ | 29,027 |  |
| Inventory                                    |  |  |  |  | — |  |  |  |  |  | 135,570 |  |
| Currentassets of discontinuedoperations      |  |  |  |  | — |  |  |  |  | $ | 164,597 |  |
| Deposits                                     |  |  |  |  | — |  |  |  |  | $ | 43,750 |  |
| Fixedassets                                  |  |  |  |  | — |  |  |  |  |  | 81,714 |  |
| Non-currentassets of discontinuedoperations  |  |  |  |  |   |  |  |  |  |  |   |  |
| TotalAssets                                  |  |  |  |  | — |  |  |  |  | $ | 125,464 |  |
| Accountspayable                              |  |  |  |  | — |  |  |  |  | $ | 66,624 |  |
| Accruedexpenses                              |  |  |  |  | — |  |  |  |  |  | 144,711 |  |
| Liabilitiesof discontinuedoperations-current |  |  |  |  | — |  |  |  |  | $ | 211,335 |  |
|                                              |

|                                                                                                           |  |                                                                                          |
|-----------------------------------------------------------------------------------------------------------|--|------------------------------------------------------------------------------------------|
| 14.   QuarterlyFinancial Data        (Unaudited) |  | The followingtable sets forth selected quarterly financial data for fiscal 2006 and2005: |
|                                                                                                           |  |                                                                                          |

|                                              |
|----------------------------------------------|
|                                              |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Yearended April 30,2006                      |  |  | 1stQuarter |  |  | 2nd Quarter |  |  | 3rdQuarter |  |  | 4thQuarter |
| Revenues                                     |  |  |  | $ | 5,736,842 |  |  |  |  | $ | 5,755,534 |  |  |  |  | $ | 6,017,693 |  |  |  |  | $ | 6,025,337 |  |
| Operatingincome(loss)                        |  |  |  |  | 235,416 |  |  |  |  |  | 237,691 |  |  |  |  |  | 281,378 |  |  |  |  |  | (175,658 | ) |
| Income(loss) from Continuingoperations       |  |  |  |  | 144,058 |  |  |  |  |  | 164,663 |  |  |  |  |  | 195,422 |  |  |  |  |  | (276,321 | ) |
| Income(Loss) from discontinuedOperations     |  |  |  |  | 73,536 |  |  |  |  |  | (3,818 | ) |  |  |  |  | 910 |  |  |  |  |  | (192 | ) |
| Net income(loss)                             |  |  |  |  | 217,594 |  |  |  |  |  | 160,845 |  |  |  |  |  | 196,332 |  |  |  |  |  | (276,513 | ) |
| Less:preferred stockdividends                |  |  |  |  | (19,719 | ) |  |  |  |  | (19,281 | ) |  |  |  |  | (19,282 | ) |  |  |  |  | (20,584 | ) |
| Income(loss) available to commonshareholders |  |  |  |  | 197,875 |  |  |  |  |  | 141,564 |  |  |  |  |  | 177,050 |  |  |  |  |  | (297,097 | ) |
| Earnings(loss) per common shareBasic:        |  |  |  |  |   |  |  |  |  |  |   |  |  |  |  |  |   |  |  |  |  |  |   |  |
| Income(loss) from continuingoperations       |  |  |  |  | .02 |  |  |  |  |  | .02 |  |  |  |  |  | .03 |  |  |  |  |  | (.04 | ) |
| Income(Loss) from discontinuedoperations     |  |  |  |  | .01 |  |  |  |  |  | — |  |  |  |  |  | — |  |  |  |  |  | — |  |
| Income(loss) available to commonshareholders |  |  |  |  | .03 |  |  |  |  |  | .02 |  |  |  |  |  | .03 |  |  |  |  |  | (.04 | ) |
| Diluted:                                     |  |  |  |  |   |  |  |  |  |  |   |  |  |  |  |  |   |  |  |  |  |  |   |  |
| Income(loss) from continuingoperations       |  |  |  |  | .02 |  |  |  |  |  | .02 |  |  |  |  |  | .03 |  |  |  |  |  | (.04 | ) |
| Income(Loss) from discontinuedoperations     |  |  |  |  | .01 |  |  |  |  |  | — |  |  |  |  |  | — |  |  |  |  |  | — |  |
| Income(loss) available to commonshareholders |  |  |  |  | .03 |  |  |  |  |  | .02 |  |  |  |  |  | .03 |  |  |  |  |  | (.04 | ) |
|                                              |

F-30

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Table of Contents

BostonRestaurant Associates, Inc.and SubsidiariesNotes toConsolidated FinancialStatement    

|  |
|--|
|  |  |
|  |

|                                                                                                                       |  |  |
|-----------------------------------------------------------------------------------------------------------------------|--|--|
| 14.   QuarterlyFinancial Data         (Unaudited)(Continued) |  |  |
|                                                                                                                       |  |  |

|                                                  |
|--------------------------------------------------|
|                                                  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Yearended April 24,2005                          |  |  | 1stQuarter |  |  | 2nd Quarter |  |  | 3rdQuarter |  |  | 4thQuarter |
| Revenues                                         |  |  |  | $ | 5,385,719 |  |  |  |  | $ | 5,856,724 |  |  |  |  | $ | 5,826,725 |  |  |  |  | $ | 5,559,884 |  |
| Operatingincome(loss)                            |  |  |  |  | 22,281 |  |  |  |  |  | 268,394 |  |  |  |  |  | 281,878 |  |  |  |  |  | 93,898 |  |
| Income(loss) from Continuingoperations           |  |  |  |  | (94,165 | ) |  |  |  |  | 140,708 |  |  |  |  |  | 168,454 |  |  |  |  |  | (15,260 | ) |
| Lossfrom discontinuedOperations                  |  |  |  |  | (218,492 | ) |  |  |  |  | (5,354 | ) |  |  |  |  | (163,640 | ) |  |  |  |  | (240,966 | ) |
| Netincome(loss)                                  |  |  |  |  | (312,657 | ) |  |  |  |  | 135,354 |  |  |  |  |  | 4,814 |  |  |  |  |  | (256,226 | ) |
| Less:preferred stockdividends                    |  |  |  |  | — |  |  |  |  |  | — |  |  |  |  |  | — |  |  |  |  |  | (20,583 | ) |
| Netincome (loss) available to commonshareholders |  |  |  |  | (312,657 | ) |  |  |  |  | 135,354 |  |  |  |  |  | 4,814 |  |  |  |  |  | (276,809 | ) |
| Earnings(loss) per common shareBasic:            |  |  |  |  |   |  |  |  |  |  |   |  |  |  |  |  |   |  |  |  |  |  |   |  |
| Income(loss) from continuingoperations           |  |  |  |  | (.01 | ) |  |  |  |  | .02 |  |  |  |  |  | .02 |  |  |  |  |  | — |  |
| Lossfrom discontinuedoperations                  |  |  |  |  | (.03 | ) |  |  |  |  | — |  |  |  |  |  | (.02 | ) |  |  |  |  | (.04 | ) |
| NetIncome (loss) available to commonshareholders |  |  |  |  | (.04 | ) |  |  |  |  | .02 |  |  |  |  |  | — |  |  |  |  |  | (.04 | ) |
| Diluted:                                         |  |  |  |  |   |  |  |  |  |  |   |  |  |  |  |  |   |  |  |  |  |  |   |  |
| Income(loss) from continuingoperations           |  |  |  |  | (.01 | ) |  |  |  |  | .02 |  |  |  |  |  | .02 |  |  |  |  |  | — |  |
| Lossfrom discontinuedoperations                  |  |  |  |  | (.03 | ) |  |  |  |  | — |  |  |  |  |  | (.02 | ) |  |  |  |  | (.04 | ) |
| Netincome (loss) available to commonshareholders |  |  |  |  | (.04 | ) |  |  |  |  | .02 |  |  |  |  |  | — |  |  |  |  |  | (.04 | ) |
|                                                  |

|                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--------------------------------------|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 15.   MergerAgreement |  | On March  17,  2006, theCompany entered into an Agreement and Plan of Merger (the‘‘Merger Agreement’’) by and among theCompany, Dolphin Direct Equity Partners, LP(‘‘Dolphin’’) and Braidol AcquisitionCorp., (‘‘Braidol’’) a wholly-ownedsubsidiary of Dolphin (‘‘Sub’’), wherebyBraidol Sub will merge (the ‘‘Merger’’)with and into the Company with the Company surviving the Merger. Underthe terms of the Merger Agreement, the common stockholders of theCompany, would be entitled to receive an amount equal to $0.70, withoutinterest, per share of common stock. Under the terms of the MergerAgreement, the preferred stockholders of the Company would be entitledto receive a liquidation preference of $0.85 per share ($974,998) plusaccrued but unpaid dividends totaling |
|                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

F-31

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Table of Contents

BostonRestaurant Associates, Inc.and SubsidiariesNotes toConsolidated FinancialStatement    

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|--|
|  |  |
|  |

|                                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|--------------------------------------------------|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 15.   Merger Agreement(Continued) |  | approximately $994,498 totalliquidation pref). as set forth in the certificate of designation forthe preferred stock, without interest, as well as the product of thenumber of shares of common stock that such shares of preferred stockare convertible in to immediately prior to the merger and $.70, withoutinterest. The consummation of the Merger is subject to customaryclosing conditions, including the approval of the stockholders of theCompany. In addition, the consummation of the Merger is subject to thecondition that certain transaction costs incurred by the Company notexceed $625,000. The Company has determined that it is unlikely thatthe Company will satisfy this condition and has sought a waiver fromDolphin. As of June  29,  2006, the Company has notreceived that waiver. |
|                                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |

|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|--|--|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | The Company is required topay certain of Dolphin’s expenses. Under certain circumstances,if the Merger is not completed, the Company is required to pay atermination fee of up to $325,000 less any expenses it has paid for thebenefit of Dolphin and its affiliates. As of the date hereof, Dolphinand its affiliate Dolphin Offshore Partners, L.P. hold a 40.3%beneficial interest in the Company’s common stock. Peter Salas,a member of the Company’s Board of Directors, is President ofDolphin Asset Management Corp. an affiliate of Dolphin, and its relatedcompanies. |
|  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |

|  |  |                                                                                                                                                                                                  |
|--|--|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|  |  | If the merger agreement is successfullycompleted, the Company will operate as a private company with noSecurities and Exchange Commission(‘‘SEC’’) reportingobligations. |
|  |  |                                                                                                                                                                                                  |

F-32

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