UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.

FORM 10-K

Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Year Ended December 28, 2004

Commission File Number: 000-23739

STEAKHOUSE PARTNERS, INC.
(Exact name of registrant as specified in its charter)

Delaware	94-3248672
(State or other jurisdiction of Incorporation or organization)	(I.R.S. Employer I.D. Number)

10200 Willow Creek Road, San Diego, California 92131
(Address of principal executive offices and Zip Code)

Registrant’s telephone number, including area code: (858) 689-2333

Securities registered pursuant to Section 12(b) of the Exchange Act: None.

Securities registered pursuant to Section 12(g) of the Exchange Act: Common Stock, par value $0.001 per share.

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: ý YES o NO

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not contained in this form, and no disclosure will be contained, to the best of Registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K: ý YES o NO

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act): o YES ý NO

Registrant’s net revenues for its most recent fiscal year (ended December 31, 2004): $55,070,680

Aggregate market value of voting and non-voting equity stock held by non-affiliates computed by reference to the price at which the Common Stock was sold, or the average bid and ask price of said Common Stock, as of April 11, 2005, was approximately $5,019,964

Indicate the number of shares outstanding of each of the registrant’s classes of common stock: 6,073,915 shares of Common Stock were outstanding as of April 12, 2005.

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court: ý YES o NO

DOCUMENTS INCORPORATED BY REFERENCE:

Part III — Proxy Statement to be issued in conjunction with Registrant’s Annual Stockholders’ Meeting. The index to exhibits is located on page 33, hereof

Table of Contents

		Page
PART I
Item 1.	Business	1
Item 2.	Properties	16
Item 3.	Legal Proceedings	17
Item 4.	Submission of Matters to a Vote of Security Holders	17
PART II
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities	17
Item 6.	Selected Financial Data	19
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 7B.	Critical Accounting Policies	30
Item 8.	Financial Statements and Supplementary Data	31
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	31
Item 9A.	Controls and Procedures	31
PART III
Item 10.	Directors and Executive Officers, of the Registrant	31
Item 11.	Executive Compensation	32
Item 12.	Security Ownership of Certain Beneficial Owners and Management, and Related Stockholders Matters	32
Item 13.	Certain Relationships and Related Transactions	32
Item 14.	Principal Accounting Fees and Services	32
PART IV
Item 15.	Exhibits, Financial Statement Schedules	33
Signatures		35

PART I

Item 1. BUSINESS

Unless otherwise stated in this document or unless the context otherwise requires, references herein to the “Company,” “we,” “our” and “us” include Steakhouse Partners, Inc. and its wholly owned subsidiaries, namely Paragon Steakhouse Restaurants, Inc. and its subsidiaries ( “Paragon”). “Steakhouse” refers to Steakhouse Partners, Inc., not including any of its wholly owned subsidiaries.

OVERVIEW

We own and operate 25 full-service steakhouse restaurants located in eight states. Our restaurants principally operate under the brand names of Hungry Hunter, Hunter Steakhouse, Mountain Jack’s and Carvers. Our restaurants specialize in complete steak and prime rib meals, and also offer fresh fish and other lunch and dinner dishes. Our average check is $26.85 (including alcoholic beverages) and our 25 restaurants serve approximately 2.5 million meals annually. Our management believes that our emphasis on quality service and our concentration on fresh cut, high quality USDA graded steaks and prime ribs distinguishes our restaurants from our competitors, presenting an opportunity for growth.

COMPANY BACKGROUND

We were incorporated in the State of Delaware on June 3, 1996 under the name “Texas Loosey’s Steakhouse & Saloon, Inc.” On December 19, 1996, our Board of Directors adopted a resolution to change our name to “Galveston’s Steakhouse Corp.” Up until December 18, 1998, Galveston’s Steakhouse Corp. owned two steakhouse restaurants and operated two others in Southern California, which together formerly comprised all of the restaurants known as “Texas Loosey’s Chili Parlor & Saloon” ( “Texas Loosey’s”).

Galveston’s Steakhouse Corp. first acquired two Texas Loosey’s restaurants on August 19, 1996 pursuant to an Asset Purchase Agreement, dated April 10, 1996 (which was subsequently amended on November 1, 1998), and acquired on the remaining two Texas Loosey’s restaurants on May 1, 1999.

On December 21, 1998, Galveston’s Steakhouse Corp. acquired Paragon Steakhouse Restaurants, Inc. and its subsidiaries (Paragon of Michigan, Inc., Paragon of Nevada, Inc., and Paragon of Wisconsin, Inc.) through its acquisition of all of the outstanding capital stock of Paragon. Paragon also owned Pacific Basin Foods, Inc. ( “PBF”), a company which was engaged in purchasing and selling food and other restaurant supplies to Paragon and nonaffiliated companies. On October 11, 2002 PBF filed for voluntary protection under Chapter 7 of the United States Bankruptcy Court. PBF ceased operations effective as of the filing date thereof.

During the year ended December 31, 1999, Galveston’s Steakhouse Corp.’s name was changed to Steakhouse Partners, Inc.

We maintain an Internet website at www.paragonsteak.com. This website offers free access to our press releases and filings with the U.S. Securities and Exchange Commission (the “Commission”), including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports, as soon as reasonably practicable after these reports are filed with or furnished to the Commission.

Bankruptcy Filing

Effective December 31, 2003 (the “Effective Date”), the Company confirmed a Plan of Reorganization and emerged from Chapter 11 bankruptcy, which allowed it to achieve the benefits that motivated the filings described below. By way of background, on February 15, 2002, the Company filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the Central District of California (the “Bankruptcy Court”). On February 19, 2002, Paragon also filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court (together, the “Filing”).

The initial Filing was made in response to the maturing of certain notes aggregating $1,734,285, which the Company was unable to pay. Throughout the course of the Reorganization, the Company sought to retain core locations, eliminate non-competitive leases, restructure its debt, and withdraw from under-performing markets.

During the process, the Company continued to manage its properties and operated its businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code.

As a result of the Filing, all pending litigation and claims against the Company were stayed, and no party was permitted to take action to realize its pre-petition claim, except pursuant to order of the Bankruptcy Code. While utilizing the protection of this stay, the Company disposed of under performing assets and sought third party participation in funding a plan. Separately, PBF, was a wholesale food distributor serving the restaurant industry. Its principal clients were Paragon and several small regional chains. As Paragon downsized and reduced the total number of restaurants serviced by Pacific Basin Foods, the volume required to maintain its economic feasibility also diminished. On October 11, 2002 Pacific Basin Foods ceased operations and filed a voluntary petition for bankruptcy under Chapter 7 of the Code.

In July 2003, the Bankruptcy Court approved a debtor-in-possession (DIP) loan and the general terms pursuant to which a plan would be approved, as more fully described below. Generally, under the provisions of the Bankruptcy Code, holders of equity interests may not participate under a plan of reorganization unless the claims of creditors are satisfied in full under the plan or unless creditors accept a reorganization plan that permits holders of equity interest to participate. Our approved plan provided for no distribution to equity holders, but rather provided for distribution of equity upon confirmation to the plan funder and creditors, as more fully described below.

The Company commenced a balloting and solicitation process with respect to the Plan of Reorganization, which concluded in early December 2003. On December 19, 2003, the Company’s Plan of Reorganization (the “Plan”) was confirmed by the Bankruptcy Court. Upon confirmation of the Plan, the entire balance of the DIP loan of $5,000,000, including accrued interest, became due and payable to Steakhouse Investors, LLC or its assignees ( “Steakhouse Investors”), and Steakhouse Investors received 90% of the new common stock of the reorganized company in exchange for a full and complete release of the Company’s obligations under the DIP agreement other than interest. The Plan provided that all capital stock of the Company outstanding prior to the confirmation of the Plan would be canceled. In addition, all of the Company’s pre-petition liabilities were completely restructured by the Plan. As a result, the Company was obligated to pay the following claims:

1. Priority tax claim in the amount of approximately $1,921,000 will be paid over a four-year period from the Effective Date, with interest payable at a rate of 6% per annum. (See Financial Note # 8)

2. Secured claims in the amount of approximately $2,151,000 will be paid as follows: (a) $1,535,000 will be paid in full over a period of six years. Interest only will be paid over the first three years, and the principal will be paid over the remaining three years and (b) $616,000 will be deemed paid upon the transfer of all of the assets and lease rights of one of the Company’s restaurants in Torrance, California. On December 31, 2003, the Effective Date, the Company emerged from bankruptcy. All of the assets and lease rights of the Torrance, CA restaurant were transferred in satisfaction of such secured claim. (See Financial Note # 8)

3. Unsecured claims estimated to be between $8,700,000 to $12,700,000 will be paid as follows: (a) general unsecured claims in the amount of $8,000,000 to $12,000,000 are expected to receive recovery of 50% to 70% of their allowed claims. The Company paid to the creditors $1,000,000 within 30 days of the Effective Date of the Bankruptcy Plan, and will make payments under a $5,030,000 note payable, which was scheduled in the amount of $500,000 on each April, August, and December of each year for the next three years. The note is non-interest-bearing and the last payment is due on or before December 2006. Currently, the Company and the Trustee for the unsecured creditors are negotiating extending the payments over a longer period of time so the payments conform more closely to available cash flow. In addition, 500,000 shares of Common

Stock have been reserved for issuance to the general unsecured creditors representing 10% of the new common stock of the Company; and (b) convenience claims in the amount of approximately $700,000 were paid an estimated recovery of 50%. Each allowed claim received its payment within 90 days after the effective date of the Bankruptcy Plan. (See Financial Note # 8)

Additionally, the Plan provided for the Company to assume 25 profitable restaurants as its core. For all the other units, either the Company’s leasehold interests were sold or the leases were rejected as of the Effective Date. Any claims associated with the rejected leases were provided for in the Plan.

In connection our emergence from bankruptcy protection, we implemented fresh-start accounting under the provisions of SOP 90-7, “Financial Reporting by Entities in Reorganization under the Bankruptcy Code”. Under SOP 90-7, the reorganization fair value of the Company was allocated to its assets and liabilities, its accumulated deficit was eliminated, and its new equity was issued according to the Plan of Reorganization as if it were a new reporting entity.

In accordance with fresh-start accounting, all assets and liabilities were recorded at their respective fair market values upon emergence from Chapter 11. Such fair values represented the Company’s estimates based on independent appraisals and valuations. Immaterial differences between estimated pre-petition liabilities assumed by us after the Effective Date (the “Reorganized Company”) and the final settlement amounts are recognized as they occur.

To facilitate the calculation of the enterprise value of the Reorganized Company, we developed a set of financial projections. Based on these financial projections and with the assistance of a financial advisor, the enterprise value was determined by the Company, using various valuation methods, including (i) a comparison of the Company and its projected performance to the market values of comparable companies, (ii) a review and analysis of several recent transactions of companies in similar industries to the Company, and (iii) a calculation of the present value of the future cash flows under the projections. The estimated enterprise value is highly dependent upon achieving the future financial results set forth in the projections as well as the realization of certain other assumptions, which are not guaranteed.

SOP 90-7 requires an allocation of the reorganization equity value in conformity with procedures specified by APB 16, Business Combinations, as amended by SFAS 141, Business Combinations, for transactions reported on the basis of the purchase method. The excess of reorganization value over fair value of net assets ( “goodwill”) was approximately $18,900,000 as of December 31, 2003. (See Financial Note #2)

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the continuation of operations, realization of assets, and liquidation of liabilities in the ordinary course of business. As a result of the Plan, realization of certain of the Company’s assets and liquidation of certain of the Company’s liabilities are subject to significant uncertainty. Furthermore, the Plan of Reorganization materially changed the amounts and classifications reported in the December 30, 2003 consolidated financial statements, which did not give effect to any adjustments to the carrying value or classification of assets or liabilities that were necessary as a consequence of a Plan of Reorganization.

All references to the “Predecessor Company” mean our Company prior to and including December 30, 2003 and all references to the “Reorganized Company” mean our Company during periods including and subsequent to December 31, 2003.

Our Business Background

We believe the steakhouse industry is expected to continue to expand over the next several years. We believe that this industry is highly fragmented and, if we are successful in implementing our Plan of Reorganization, we may have the opportunity to grow our business by expanding one of Paragon’s brand-name steakhouses, Carvers.

Our overall steakhouse operations have historically experienced seasonal fluctuations; with the fourth quarter and first quarter of each year being our strongest quarters, reflecting both the Christmas

season and the colder weather at our Mid-west operations, and the third quarter being the slowest, as people tend to eat less steak in restaurants in the summer months. This seasonality, however, is less pronounced at our California locations, which do not experience the same seasonal changes in weather that occur at our Mid-west locations.

Restaurant Concepts

All of our restaurants are positioned as destination restaurants that seek to attract loyal clientele. Destination restaurants are restaurants situated as the primary destination of our clientele, rather than a destination or activity ancillary to another activity, such as shopping or sight seeing. All but one of our restaurants are full-service steakhouses. We hand-cut our steaks in-house from whole loins of beef for superior freshness and taste. Prime rib is our “signature product” and is the basis for our distinctive merchandising commitment to “The Best Prime Rib in Town”. Our prime rib, which is served in a herb crust, is slow roasted for eighteen hours to enhance its flavor and tenderness. Portions are deliberately generous. Prime Rib and steaks account for approximately 65.0% of our food revenue. Full liquor, wine and bar service are available. Alcoholic beverage sales account for approximately 19.0% of our total net sales.

Our restaurants are generally open seven days a week with typical hours of operation being from 4:30 p.m. to 9:30 p.m. on weekdays and from 4:00 p.m. to 10:00 p.m. on weekends. Some restaurants are open for lunch beginning at 11:30 a.m. on weekdays; most of these restaurants are closed for lunch on weekends.

We intend to continue our efforts to differentiate our restaurants by emphasizing personal and attentive service, consistent high-quality, fresh products and position in the mid-priced, full service steakhouse segment of the restaurant industry.

We currently operate in three distinctive steakhouse markets:

Hungry Hunter, Hunter Steakhouse and Mountain Jack’s

We have 17 steakhouses operating under our core registered trade names, Hungry Hunter, Hunter Steakhouse and Mountain Jack’s, for which the average dinner check in 2004 was approximately $25.17 per guest. Many of these steakhouses have been in business for over 25 years, and, as such, have loyal clientele and the “look and feel”of a classic special occasion restaurant. For this reason, we have been able to position our Hungry Hunter, Hunter Steakhouse and Mountain Jack’s steakhouses as a step-above the lower ticket restaurant chains such as Outback Steakhouse and Lone Star Steakhouse & Saloon.

Our core menu also features fresh fish, seafood, pasta and chicken in addition to prime rib and steaks. A complete meal includes salad and a choice of two side dishes including soup, choice of potato, and steamed vegetables. The menu also includes appetizers and desserts. The restaurant menus have recently been revised and expanded to respond to changing guest palates and diets, and to increase variety and emotional value. The change included the addition of new appetizers, seafood, specialty steaks, prime rib combinations and revisions to all plate presentations.

Our Hungry Hunter, Hunter Steakhouse and Mountain Jack’s restaurants are typically free-standing buildings with dinner seating capacities ranging from 150 to 220 seats and an average seating capacity of approximately 180 seats. Unlike an Outback Steakhouse or Lone Star Steakhouse & Saloon, our restaurants typically have one or more banquet rooms to accommodate private parties and corporate events. The bar in each restaurant is generally located adjacent to the dining room primarily to accommodate customers waiting for dining tables and up to approximately 30 additional diners.

Carvers

We have four steakhouses operating in the upscale steakhouse-dining segment under the Carvers brand name with an average dinner check per guest of slightly more than $36.20. Carvers is a sophisticated, upper tier yet mid-priced restaurant specializing in complete steak, chop, prime rib and seafood meals. Most Carvers are divided into distinctive dining areas to provide greater intimacy.

Prices at the Carvers restaurants are slightly higher than those of our other restaurants, but are substantially lower than high-end steakhouses such as Morton’s and Ruth’s Chris.

Our Carvers restaurants are also typically housed in freestanding buildings with dinner seating capacities ranging from 180 to 240 seats and an average seating capacity of approximately 220 seats. Our Carvers restaurants also have one or more banquet rooms to accommodate private parties and corporate events. We are currently developing the next generation lunch and dinner menus for Carvers.

Concept Restaurants

We operate four concept (unique) properties, with average checks ranging from $28.00 to $35.00:

The Tippecanoe Place is an upscale restaurant located in a 24,000 square foot historical building formerly known as the Studebaker Mansion, in South Bend, Indiana. Both the menu (featuring 60% of our core entr ées and menu complimented by gourmet and local favorites) and the structure are South Bend landmarks. Tippecanoe Place is regularly voted the best steakhouse, dining location and wedding site in northern Indiana.

The Cliffhouse, in Folsom, California, overlooks the American River, and attracts both “locals” as well as tourists with its beef and seafood specialties and panoramic patio seating. The restaurant is approximately 10,000 square feet in size, and attracts a younger dining clientele with expansive bar offerings and regular karaoke and dancing opportunities.

The Whaling Company, our only seafood restaurant, is situated in colonial Williamsburg, Virginia. Fresh catches and local-tradition offerings are presented on a daily “catch board.” Tourists visiting colonial Williamsburg and the Busch Gardens amusement park enhance the strong community use of this profitable venture.

The Company operates its final unique restaurant under the name Carvers Creek in Raleigh, North Carolina. When the Company entered the southeast region of the country, the names Carvers Creek and Carvers were tested for market appeal. The former Mountain Jack’s was renamed Carvers Creek, but retained substantially all of the core concept attributes except certain full meal add-ons (such as salad and soup) and point variations.

Reorganization Strategy

Among others, the benefits of the Plan of Reorganization have included the restructuring of our debt, the improvement of our financial performance through cost-reduction and restructuring of administrative overhead, the ability to raise money, through the selective sale of non-strategic restaurants and the commitment of funding in connection with the Plan of Reorganization. Our goal for the future is to enhance our position in the steakhouse restaurant industry by building through internal growth (Carvers) and through the potential acquisition of steakhouse (step-up casual) restaurants. Key components of this strategy include leveraging established brands, achieving operating efficiencies and cost savings through volume discounts on purchases, and efficiently penetrating new markets.

Marketing

We rely principally on our commitment to customer service and excellent price-value relationship to attract and retain customers. Accordingly, we focus our resources on seeking to provide customers with high-quality and attentive service, value and an exciting and vibrant atmosphere.

Our marketing efforts consist of local print media advertising, participation and limited discount coupons. Both local advertising and discount coupons consist of bulk mailers, freestanding newspaper inserts and targeted direct mailers. We have also offered discounts to encourage more people to try our restaurants, as well as to increase weekday customer counts. We also evaluate local image advertising opportunities and are utilizing spot radio strategies in affordable markets.

To promote local community awareness, each restaurant manager is encouraged to become a part of the local community. Many of our restaurants host meetings with community leaders to solicit local input about such restaurant’s potential community participation. Restaurant leadership teams also coordinate birthday and anniversary programs, hotel relationships, catering outreach, and other community-unique guest relations programs.

Restaurant Operations and Management

We maintain quality and consistency in our restaurants through the careful hiring, training and supervision of personnel and the establishment of standards relating to food and beverage preparation, maintenance of facilities and conduct of personnel. To achieve our service goals, each service employee completes a training program, which teaches employees to provide the level of quality service that encourages guests to return and request the same server on subsequent visits.

We maintain financial and accounting controls for each of our restaurants through the use of centralized accounting and management information systems. All levels of our management participate in the ongoing process of strategic and financial planning and our systems are continuously refined to allow management to compare actual results with budgets and projections.

We also utilize management information systems to allow timely information analysis and response. Our computerized point-of-sale (POS) data management system and related telecommunication equipment permits daily polling of restaurant operations and rapid collection of sales data and cash management information. Transaction level data is electronically transferred from each restaurant location via POS systems on a daily basis. By consolidating individual restaurant’s sales, purchasing, payroll, operating expenses, guest related statistics and other data, we can regularly monitor restaurant operations. Our management uses real-time information and control systems to reduce labor costs, to maintain constant surveillance of inventory usage and to analyze various aspects of restaurant operations including ideal food costs, sales mix, labor, minutes per meal, promotional programs, restaurant costs and general marketing data. However, because of the age, reliability and serviceability issues of our existing POS system, we have begun to upgrade this critical feature starting in 2005. The software and hardware vendors have been selected, two installations have been completed with testing and training in process. Once proven and tested, we anticipate it will take approximately twelve to eighteen months to convert all the units.

Our management team for a typical steakhouse restaurant generally consists of one general manager, one or two leaders and a kitchen manager. Each restaurant also employs a staff consisting of approximately 40 to 70 hourly employees, many of whom work part-time. Typically, each general manager reports directly to either a district leader or one of our two regional vice presidents of operations, who each supervise five to seven restaurants. Our restaurant managers complete an extensive training program during which they are instructed in areas including food quality and preparation, customer satisfaction, alcoholic beverage service, governmental regulations compliance, liquor liability management and employee relations. Our restaurant managers are also provided with an operations manual relating to food and beverage preparation, all areas of restaurant management and compliance with governmental regulations. Working in concert with the individual restaurant managers, our senior management defines operations and performance objectives for each restaurant and monitor implementation. Our senior management regularly visits our restaurants and meets with the respective management teams to ensure compliance with our strategies and standards of quality in all respects of our restaurant operations and personnel development.

Each of our new restaurant employees participates in a training program during which the employee works under the close supervision of a restaurant manager or an experienced key employee. Each general manager is required to attend the annual conference, which is held in San Diego, California, for individualized training and the opportunity to hear directly from their peer group. Our management continuously solicits employee feedback concerning restaurant operations and strives to be responsive to our employees’ concerns.

Purchasing

We purchase our food and beverage products from two UniPro Food Distributors: Southwest Traders on the West Coast and Van Eerden in the Mid-West. Food and supplies are shipped directly to the restaurants, although invoices for purchases are sent to the corporate support center for payment. Our emphasis on high-quality food requires frequent deliveries of fresh food supplies.

Sources and Availability of Raw Materials

We strive to obtain quality menu ingredients, raw materials and other supplies and services for our operations from reliable sources at competitive prices. We concentrate our distribution to achieve more favorable terms, but believe we could replace any distributor, if necessary, on a timely basis. Substantially all menu items are prepared on each restaurant’s premises daily from scratch, which includes fresh (non-frozen) beef. Each restaurant’s management determines the quantities of food and supplies required and orders items from regional suppliers on terms negotiated by us. Restaurant level inventories are maintained at a minimum dollar-value level in relation to sales due to the relatively rapid turnover of the perishable produce, poultry, meat, fish and dairy commodities that are used in operations.

Trademarks and Service Marks

We have registered various service marks, including Hungry Hunter, Hunter Steakhouse, Mountain Jack’s and Carvers and their related designs with the United States Patent and Trademark Office. All of our trademarks and service marks have stated expiration dates ranging from 2008 to 2012. However, they are renewable for an unlimited number of additional 10-year terms at our option.

Competition

The restaurant industry is intensely competitive with respect to price, service, location and food quality, and there are many well-established competitors with substantially greater financial and other resources than the Company. The food service is often impacted by changes in the taste and eating habits of the public, economic and political conditions affecting spending habits, population and traffic patterns. The principal bases of competition in the industry are the quality and price of the food products offered. Our restaurants compete with other mid-priced, full service restaurants, which are not necessarily steakhouse restaurants, primarily on the basis of quality of food and service, ambiance, location and price-value relationship. We also compete with a number of other steakhouse restaurants within our markets, including both locally owned restaurants and regional or national chains. Although, we believe that the quality of our service, our well-regarded brands, attractive price-value relationship and quality of food will enable us to differentiate ourselves from our competitors and place us in an excellent competitive position, many of our competitors are well established in the mid-priced dining segment and certain competitors have substantially greater financial, marketing and other resources than us. We also compete with other restaurants and retail establishments for sites. We believe that our ability to compete effectively will continue to depend upon our ability to offer high-quality, mid-priced food in a full service, distinctive dining environment.

Research

We engage an outside company to conduct two secret shops per month for each of our locations completing a sixty-six question survey regarding food, service, quality, value and suggestions for improvement. We also regularly provide “bounce-back” cards to its guests to solicit dining experience information in return for discounts or free desserts.

Government Regulation

Our restaurants are subject to numerous federal, state and local laws affecting health, sanitation and safety standards, as well as to state and local licensing regulation of the sale of alcoholic beverages. Each restaurant currently has appropriate licenses from regulatory authorities allowing it to sell liquor,

beer and wine, and each restaurant has food service licenses from local health authorities. We are required to renew these licenses annually. In addition, these licenses may be suspended or revoked at any time for cause, including violation by us or our employees of any law or regulation pertaining to alcoholic beverage control, such as those regulating the minimum age of patrons or employees, advertising, wholesale purchasing and inventory control. Our failure to obtain or retain liquor or food service licenses would likely have a material adverse effect on our operations. In order to reduce this risk, each of our restaurants is expected to be operated in accordance with standardized procedures designed to assure compliance with all applicable codes and regulations. Difficulties in obtaining or failures to obtain the required licenses or approvals could delay or prevent the development of a new restaurant in a particular area. In certain states, there are a set number of alcoholic beverage licenses available, but there is an active market through which new licenses can be obtained at the then-applicable market price. The failure to receive or retain, or a delay in obtaining, a liquor license in a particular location could adversely affect our ability to obtain such a license elsewhere.

We are subject in certain states to “dram-shop” statutes, which generally provide a person injured by an intoxicated person the right to recover damages from an establishment that wrongfully served alcoholic beverages to the intoxicated person. We carry liquor liability coverage as part of our comprehensive general liability insurance.

Our restaurant operations are also subject to federal and state employment and wage laws governing such matters as working conditions, overtime, meal breaks, rest breaks and tip credits and other employee matters. Significant numbers of our food service and preparation personnel are paid at rates related to the federal minimum wage. Government-imposed increases in minimum wages, paid leaves of absence and mandated health benefits, or increased tax reporting and tax payment requirements for employees who receive gratuities, could be detrimental to the economic viability of our restaurants.

The development and construction of additional restaurants will be subject to compliance with applicable zoning, land use and environmental regulations. Our management is not aware of any environmental regulations that have had a material effect on us or our restaurants to date.

The Federal Americans With Disabilities Act prohibits discrimination on the basis of disability in public accommodations and employment. We intend to ensure that our restaurants will be in full compliance with the ADA, and we review plans and specifications and make periodic inspections to ensure continued compliance. We believe that we are in substantial compliance with all current applicable regulations relating to restaurant accommodations for the disabled. We do not anticipate that such compliance will require us to expend substantial funds.

Employees

At April 5, 2005, we employed approximately 1,353 individuals, of which 114 occupy executive, managerial or clerical positions, and 1,239 hold non-managerial restaurant-related positions. None of our employees is covered by a collective bargaining agreement.

We consider our relations with our employees to be good and have not experienced any interruption of operations due to labor disputes.

Information as to Classes of Similar Products or Services

We operate in only one industry segment. All significant revenues and pre-tax earnings are related to retail sales of food and beverages to the general public through Company-operated restaurants. At December 28, 2004, we had no operations outside the continental United States.

Risk factors that may affect future results and financial condition

The following risk factors and other information included in this Annual Report should be carefully considered. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may

impair our business operations. If any of the following risks actually occur, our business, financial condition and operating results could be materially adversely affected.

Our prior bankruptcy could hinder our ability to negotiate effectively with third parties and could adversely affect our operations going forward.

In February 2002, our Company, along with our wholly owned subsidiary Paragon, filed for voluntary reorganization under Chapter 11 of the Bankruptcy Code. We officially emerged from bankruptcy on December 31, 2003. However, our Chapter 11 reorganization and financial condition and performance could adversely affect our operations going forward. Our bankruptcy filings had an adverse affect on our credit standing with our lenders, certain suppliers and other trade creditors. This can increase our costs of doing business and can hinder our negotiating power with our lenders, certain suppliers and other trade creditors. The failure to negotiate favorable terms could adversely affect our financial performance. Though we have emerged from Chapter 11, we are still obligated to issue 500,000 shares of Common Stock which have been reserved for issuance to creditors in connection with the Plan of Reorganization to the general unsecured creditors. As we continue to reconcile the claims made by these creditors, we will continue to incur expenses with respect to the reorganization process.

If we are unable to obtain additional funds in a timely manner or on acceptable terms or the plan of reorganization is unsuccessful, we may have to curtail or suspend certain or all of our operations, which could adversely affect our financial condition, results of operations and prospects.

Although in January 2005, we successfully raised $1,050,000 in a private placement of securities, we cannot be certain that additional financing will be available when and to the extent required or that, if available, it will be on acceptable terms. If we are unable to obtain additional funds in a timely manner or on acceptable terms to fund our deferred capital expense, it will seriously effect our ability to meet our Plan of Organization objectives, and we may have to curtail or suspend the expansion of our operations and possibly terminate existing operations, which could lead to overall lower revenues and adversely affect our financial results and prospects. If adequate funds are not available on acceptable terms, we may not be able to fund our expansion or respond to competitive pressures, which could lead to our inability to continue as a going concern.

We have incurred losses from inception and may never generate substantial profits.

We were organized in May 1996, and have incurred significant losses since inception. We may never generate profits. We incurred a net loss of approximately $635,302 for the fiscal year ended December 31, 2004; incurred a net loss of approximately $4,851,281 for the fiscal year ended December 30, 2003; and a net loss of approximately $6,582,559 for the fiscal year ended December 24, 2002. As of December 30, 2003, the Predecessor Company had an accumulated deficit of approximately $37.7 million. As of the Effective Date, the accumulated deficit was written off to goodwill as part of the fresh start accounting.

We will need additional capital for expansion.

The development of new restaurants requires funds for construction, tenant improvements, furniture, fixtures, equipment, training of employees, permits, initial franchise fees, and other expenditures. We will require funds to develop additional restaurants and to pursue any additional restaurant development or restaurant acquisition opportunities that may develop.

In the future, we may seek additional equity or debt financing to provide funds so that we can develop or acquire additional restaurants. Such financing may not be available or may not be available on satisfactory terms. If financing is not available on satisfactory terms, we may be unable to expand our restaurant operations. While debt financing will enable us to add more restaurants than we otherwise would be able to add, debt financing increases expenses and is limited as to availability due to our financial results and bankruptcy history, and we must repay the debt regardless of our operating results. Future equity financings could result in dilution to our stockholders.

We may not have sufficient cash reserves to maintain and fund our operations and fund our obligations.

We may not have sufficient cash reserves to maintain our operations and fund our obligations. In such event, we may need to seek additional financing. Any required additional financing may not be available on terms favorable to us, or at all. If adequate funds are not available on acceptable terms, we may be unable to fund our reorganization plan and may be required to sell core assets or dissolve the business. If we raise additional funds by issuing equity securities, shareholders may experience dilution of their ownership interest and the newly issued securities may have a rights superior to those of the common stock. If we issue or incur debt to raise funds, we may be subject to limitations on our operations.

If we lose or are unable to obtain key personnel, our ability to effectively operate our business could be hindered.

Our ability to maintain or enhance our competitive position will depend to a significant extent on the efforts and ability of our executive officers, particularly our chief executive officer. Our future success and our ability to manage future growth will depend in large part upon the efforts of our management team and on our ability to attract and retain other highly qualified personnel. Competition for personnel is intense, and we may not be successful in attracting and retaining our personnel. Our inability to retain our current management team and attract and retain other highly qualified personnel could adversely affect our results of operations and hinder our ability to effectively manage our business.

Because “fresh start” reporting will make future financial statements difficult to compare with our historical financial statements, it may be difficult for investors to measure our financial performance or assess our prospects for growth.

In accordance with the requirements of SOP 90-7, Financial Reporting by Entities in Reorganization Under the Bankruptcy Code, we adopted fresh start reporting effective December 31, 2003. Because SOP 90-7 required us to reset our assets and liabilities to current fair value, our financial position, results of operations and cash flows for periods ending after December 31, 2003 will not be comparable to the financial position, results of operations and cash flows reflected in our historical financial statements for periods ending on or prior to December 31, 2003 included elsewhere in this prospectus. The use of fresh start reporting will make it difficult to assess our future prospects based on historical performance.

Changing consumer preferences and discretionary spending patters, potential outbreaks of “mad cow disease” or “foot/mouth disease” and other factors affecting the availability of beef could force us to modify our restaurants’ concept and menu and could result in a reduction in our revenues.

Even if we are able to successfully compete with other restaurant companies with similar concepts, we may be forced to make changes in one or more of our concepts in order to respond to changes in consumer tastes or dining patterns. Consumer preferences could be affected by health concerns about the consumption of beef, the primary item on our Hungry Hunter, Hunter Steakhouse, Mountain Jack’s, Carvers restaurants’ menus, or by specific events such as the recently confirmed cases of “mad cow disease” by the Canadian government or “foot/mouth disease” which occurred in the United Kingdom. In addition, these events could reduce the available supply of beef or significantly raise the price of beef. If we were to modify the emphasis on beef in our restaurant’s menus, we may lose additional customers who do not prefer the new concept and menu, and we may not be able to attract a sufficient new customer base to generate the necessary revenues needed to make the restaurant profitable.

In addition, we may have different or additional competitors for our intended customers as a result of such a concept change and may not be able to successfully compete against such competitors. Our success also depends on numerous factors affecting discretionary consumer spending, including economic conditions, the cost of gasoline, disposable consumer income and consumer confidence. Adverse changes in these factors could reduce guest traffic or impose practical limits on pricing, either of which could reduce revenues and operating income.

We face risks associated with changes in general economic and political conditions that effect consumer spending.

We believe that the weak and general economic conditions in effect in the United States will continue through 2005. As the economy fluctuates, we are concerned that our customers may become more apprehensive about the economy and reduce their level of discretionary spending. We believe that a decrease in discretionary spending could impact the frequency with which our customers choose to dine out or the amount they spend on meals while dining out, thereby decreasing our revenues. Additionally, the continued military responses to terrorist attacks and our military operations abroad may exacerbate current economic conditions and lead to further weakening in the economy. Adverse economic conditions and any related decrease in discretionary spending by our customers could have an adverse effect on our revenues and operating results.

Our profitability is dependent in large measure on food and supply costs which are not within our control.

Our profitability is dependent in large measure on our ability to anticipate and react to changes in food and supply costs. Various factors beyond our control, including climatic changes and government regulations, may affect food costs. Specifically, our dependence on frequent, timely deliveries of fresh beef, poultry, seafood and produce subjects us to the risks of possible shortages or interruptions in supply caused by adverse weather or other conditions, which could adversely affect the availability and cost of any such items. We cannot assure you that we will be able to anticipate or react to increasing food and supply costs in the future. The failure to react to these increases could materially and adversely affect our business and result of operations.

Our ability to execute our expansion plans depends on securing suitable locations at favorable prices.

Our strategy for expansion of our operations includes the construction of new restaurant properties and/or acquisition of existing properties. Our ability to open additional restaurants will depend upon our ability to identify and acquire available new construction sites or restaurant conversions at favorable prices. We must also have sufficient available funds from operations or otherwise to support this expansion.

If we cannot successfully construct new restaurant properties or convert acquired restaurant properties to our established brands within projected budgets or time periods, our business and our ability to continue as a going concern will be adversely affected. Even with a successful reorganization and sufficient funds, plans to expand our business may fail due to construction delays or cost overruns, which could be caused by numerous factors, such as shortages of materials and skilled labor, labor disputes, weather interference, environmental problems and construction or zoning problems.

We face risks associated with the expansion of our operations.

The success of our business depends on our ability to expand the number of our restaurants, either by developing or acquiring additional restaurants. Our success also depends on our ability to operate and manage successfully our growing operations. Our ability to expand successfully will depend upon a number of factors, including the following:

• the availability and cost of suitable restaurant locations for development;

• the availability of restaurant acquisition opportunities;

• the hiring, training, and retention of additional management and restaurant personnel;

• the availability of adequate financing;

• the continued development and implementation of management information systems;

• competitive factors; and

• general economic and business conditions.

Increased construction costs and delays resulting from governmental regulatory approvals, strikes, or work stoppages, adverse weather conditions, and various acts of God may also affect the opening of

new restaurants. Newly opened restaurants may operate at a loss for a period following their initial opening. The length of this period will depend upon a number of factors, including the time of the year the restaurant is opened, the sales volume, and our ability to control costs.

We may not successfully achieve our expansion goals. Additional restaurants that we develop or acquire may not be profitable. In addition, the opening of additional restaurants in an existing market may have the effect of drawing customers from and reducing the sales volume of our existing restaurants in those markets.

We depend on key food product distributors.

We currently rely chiefly on two food product distributors: Southwest Traders on the West Coast and and Van Eerden in the Mid-West. If either Southwest Traders or Van Eerden is unable to continue providing us with a high level of quality and dependability in the receipt of our supplies, at the cost advantages resulting from our volume purchases, this could have a material impact on our business.

We believe that all essential products are available from other national suppliers as well as from local suppliers in the cities in which our restaurants are located in the event we must purchase our products from other suppliers; however, there can be no assurance that we will be able to match quality, price or dependability of supply.

We face commodity price and availability risk.

We purchase energy and agricultural products that are subject to price volatility caused by weather, market conditions and other factors that are not predictable or within our control. Increases in commodity prices could result in lower restaurant-level operating margins for our restaurant concepts. Occasionally, the availability of commodities can be limited due to circumstances beyond our control. If we are unable to obtain such commodities, we may be unable to offer related products, which would have a negative impact on our profitability.

Increases in federal and state statutory minimum wages could increase our expenses, which could adversely affect our results of operations.

Certain states have each increased their state minimum wages to a level that significantly exceeded the federal minimum wage. These recent increases in the state statutory minimum wage and any future federal or state minimum wage increases could raise minimum wages above the current wages of some of our employees. As a result, competitive factors could require us to make corresponding increases in our employees’wages. Increases in our wage rates increase our expenses, which could adversely affect our results of operations.

The failure to enforce and maintain our trademarks and trade names could adversely affect our ability to establish and maintain brand awareness.

Our current operations and marketing strategy depend significantly on the strength of trademarks and service marks. Our wholly owned subsidiary, Paragon of Michigan, Inc., has registered, among others, the names Hungry Hunter, Mountain Jack’s and Carvers. The success of our growth strategy depends on our continued ability to use our existing trademarks and service marks in order to increase brand awareness and further develop our branded products. Although we are not aware of any infringing uses of any of the trademarks or service marks that we believe could materially affect us; we cannot assure you that we will be free from such infringements in the future.

The names “Hungry Hunter,” “Mountain Jack’s” and “Carvers” represent our core concept. The termination of our right to use this name or our failure to maintain any of our other existing trademarks could materially and adversely affect our growth and marketing strategies.

Because we maintain a small number of restaurants, the negative performance of a single restaurant could have a substantial impact on our operating results.

We currently own and operate 25 restaurants. Due to this relatively small number of restaurants, poor financial performance at any owned restaurant could have a significant negative impact on our profitability as a whole. The results achieved to date by our relatively small restaurant base may not

be indicative of the results of a larger number of restaurants in a more geographically dispersed area with varied demographic characteristics. We cannot assure you that we will be able to operate our existing restaurants at higher sales levels that generate equal or higher operating profits or increase the number of our restaurants sufficiently to offset the impact of poor performance at any one restaurant.

Our operating results may fluctuate significantly due to seasonality and other factors beyond our control.

Our business is subject to seasonal fluctuations, which may vary greatly depending upon the region of the United States in which a particular restaurant is located. In addition to seasonality, our quarterly and annual operating results and comparable unit sales may fluctuate significantly as a result of a variety of factors, including:

• the amount of sales contributed by new and existing restaurants;

• the timing of new openings;

• increases in the cost of key food or beverage products;

• labor costs for our personnel;

• our ability to achieve and sustain profitability on a quarterly or annual basis;

• consumer confidence and changes in consumer preferences;

• health concerns, including adverse publicity concerning food-related illness;

• the level of competition from existing or new competitors in the our segment of the restaurant industry; and

• economic conditions generally and in each of the market in which we are located.

These fluctuations make it difficult for us to predict and address in a timely manner factors that may have a negative impact on our results of operations.

We could face labor shortages, increased labor costs and other adverse effects of varying labor conditions.

The development and success of our restaurants depend, in large part, on the efforts, abilities, experience and reputations of the general managers and chefs at such restaurants. In addition, our success depends in part upon our ability to attract, motivate and retain a sufficient number of qualified employees, including restaurant managers, kitchen staff and wait staff. Qualified individuals needed to fill these positions are in short supply and the inability to recruit and retain such individuals may delay the planned openings of new restaurants or result in high employee turnover in existing restaurants. A significant delay in finding qualified employees or high turnover of existing employees could materially and adversely affect our results of operations or business. Also, competition for qualified employees could require us to pay higher wages to attract sufficient qualified employees, which could result in higher, labor costs. In addition, increases in the minimum hourly wage, employment tax rates and levies, related benefits costs, including health insurance, and similar matters over which we have no control may increase our operating costs.

The restaurant industry is affected by litigation and publicity concerning food quality, health and other issues, which can cause guests to avoid our restaurants and result in liabilities.

Health concerns, including adverse publicity concerning food-related illness, although not specifically related to our restaurants, could cause guests to avoid our restaurants, which would have a negative impact on our sales. We may also be the subject of complaints or litigation from guests alleging food-related illness, injuries suffered on the premises or other food quality, health or operational concerns. A lawsuit or claim could result in an adverse decision against us that could have a material adverse effect on our business and results of operations. We may also be subject to litigation, which, regardless of the outcome, could result in adverse publicity. Adverse publicity resulting from such allegations may materially adversely affect our restaurants, regardless of whether such allegations are true or

whether we are ultimately held liable and us. Such litigation, adverse publicity or damages could have a material adverse effect on our business, competitive position and results of operations.

Compliance with environmental laws may affect our financial condition.

We are subject to various federal, state and local environmental laws. These laws govern discharges to air and water, as well as handling and disposal practices for solid and hazardous wastes. These laws may also impose liability for damages from and the costs of cleaning up sites of spills, disposals or other releases of hazardous materials. We may be responsible for environmental conditions or contamination relating to our restaurants and the land on which our restaurants are located, regardless of whether we lease or own the restaurant or land in question and regardless of whether such environmental conditions were created by us or by a prior owner or tenant. The costs of any cleanup could be significant and have a material adverse effect on our financial position and results of operations.

We face increased expenditures of time and money associated with compliance with changing regulation of corporate governance and public disclosure.

Keeping abreast of, and in compliance with, changing laws, regulations, and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, and new SEC regulations, has required an increased amount of management attention and external resources. We remain committed to maintaining high standards of corporate governance and public disclosure. As a result, we intend to invest all reasonably necessary resources to comply with evolving standards, and this investment may result in increased general and administrative expenses and a diversion of management time and attention from revenue generating activities to compliance activities.

Risks related to our common stock

Since our shares are thinly traded, and trading on the pink sheets may be sporadic because it is not an exchange, stockholders may have difficulty reselling their shares.

Our common stock is currently quoted on the Pink Sheets. The fact that our common stock is not listed is likely to make trading more difficult for broker-dealers, shareholders and investors, potentially leading to further declines in share price. An investor may find it more difficult to sell our common stock or to obtain accurate quotations of the share price of its common stock.

The price of our common stock may fluctuate significantly.

The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of other companies, trading volume in our common stock, dilution systemic to financing operations, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or us. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock.

In the past, following periods of volatility in the market price of a company’s securities, securities class-action litigation has often been instituted. Such litigation, if initiated, could result in substantial costs, a material adverse effect, and a diversion of management’s attention and resources.

Failure of our common stock to appreciate in value could affect our ability to raise working capital and adversely impact our ability to continue our normal operations.

A prolonged period in which our common stock trades at current levels could result in our inability to raise capital and may force us to reallocate funds from other planned uses, which would have a significant negative effect on our business plans and operations. If our stock price does not recover from its current levels, there can be no assurance that we can raise additional capital or generate funds from operations sufficient to meet our obligations. If we are unable to raise sufficient capital in the future, we may not be able to have the resources to continue our normal operations.

The large number of shares of our common stock eligible for public sale and the fact that a relatively small number of investors hold our publicly traded common stock could cause our stock price to fluctuate.

The market price of our common stock could fluctuate as a result of sales by our existing stockholders of a large number of shares of our common stock in the market or the perception that such sales could occur. A large number of shares of our stock is eligible for public sale and our common stock is concentrated in the hands of a small number of investors and is thinly traded. An attempt to sell by a large holder could adversely affect the price of our common stock. These sales or the perception that these sales might occur could also make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

Trading of our stock may be restricted by the sec’s penny stock regulations, which may limit a stockholder’s ability to buy and sell our stock.

The SEC has adopted regulations which generally define “penny stock” to be any equity security that has a market price (as defined) less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exceptions. Our securities are covered by the penny stock rules, which impose additional sales practice requirements on broker-dealers who sell to persons other than established customers and “accredited investors”. The term “accredited investor” refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document in a form prepared by the SEC, which provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction and monthly account statements showing the market value of each penny stock held in the customer’s account. The bid and offer quotations, and the broker-dealer and salesperson compensation information, must be given to the customer orally or in writing prior to effecting the transaction and must be given to the customer in writing before or with the customer’s confirmation. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from these rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure requirements may have the effect of reducing the level of trading activity in the secondary market for the stock that is subject to these penny stock rules. Consequently, these penny stock rules may affect the ability of broker-dealers to trade our securities. We believe that the penny stock rules discourage investor interest in and limit the marketability of our common stock.

NASD sales practice requirements may also limit a stockholder’s ability to buy and sell our stock.

In addition to the “penny stock”rules described above, the NASD, Inc. ( “NASD”) has adopted rules that require that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, the NASD believes that there is a high probability that speculative low priced securities will not be suitable for at least some customers. The NASD requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit your ability to buy and sell our stock and have an adverse effect on the market for our shares.

We do not expect to declare or pay any dividends. We have not declared or paid any dividends on our common stock since our inception, and we do not anticipate paying any such dividends for the foreseeable future.

Anti-takeover provisions.

We do not currently have a shareholder rights plan or any anti-takeover provisions in our by-laws. Without any anti-takeover provisions, there is no deterrent for a take-over of our company, which may result in a change in our management and directors.

Ownership of approximately 38% of our outstanding common stock by five stockholders will limit your ability to influence corporate matters.

A substantial majority of our capital stock is held by a limited number of stockholders. Five stockholders, including our officers and directors and parties affiliated with or related to such persons or to us, own approximately 38% of the shares of common stock outstanding. Accordingly, such stockholders will likely have a strong influence on major decisions of corporate policy, and the outcome of any major transaction or other matters submitted to our stockholders or board of directors, including potential mergers or acquisitions, and amendments to our Amended and Restated Certificate of Incorporation. Stockholders other than these principal stockholders are therefore likely to have little influence on decisions regarding such matters.

ITEM 2. PROPERTIES

We lease all of our restaurant locations. Lease terms are generally 10 to 35 years, with renewal options. All of our leases provide for a minimum annual rent and some leases provide for additional rent based on sales volume at the particular location over specified minimum levels. Generally, the leases are net leases that require us to pay the costs of insurance, taxes and maintenance. We intend to continue to lease restaurant locations where cost-effective if cash flow permits. On July 19, 2000, we completed a sale and leaseback transaction with PS Realty Partners, LP with respect to 19 of its properties, yielding net proceeds of approximately $22 million. We utilized a majority of these net proceeds to pay down a $20 million mortgage debt.

The following table sets forth the location of our existing Hungry Hunter’s, Hunter’s Steakhouse, and Mountain Jack’s restaurants as of April 12, 2005:

	California			Indiana
	Bakersfield Fairfield Lafayette Modesto Oceanside S. San Francisco Sacramento San Diego Santa Rosa	Temucula Thousand Oaks Ventura		Lafayette Michigan Auburn Hills Taylor Troy Traverse City

The following table sets forth the location of our existing Carvers restaurants as well as our concept (unique) restaurants as of April 12, 2005:

	Carvers Locations		Concept (Unique) Restaurant Locations
	Glendale, Arizona Centerville, Ohio Roseville, California Sandy, Utah		Folsom, California South Bend, Indiana Williamsburg, Virginia Raleigh, North Carolina

Our executive offices are located at 10200 Willow Creek Road, San Diego, California 92131. Our executive offices have a three-year lease at very competitive rates with an option to renew. Our telephone number is (858) 689-2333. We believe that there is sufficient office space available at favorable leasing terms in the San Diego, California, metropolitan area to satisfy our additional needs that may result from future expansion.

ITEM 3. LEGAL PROCEEDINGS

In the opinion of our management, other than the bankruptcy filing described above, there are no legal proceedings, which will have a material adverse effect on our financial position or our operating results. See Part I Item 1. Description of Business — Bankruptcy Filing.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted for shareholder approval during the fourth quarter of the fiscal year covered by this Report.

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

Our Common Stock was listed on the over-the-counter on the Pink Sheets under the symbol “SIZLQ.PK” until the Effective Date of the Plan. As of the Effective Date, all of our outstanding capital stock was cancelled. On May 3, 2004, our Common Stock began trading on the Pink Sheets as a Reorganized Company under the symbol STKP.PK.

The following table sets forth the range of high and low closing prices for our Common Stock for each quarterly period indicated, as reported by brokers and dealers making a market in the capital stock. Such quotations reflect inter-dealer prices without retail markup, markdown or commission, and may not necessarily represent actual transactions:

	High			Low
Year ended December 31, 2002
First Quarter	$	0	.28	$	0	.01
Second Quarter		0	.19		0	.01
Third Quarter		0	.15		0	.02
Fourth Quarter		0	.10		0	.00
Year ended December 31, 2003	No Activity

	High			Low
Year ended December 31, 2004
First Quarter	No Activity
Second Quarter	$	2	.75	$	2	.30
Third Quarter		2	.75		1	.15
Fourth Quarter		2	.12		2	.00

Holders

As of January 4, 2005 there were approximately 69 record holders of our Common Stock. Upon Effective Date, the entire balance of the DIP loan (described above), including accrued interest, became due and payable to Steakhouse Investors, LLC or its assignees ( “Steakhouse Investors”), and the former members of Steakhouse Investors received 90% of the new common stock of the Reorganized Company in exchange for a full and complete release of our obligations under the DIP agreement, other than interest. All of our outstanding capital stock as of the filing of the Plan was canceled as of the Effective Date.

Dividends

We have not paid any cash or other dividends on our Common Stock since our inception and do not anticipate paying any such dividends in the foreseeable future. We intend to retain any earnings for use in our operations and to finance our reorganization plan.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table provides information on the number of securities to be issued upon the exercise of outstanding options, warrants and rights and the number of securities remaining available for future issuance.

Recent Securities Sold

On January 19, 2005, in a transaction exempt from registration under the Securities Act of 1933, as amended, pursuant to Section 4(2) of such Act and Regulation D promulgated thereunder, we completed an initial closing with respect to the sale of 700,000 shares of Common Stock and Common Stock purchase warrants (the “Private Placement Warrants”) to purchase 350,000 shares of Common Stock, at an initial exercise price of $2.00 per share (the “Exercise Price”), for an aggregate of $1,050,000 of gross proceeds. Following the delivery of our audited financial statements for the year ended December 27, 2005 ( “Fiscal 2005”), the Exercise Price of the Warrants will be subject to increase or decrease based on our earnings from recurring operations before interest payments, income tax, depreciation and amortization ( “EBITDA”) for Fiscal 2005. The Exercise Price will be adjusted as follows upon the date of exercise: (i) increased by 5% (but in no event will the Exercise Price exceed $2.50) for every $100,000 by which EBITDA for Fiscal 2005 exceeds $3.5 million (the “EBITDA Threshold”) and (ii) decreased by 10% (but in no event will the Exercise Price be less than $1.00) for every $100,000 by which Fiscal 2005 EBITDA is below the EBITDA Threshold.

On April 7, 2005, in a transaction exempt from registration under the Securities Act of 1933, as amended, pursuant to Section 4(2) of such Act and Regulation D promulgated thereunder, we issued to an investor 173,915 shares of common stock and a warrants (the “April Warrant”) to purchase 86,958 shares of Common Stock (the “April Warrant Shares”), at an initial exercise price of $2.00 per share (the “April Exercise Price”), in full and complete satisfaction of our obligation to pay such investor $200,002.25. Following the delivery of our audited financial statements for Fiscal 2005, the April Exercise Price of the April Warrants will be subject to increase or decrease based on EBITDA for Fiscal 2005. The April Exercise Price will be adjusted as follows upon the date of exercise: (i) increased by 5% (but in no event will the April Exercise Price exceed $2.50) for every $100,000 by which EBITDA for Fiscal 2005 exceeds $3.5 million and (ii) decreased by 10% (but in no event will the April Exercise Price be less than $1.00) for every $100,000 by which Fiscal 2005 EBITDA is below the EBITDA Threshold. The April Warrant also contains certain redemption and anti-dilution provisions. The securities were issued with restricted security legends.

Equity Compensation Plan Information at Last Fiscal Year-End

2004 STOCK INCENTIVE PLAN APPROVED IN 2005 BY THE SHAREHOLDERS

Plan Category	(a) Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights (#)		(b) Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights ($/Sh)		(c) Number of Securities Remaining available for Future Issuance under Equity Compensation Plans (Excluding Securities Reflected in Column (a))
Equity compensation plans approved by security holders		1,330,000		1.11		170,000
Equity compensation plans not approved by security holders		0		0.00		0

Total		1,330,000		1.11		170,000

The Company did not repurchase any equity securities during the fourth quarter of 2004.

In year-ended December 31, 2004, we introduced a performance-based incentive compensation program in order to motivate restaurant leadership teams to deliver excellence in all qualitative and quantitative areas of their business; to drive the behaviors leaders must exhibit in order to create value for us and our owners; and to enable us to attract and retain leaders of great business acumen and restaurant passion. Substantially all employees serving in General Manager, Manager and Working Chef positions are eligible participants. (See Financial Notes #5, #14 & #15).

Restaurant Leadership teams have the opportunity to earn bonus based on qualitative and quantitative contributions. Each restaurant team can earn a quarterly incentive on their restaurant performance of the “operating basics” and “extraordinary hospitality measurements” as evaluated by an independent shopping service. Each restaurant also earns bonus incentives on a periodic basis and calculated based on the restaurant financial results. The team shares a percentage of the restaurant results, and receives a greater percentage in the event that the performance exceeds budget by a targeted amount.

ITEM 6. SELECTED FINANCIAL DATA

The selected consolidated financial data for the five years ended December 28, 2004 has been derived from the Company’s Consolidated Financial Statements. This data should be read in conjunction with Consolidated Financial Statements and related Notes for the year ended December 28, 2004, and the Management’s Discussion and Analysis of Financial Condition and Results of Operations. It should be noted that the Plan of Reorganization materially changed the amounts and classifications reported in the December 30, 2003 consolidated financial statements, which did not give effect to any adjustments to the carrying value or classification of assets and liabilities that were necessary as a consequence of the Plan of Reorganization:

Income Statement Data:	2004		2003		2002		2001		2000

Revenues	$	55,070,680	$	77,757,815	$	97,102,252	$	110,684,409	$	123,618,199

Cost of sales
Food and beverage		18,710,282		28,395,681		33,886,807		38,480,981		43,119,602
Payroll and payroll related costs		18,597,914		27,703,764		34,312,955		36,719,587		39,504,498
Direct operating costs		11,428,472		20,008,320		24,297,312		27,259,432		25,843,817
Reserve on impairment of property, plant, and equipment		—		—		—		6,581,527		388,868
Depreciation and amortization		1,235,156		1,876,778		2,785,465		3,452,109		3,703,346

FORM 10-K

STEAKHOUSE PARTNERS, INC.(Exact name of registrant as specified in its charter)

STEAKHOUSE PARTNERS, INC.
(Exact name of registrant as specified in its charter)