Exhibit 99.2

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors of

Ignite Restaurant Group, Inc.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, changes in stockholder’s equity and cash flows present fairly, in all material respects, the financial position of Ignite Restaurant Group, Inc. and its subsidiaries (the “Company”) at January 3, 2011 and January 2, 2012, and the results of their operations and their cash flows for the fiscal years ended December 28, 2009, January 3, 2011, and January 2, 2012, in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

As discussed in Note 3 to the consolidated financial statements, the Company has restated its fiscal year 2009, 2010 and 2011 consolidated financial statements.

/s/ PricewaterhouseCoopers LLP

Houston, Texas

March 1, 2012, except as to Notes 3 and 16, which are dated October 30, 2012

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IGNITE RESTAURANT GROUP, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except par value)

See accompanying notes to consolidated financial statements.

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IGNITE RESTAURANT GROUP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except earnings per share)

See accompanying notes to consolidated financial statements.

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IGNITE RESTAURANT GROUP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER’S EQUITY

(in thousands, except as indicated)

See accompanying notes to consolidated financial statements.

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IGNITE RESTAURANT GROUP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

See accompanying notes to consolidated financial statements.

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IGNITE RESTAURANT GROUP, INC.

Notes to Consolidated Financial Statements

Note 1—Description of Business

Ignite Restaurant Group, Inc. (referred to herein as the “Company,” “Ignite,” “we,” “us” or “our”) operates two highly differentiated restaurant businesses, Joe’s Crab Shack and Brick House Tavern + Tap. As of January 2, 2012, we owned and operated 119 Joe’s Crab Shack restaurants and 16 Brick House Tavern + Tap restaurants in 31 states within the United States. Joe’s Crab Shack is an established, national chain of casual seafood restaurants. Joe’s serves a variety of high-quality seafood items, with an emphasis on crab. Joe’s is a high-energy, family-friendly restaurant that encourages guests to “roll up your sleeves and crack into some crab.” Brick House Tavern + Tap is a casual restaurant business that provides guests a differentiated “gastro pub” experience by offering a distinctive blend of menu items in a polished setting. Brick House seeks to strike a balance between providing guests with an elevated experience while also appealing to “every-man, every-day.”

As of January 2, 2012, J.H. Whitney VI, L.P. (“J.H. Whitney VI”), an affiliate of J.H. Whitney Capital Partners, LLC, held all the Series A preferred units of JCS Holdings, LLC, our parent (see Note 11 for subsequent initial public offering). Consequently, J.H. Whitney VI held approximately 100% of our total voting stock and, thus, was able to exert substantial influence over us and to control matters requiring approval by our shareholders, including the election of directors, increasing our authorized capital stock, or a merger or sale of substantially all of our assets. As a result of J.H. Whitney VI’s control of us, no change of control can occur without J.H. Whitney VI’s consent.

Note 2—Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Ignite and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Fiscal Year

Our fiscal year ends on the Monday nearest to December 31 of each year. Fiscal year 2010 was a 53-week year, while fiscal years 2009 and 2011 were 52-week years. References to 2009, 2010, and 2011 are references to fiscal years ended December 28, 2009, January 3, 2011, and January 2, 2012, respectively. The first three quarters of our fiscal year consist of 12 weeks and our fourth quarter consists of 16 weeks for 52-week fiscal years and 17 weeks for 53-week fiscal years.

Segment Reporting

We own and operate the Joe’s Crab Shack and Brick House Tavern + Tap restaurant brands in the United States. All of our restaurants compete in the full-service casual dining industry, providing in-restaurant, full service, casual dining, food away from home to our guests. Our brands also possess similar production methods, distribution methods, and economic characteristics, resulting in similar long-term expected financial performance characteristics. Therefore, we believe we meet the criteria for aggregating our restaurant operations into a single reporting segment.

Subsequent Events

We evaluate events subsequent to the balance sheet date through the date the financial statements were issued, noting no subsequent events or transactions that required recognition or disclosures in the financial statements, except as discussed in Note 16.

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Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Fair Value Measurements

We apply fair value accounting for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. We define fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities that are required to be recorded at fair value, we assume the highest and best use of the asset by market participants in which we would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as inherent risk, transfer restrictions, and credit risk.

We apply the following fair value hierarchy, which prioritizes the inputs used to measure fair value into three levels, and base the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:

Financial Instruments

We record all financial instruments at cost, which is the fair value at the date of transaction. The amounts reported in the consolidated balance sheets for cash and cash equivalents, investments, accounts receivable, derivative financial instruments, and accounts payable and accrued liabilities approximate their fair value because of the short-term maturities of these instruments. The carrying amount of debt is a reasonable estimate of its fair value given the variable rate of interest associated with the instruments.

Revenue Recognition

Revenues from food and beverage sales are recognized when payment is tendered at the point-of-sale and are presented net of promotional allowances, discounts, and employee meals.

Revenues from the sale of gift cards are deferred and recognized upon redemption. Deferred gift card revenue included in accrued liabilities in our consolidated balance sheets was $1.5 million and $1.9 million as of January 3, 2011 and January 2, 2012, respectively. Our gift cards do not have an expiration date and we do not deduct non-usage fees from outstanding gift card balances. We recognize gift card breakage income exclusive of amounts subject to state escheatment laws when the likelihood of redemption of the cards becomes remote. We recorded breakage income of $0.3 million during 2011, the first year in which we have accumulated enough redemption historical data to make such an estimate, and is included in revenues in our consolidated statements of operations. As 2011 was the first year in which we

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recognized breakage income, the amount recognized includes breakage income related to gift cards sold since the inception of the program in 2007.

We also benefit from certain vendor rebates which are recorded as a reduction to cost of sales. Additionally, we may enter into certain contracts that provide marketing allowances, which are amortized over the life of the contract.

Cash and Cash Equivalents

We consider cash on hand in restaurant units, deposits in banks, and short-term marketable securities with original maturities of 90 days or less as cash and cash equivalents.

Investments

Investments include short-term marketable securities with original maturities greater than 90 days.

Accounts Receivable

Accounts receivable consist primarily of receivables from major credit card processors. We do not provide an allowance for doubtful accounts due to the relative certainty of collection of these receivables and based on our prior loss history with these credit card companies.

Inventories

Inventories are stated at the lower of cost or market, and consist of food, beverage, and retail merchandise. Food and beverage cost is determined using the average cost method. Retail merchandise cost is on a first-in, first-out basis.

Property and Equipment

Property and equipment acquired is stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method, based on the following estimated useful lives:

We capitalize major replacements and improvements that increase the useful life of the asset, whereas we expense repairs and maintenance as incurred. The cost and accumulated depreciation of assets sold or otherwise disposed of are removed from the balance sheet and any gain or loss is included in the statement of operations.

We capitalize direct costs associated with the site acquisition and construction of restaurant units, including direct internal payroll and payroll-related costs, incremental travel expenses, and interest cost as leasehold improvements. If we subsequently determine that we will not continue acquiring or developing a project for which we have been capitalizing costs, any previously capitalized internal development and third-party costs will be written off as dead deals and included in general and administrative expenses.

Impairment of Long-Lived Assets

We evaluate the recoverability of the carrying amount of long-lived assets, which include property and equipment and intangible assets with definite useful lives, whenever events and circumstances indicate that the carrying value of an asset may not be fully recoverable. Our review for impairment of these long-

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lived assets takes into account estimates of future undiscounted cash flows. Factors considered include, but are not limited to, significant underperformance relative to historical or projected future operating results, significant changes in the manner of use of the acquired assets or the strategy for the overall business, and significant negative industry or economic trends. Our asset group for impairment testing is comprised of the assets and liabilities of each of our individual restaurants, since this is the lowest level of identifiable cash flows. An impairment loss is recognized if the future undiscounted cash flows associated with the assets are less than their carrying value. Impairment losses are measured as the amount by which the carrying values of the assets exceed their fair values. For assets held for sale or disposal, we measure fair value using quoted market prices or an estimation of net realizable value.

Restaurant Closure

Costs associated with restaurant closures are recorded when the decision is made to close the restaurant. Expenses and losses related to closed restaurants are recorded in restaurant impairments and closures and loss on disposal of property and equipment in our consolidated statements of operations.

Trademarks

Trademarks consist of intangible assets we acquired during the purchase of Joe’s Crab Shack from Landry’s Restaurants, Inc. (“Landry’s”) in November 2006. At the time of purchase, the trademarks were determined to be approximately $4.4 million, and as of January 3, 2011 and January 2, 2012 had accumulated amortization of approximately $1.8 million and $2.2 million, respectively. Trademarks are amortized on a straight-line basis over their estimated useful life of 10 years. Amortization expense was approximately $0.4 million for 2009, 2010 and 2011, respectively.

Scheduled amortization of trademarks is as follows (in thousands):

Deferred Charges

Debt issuance costs representing costs to obtain long-term financing are accounted for as a deferred charge and amortized using the interest method over the term of the related financing. Amortization of debt issuance costs, which was approximately $0.7 million, $0.7 million, and $0.8 million for 2009, 2010 and 2011, respectively, are included in interest expense in our consolidated statements of operations.

Scheduled amortization of debt issuance costs is as follows (in thousands):

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Liquor Licenses

The costs of purchasing transferable liquor licenses through open markets in jurisdictions with a limited number of authorized liquor licenses are capitalized as indefinite-lived intangibles and included in other assets. The costs of obtaining non-transferable liquor licenses that are directly issued by local government agencies are expensed as incurred. Annual liquor license renewal fees are expensed over the renewal term. Liquor licenses are reviewed for impairment annually or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

Leases

We currently lease all of our restaurant locations under leases classified as operating leases. Minimum base rent for our operating leases, which generally have escalating rentals over the term of the lease, is recorded on a straight-line basis over the lease term. As such, an equal amount of rent expense is attributed to each period during the term of the lease regardless of when actual payments occur. Lease terms begin on the date we take effective control of the property and include cancelable option periods where failure to exercise such options would result in an economic penalty. The difference between rent expense and actual cash payments is classified as deferred rent in the consolidated balance sheets.

Certain leases contain provisions that require additional rental payments based upon restaurant sales volume (“contingent rentals”). Contingent rentals are accrued each period as the liabilities are incurred, in addition to the straight-line rent expense noted above.

Insurance Liabilities

We maintain large deductibles on workers’ compensation, general liability, property, and business interruption insurance coverage. These policies have been structured to limit our per-occurrence exposure. Our estimated liabilities for workers’ compensation and general liability are based on our judgment regarding a number of assumptions and factors, including the frequency and severity of claims, claims development history, case jurisdiction, applicable legislation, and our claims settlement practices.

Hedging Activity

In the past, we have used financial derivatives to manage exposure to interest rate risks. Our derivative instrument was structured as a cash flow hedge, which focuses on variability in cash flows of future transactions. The counterparty to the instrument was a major financial institution who also participates in our bank credit facilities. We do not use hedge instruments for speculative purposes. Derivative instruments were recorded in the balance sheet at fair value. Changes in the fair value of derivatives that were highly effective and were designated and qualify as cash flow hedges are recorded in accumulated other comprehensive loss until realized.

Advertising Expenses

Advertising production costs are expensed at the time the advertising is first aired. All other advertising costs are expensed as incurred. Advertising expenses were approximately $16.7 million, $17.2 million, and $17.9 million for 2009, 2010 and 2011, respectively, and are included in other operating expenses in our consolidated statements of operations.

Pre-opening Costs

Non-capital expenditures associated with the opening of new or converted restaurants are expensed as incurred. Pre-opening costs consist of costs incurred prior to opening a new or converted restaurant and are made up primarily of manager salaries, employee payroll, and other costs related to training and preparing new or converted restaurants for opening. Pre-opening costs also include an accrual

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for straight-line rent recorded during the period between the date we take effective control of the property and the restaurant opening date for our leased locations.

Stock-based Compensation

Certain key members of management and independent directors were granted common units of JCS Holdings, LLC, our parent company prior to our IPO, under unit grant agreements. Because our parent company’s membership interests have no active market, we performed a valuation to determine the fair value of each common unit granted in fiscal year 2009. The valuation used the market and income approaches with an appropriate discount factor for the common unit’s lack of marketability. No units were granted in fiscal years 2010 or 2011.

We recognize compensation expense for employee and independent director services received in exchange for our parent company’s common units, which is equal to the fair value of the common units at grant date. We ratably expense the fair value of grants in general and administrative expenses in our consolidated statements of operations over the remaining service period of the awards.

Interest Expense, Net

Interest expense, net consists primarily of interest expense related to our debt and amortization of debt issuance costs, net of interest income totaling $1,000, $7,000, and $0 for fiscal years ended 2009, 2010 and 2011, respectively, and capitalized interest expense of $0.3 million in 2011, $0.2 million in 2010, and $0 in 2009.

Income Taxes

We are subject to U.S. federal income tax and income taxes imposed in the state and local jurisdictions where we operate our restaurants. Deferred income taxes are provided on temporary differences between financial statement and income tax reporting. Temporary differences are differences between the amounts of assets and liabilities reported for financial statement purposes and their tax bases. Deferred tax assets are recognized for temporary differences that will be deductible in future years’ tax returns and for operating loss and tax credit carryforwards. Deferred tax assets are reduced by a valuation allowance if it is deemed more likely than not that some or all of the deferred tax assets will not be realized. In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Deferred tax liabilities are recognized for temporary differences that will be taxable in future years’ tax returns.

We account for uncertain tax positions under Financial Accounting Standards Board (“FASB”) guidance, which prescribes a minimum probability threshold that a tax position must meet before a financial statement benefit is recognized. The minimum threshold is defined as a tax position that is more likely than not to be sustained upon examination by tax authorities, based on the technical merits of the position. The tax benefit to be recognized is measured as the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. See Note 10 for information regarding changes in our unrecognized tax benefits.

Claims and Other Contingencies

We recognize legal claims and other loss contingencies when information becomes available indicating that a liability has been incurred and the loss amount can be reasonably estimated. Predicting the outcome of claims and litigation involves substantial uncertainties that could cause actual results to vary materially from estimates. We recognize legal expenses, including those related to loss contingencies, as incurred.

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Generally, we do not recognize gain contingencies until all contingencies have been resolved, but we recognize gain contingencies that are recoveries of previously recognized contingent losses when realization of the recovery is deemed probable and reasonably estimable.

Recent Accounting Pronouncements

In May 2011, the FASB issued Accounting Standards Update (“ASU”) No. 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in US GAAP and IFRS, which clarifies Topic 820 and provides guidance on changes to certain principles or requirements for measuring fair value. The amendment is effective during interim and annual periods beginning after December 15, 2011. We do not believe that adoption of this standard will have a significant impact on our consolidated financial statements.

In June 2011, the FASB issued ASU No. 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income, which eliminates the option to present components of other comprehensive income as part of the statement of changes in stockholder’s equity and other reclassifications presented in the financial statements. The update is effective for fiscal years and interim periods beginning after December 15, 2011. Certain provisions of ASU 2011-05 have been amended by ASU No. 2011-12, Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05, to effectively defer only those changes in ASU 2011-05 that relate to the presentation of reclassification adjustments out of accumulated other comprehensive income. We do not believe adoption of these two updates will have a significant impact on our consolidated financial statements.

Note 3 — Restatement of Previously Issued Financial Statements

We initiated and completed an internal assessment of our lease accounting policies and the review of our historical accounting for fixed assets and related depreciation and certain other accounting areas. Accordingly, we have restated our previously issued financial statements as of January 3, 2011 and January 2, 2012 and for the years ended December 28, 2009, January 3, 2011 and January 2, 2012. The restatement also includes the correction of errors in fiscal years prior to fiscal year 2009 and accordingly we recognized a cumulative adjustment to beginning retained earnings as of December 29, 2008.

Lease Accounting

When accounting for leases that included stated fixed rent increases, we historically recognized rent expense on a straight line basis over the current lease term with the term primarily commencing when actual rent payments began. Additionally, we did not record straight line rent on leases which contained CPI adjustments that also were subject to stated minimum rent increases. Following an internal assessment, we deemed it necessary to correct errors related to our accounting treatment of certain leases. We have corrected the treatment of these leases to recognize rent expense on a straight line basis over the effective lease term, including cancelable option periods where failure to exercise the options would result in an economic penalty. The effective lease term commences on the date when we establish effective control over the property. Furthermore, we now calculate straight line rent on properties with CPI adjustments that are subject to a stated minimum required rent increase.

The lease accounting errors date back to 2006, the year of our origination. The aggregate effect of the lease accounting related restatement items from 2006 (inception) through 2011 is a $3.0 million reduction in income before income taxes. The non-cash charges impact deferred rent expense, which is primarily included in occupancy expenses, and pre-opening expense (the deferred rent portion only). The cumulative impact of these expenses from 2006 through 2008 is a reduction of income before income taxes of $244 thousand. The impact is higher from 2010 through 2011, when we opened 21 new or converted units. The lease accounting restatement adjustments reduce income before income taxes by $328 thousand in 2009, $1.1 million in 2010, and $1.3 million in 2011. The increases in deferred rent expense and preopening expense resulted in a corresponding increase in deferred rent liability.

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The lease accounting related restatement items do not impact our historical cash flows, revenues or comparable restaurant sales.

Fixed Asset Review

Also as a follow-up to the lease accounting review, we undertook a detailed review of our historical accounting for fixed assets and related depreciation expense, including a review of fixed asset additions from our inception, a restaurant-level inventory of fixed assets at all 144 restaurant locations, a detailed roll-forward of fixed assets to identify appropriate disposals, a reassessment of useful lives for all assets and the recalculation of depreciation as necessary. As a result, we deemed it necessary to correct our accounting related to fixed asset capitalization, useful lives and disposals, including demolition expenses in certain locations unrelated to new store development.

Capitalization. During the review we identified that we had incorrectly capitalized certain asset additions rather than expensing them as repairs and maintenance. Through an extensive review and reassessment of fixed asset additions from 2006 through 2011, we have identified items that were incorrectly capitalized and expensed them as repairs and maintenance to the appropriate period and corrected the associated asset balance, historical depreciation expense and accumulated depreciation.

Lease lives. Additionally, during the review of asset additions and the initial work performed around the proper determination of effective lease lives, we identified that we had not consistently considered the impact of the economic life or the effective lease term on the depreciable life of certain assets. As a result, we reassessed the depreciable lives of our assets, made changes where necessary and recalculated depreciation accordingly.

Disposals. Finally, during the course of the fixed asset review, we concluded that we had not appropriately recognized loss on disposal for the undepreciated balance of assets that had been disposed or for existing store demolition costs not related to new store development, including remodels or catastrophic loss (a portion of which is recognized as reduction of gain on insurance settlements). We also determined that we had not removed certain assets and the related accumulated depreciation from the balance sheet upon disposal. Through an extensive asset roll-forward process, we identified the items that were retired through replacement, sale, or demolition, recognized the loss on disposal in the appropriate period and corrected the associated asset balance, historical depreciation expense and accumulated depreciation.

The aggregate effect of the fixed asset related accounting restatement items from 2006 through 2011 is a $5.8 million reduction in income before income taxes. These charges include increases in the loss on disposal of assets and other operating expenses and reductions in depreciation expense on our statements of operations and reductions of property and equipment, net and accumulated depreciation on our balance sheet. By year, the fixed asset accounting restatement adjustments reduce income before income taxes by a cumulative amount of $3.4 million from 2006 through 2008, $293 thousand in 2009, $1.0 million in 2010, and $1.1 million in 2011.

The total fixed asset restatement adjustments discussed above include a loss on disposal related to a sale-leaseback transaction completed in 2008. During the course of the fixed asset review, we determined that we had understated the loss on the sale-leaseback in 2008 by $870 thousand. The correction also resulted in a reduction of property and equipment, net and accumulated depreciation. We also determined that we incorrectly accounted for certain deferred costs associated with the sale-leaseback transaction. The correction resulted in a reduction of other long-term assets and accumulated depreciation in 2008 and an associated $141 thousand reduction to amortization expense from the date of the transaction through 2011.

Other Items

In conjunction with the lease accounting and fixed asset accounting review, we undertook a broader review of our existing accounting policies and concluded it was necessary to make additional adjustments to our historical financial statements.

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Advertising production costs. We incorrectly recognized production costs related to television commercials in 2011 over the time the commercials had run as opposed to expensing them when the commercials first aired. The correction to reflect this change resulted in quarterly adjustments within 2011, but will have no effect on total expenses for the full year. See Note 15 for quarterly impact.  Going forward, our policy is to expense advertising media costs as incurred, while production costs will be expensed in the period the advertising first takes place.

Vacation accrual. We determined that we had not appropriately recognized an accrual for earned but unpaid vacation in 2011. The correction to reflect this change resulted in quarterly adjustments within 2011, but had no effect on total expenses for the full year. See Note 15 for quarterly impact.

Liquor licenses. Historically we have capitalized the purchase of transferable liquor licenses for certain restaurant properties and shown the use of cash as a component of operating activities in the consolidated statement of cash flows. During the accounting review we determined that this would more appropriately be classified as a use of cash from investing activities. This amounted to an increase in net cash provided by operating activities of $465 thousand and $222 thousand in 2009 and 2011, respectively, with a corresponding increase in net cash used in investing activities. This reclassification has no impact on the consolidated balance sheet or the consolidated statement of operations.

Professional fees. As previously reported, we will also adjust $175 thousand of general and administrative expense from the first quarter of 2012 into 2011. The error correction relates to professional fees for quarterly reviews completed by our independent registered public accounting firm in 2011 that were previously recorded in the first quarter of 2012. This adjustment will have the effect of decreasing net income and increasing general and administrative expenses in 2011.

Income tax provision. We identified errors in our accounting for uncertain tax positions which dated back to the beginning of fiscal year 2009.  We performed a comprehensive recalculation of our uncertain tax positions to ensure that the appropriate amounts were recognized in each period.  This correction resulted in an increase in income tax expense and other long-term liabilities of $252 thousand in 2009, $280 thousand in 2010 and $43 thousand in 2011.  We also identified errors in the accounting related to the changes in the valuation allowance recorded on our net deferred tax assets during the fiscal quarters of 2011. Prior to the fourth quarter of 2011, we maintained a full valuation allowance.  We did not appropriately account for changes to the valuation allowance in quarterly periods prior to that time.  The correction in the accounting for the valuation allowance resulted in quarterly adjustments to income tax expense and deferred tax assets within 2011, but had no effect on the income tax benefit recognized for the full year.  See Note 15 for the quarterly impact.

Income tax effect of restatement adjustments. The restatement adjustments were analyzed to determine which amounts had a corresponding impact on our income tax expense (benefit) and the result is reflected as the income tax effect of restatement adjustments.

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A summary of the nature of the restatement adjustments and their impact on previously reported net income is as follows (in thousands):

The impacts of these restatements on our consolidated financial statements are summarized below (in thousands, except per share amounts):

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(1)                                  The “As Reported” numbers included above are the amounts that were included within the final IPO prospectus and as previously revised. During the third quarter of 2011, we identified certain previously expensed personnel, travel and interest costs incurred in 2010 related to new restaurant development which should have been capitalized and amortized over the applicable useful life of the related restaurant unit assets. We assessed the materiality of these errors and concluded that they were not material to any prior annual or interim periods. We previously revised our consolidated financial statements as of and for the fiscal year ended January 3, 2011 to correct these transactions.

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In the previous revision, general and administrative expenses were decreased by $0.2 million, interest expense, net was decreased by $0.1 million and net income was increased by $0.3 million for the year ended January 3, 2011. Property and equipment, net and stockholder’s equity were increased by $0.3 million as of January 3, 2011. Net cash used in investing activities was increased by $0.3 million with a corresponding increase in Net cash provided by operating activities.

In connection with the $80.0 million dividend payment made in March 2011 (see Note 6), we reduced additional paid-in capital by $65.9 million for the amount of the dividend that exceeded our accumulated earnings balance at that time. As a result of the restatement, accumulated earnings at the time of the dividend payment was reduced by $7.4 million. Therefore, we reduced additional paid-in capital by the additional $7.4 million.

Note 4—Property and Equipment, net

Property and equipment consists of the following (in thousands):

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Depreciation expense, as restated, was approximately $11.8 million, $12.7 million, and $15.6 million for fiscal years 2009, 2010, and 2011, respectively. Allocation of depreciation expense between our restaurants and administration is as follows (in thousands):

Based on a regular review of our restaurant units for impairment, we identified certain restaurants with carrying values on property and equipment that may not be fully recoverable. Restaurant impairments for these units amounting to approximately $0.3 million were recorded in 2010. No impairment charge was recorded in 2009 and 2011. The impairment charges reflect the difference between the impaired assets’ carrying value and their fair value, and are recorded as part of restaurant impairments and closures in the consolidated statements of operations.

Note 5—Accrued Liabilities

The components of accrued liabilities were as follows (in thousands):