UNITED STATES


SECURITIES AND EXCHANGE
COMMISSION


Washington, D.C.
20549





FORM 10-Q





(Mark
One)





xQUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For the
quarterly period ended June 30,
2009




or





oTRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For the
transition period from 
to





Commission File Number:
001-13650





Western
      Sizzlin Corporation(Exact
      name of registrant as specified in its
charter)





Delaware
                86-0723400(State
      or other jurisdiction of incorporation or organization)
                (I.R.S.
      Employer Identification
No.)





401
      Albemarle Ave SE, Roanoke, Virginia
            24013(Address
      of principal executive offices)
            (Zip
      Code)





(540)
      345-3195(Registrant’s
      telephone number, including area code)(Former
      name, former address and former fiscal year, if changed since last
      report)





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.     Yes x     No
 ̈




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).    
Yes o    
No o


Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,” “accelerated
filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. 
(Check one):




Large
      accelerated filer  ̈
              Accelerated
      filer  ̈Non-accelerated
      filer  ̈ (Do
      not check if a smaller reporting company)
              Smaller
      reporting company x
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).     Yes o    No
x
  As of
August 11, 2009, there were 2,831,884 shares of common stock
outstanding.


Table of Contents




WesternSizzlin Corporation
 
 Form 10-Q
 Six
Months Ended June 30, 2009
 Table
of Contents
 
 PagePART I. FINANCIAL INFORMATIONItem 1. Financial Statements (Unaudited)Consolidated Balance Sheets — June 30, 2009 and
      December 31, 2008
              
              3Consolidated Statements of Operations —
      Three Months and Six Months Ended June 30, 2009 and
    2008
              
              4Consolidated Statement of Changes in
      Stockholders’ Equity — Six Months Ended June 30, 2009
              
              5Consolidated Statements of Cash Flows — Six Months Ended
      June 30, 2009 and 2008
              
              6Notes to Consolidated Financial
    Statements
              
              7-17Item 2. Management’s Discussion and Analysis of Financial
      Condition and Results of Operations
              
              17-25Item 3. Quantitative and Qualitative Disclosure about Market
      Risk
              
              25Item 4. Controls and Procedures
              
              25PART II. OTHER INFORMATIONItem 1. Legal Proceedings
              
              26Item 1.A. Risk Factors
              
              26Item 6. Exhibits
              
              26
  2
 Table of Contents
  PARTI. FINANCIALINFORMATION
 WESTERN
SIZZLIN CORPORATION
  Item1.
                Financial Statements
      (Unaudited)
 Consolidated
Balance Sheets
 June 30,
2009 and December 31, 2008
 
 June
      30,
                    2009
                  
                  
                  December 31,
                    2008(unaudited)AssetsCurrent
      assets:Cash
      and cash equivalents
                  
                  $
                  1,247,670
                  
                  
                  $
                  330,998Money
      market investments
                  
                  
                  2,998,881
                  
                  
                  
                  3,735,821Trade
      accounts receivable, net of allowance for doubtful accounts of $412,161 in
      2009
                    and
      $339,752 in 2008
                  
                  
                  1,016,879
                  
                  
                  
                  1,064,389Current
      installments of notes receivable, less allowance for impaired notes of
      $62,926 in 2009 and 2008
                  
                  
                  247,066
                  
                  
                  
                  198,912Other
      receivables
                  
                  
                  72,762
                  
                  
                  
                  78,982Income
      taxes receivable
                  
                  
                  81,429
                  
                  
                  
                  98,362Inventories
                  
                  
                  86,056
                  
                  
                  
                  59,126Prepaid
      expenses
                  
                  
                  210,281
                  
                  
                  
                  133,785Deferred
      income taxes
                  
                  
                  442,379
                  
                  
                  
                  494,926Total
      current assets
                  
                  
                  6,403,403
                  
                  
                  
                  6,195,301Notes
      receivable, less allowance for impaired notes receivable of $6,980 in 2009
      and 2008, excluding current installments
                  
                  
                  381,031
                  
                  
                  
                  449,990Property
      and equipment, net
                  
                  
                  1,312,940
                  
                  
                  
                  1,500,149Investment
      in real estate
                  
                  
                  3,745,152
                  
                  
                  
                  3,745,152Investments
      in marketable securities
                  
                  
                  22,905,910
                  
                  
                  
                  16,708,479Intangible
      assets, net of accumulated amortization of $135,279  in 2009 and
      $73,762 in 2008
                  
                  
                  1,284,721
                  
                  
                  
                  1,346,238Goodwill
                  
                  
                  4,995,262
                  
                  
                  
                  4,995,262Financing
      costs, net of accumulated amortization of $195,306  in 2009 and
      $194,639 in 2008
                  
                  
                  4,904
                  
                  
                  
                  5,572Investment
      in unconsolidated joint venture
                  
                  
                  273,847
                  
                  
                  
                  304,695Deferred
      income taxes
                  
                  
                  357,999
                  
                  
                  
                  665,805Other
      assets
                  
                  
                  34,853
                  
                  
                  
                  36,180$
                  41,700,022
                  
                  
                  $
                  35,952,823Liabilities
      and Stockholders’ EquityCurrent
      liabilities:Note
      payable — line of credit
                  
                  $
                  300,000
                  
                  
                  $
                  —Current
      installments of long-term debt
                  
                  
                  2,492,547
                  
                  
                  
                  373,925Accounts
      payable
                  
                  
                  657,478
                  
                  
                  
                  812,839Accrued
      expenses and other
                  
                  
                  1,380,120
                  
                  
                  
                  1,423,092Total
      current liabilities
                  
                  
                  4,830,145
                  
                  
                  
                  2,609,856Long-term
      debt, excluding current installments
                  
                  
                  397,324
                  
                  
                  
                  2,833,587Other
      long-term liabilities
                  
                  
                  1,182,780
                  
                  
                  
                  1,208,1476,410,249
                  
                  
                  
                  6,651,590Redeemable
      noncontrolling interests
                  
                  
                  12,605,961
                  
                  
                  
                  11,288,681Commitments
      and contingenciesStockholders’
      Equity:Convertible
      preferred stock, series A, $10 par value (involuntary liquidation
      preference of $10 per share). Authorized 25,000 shares; none issued
      and outstanding
                  
                  
                  —
                  
                  
                  
                  —Convertible
      preferred stock, series B, $1 par value (involuntary liquidation
      preference of $1 per share). Authorized 875,000 shares; none issued and
      outstanding
                  
                  
                  —
                  
                  
                  
                  —Common
      stock, $0.01 par value.  Authorized 10,000,000 shares; issued and
      outstanding 2,831,884 in 2009 and 2008
                  
                  
                  28,320
                  
                  
                  
                  28,320Treasury
      stock, at cost, 9,099 shares in 2009 and 2008
                  
                  
                  (90,583
                  )
                  
                  
                  (90,583
                  )Additional
      paid-in capital
                  
                  
                  22,235,872
                  
                  
                  
                  22,235,872Retained
      earnings (accumulated deficit)
                  
                  
                  848,470
                  
                  
                  
                  (3,376,054
                  )Accumulated
      other comprehensive loss — unrealized holding losses
                  
                  
                  (338,267
                  )
                  
                  
                  (785,003
                  )Total
      stockholders’ equity
                  
                  
                  22,683,812
                  
                  
                  
                  18,012,552$
                  41,700,022
                  
                  
                  $
                  35,952,823
 
 See
accompanying notes to consolidated financial statements.
  3
 Table of Contents
  WESTERNSIZZLIN CORPORATION
 
 Consolidated
Statements of Operations
 Three
Months and Six Months Ended June 30, 2009 and 2008
 (Unaudited)
 Three Months Ended
                  
                  
                  Six Months EndedJune 30,
                  
                  
                  June 30,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Revenues:Company-operated
      restaurants
                  
                  $
                  3,551,693
                  
                  
                  $
                  3,490,292
                  
                  
                  $
                  6,714,120
                  
                  
                  $
                  6,616,402Franchise
      operations
                  
                  
                  894,610
                  
                  
                  
                  1,071,936
                  
                  
                  
                  1,851,758
                  
                  
                  
                  2,121,077Total
      revenues
                  
                  
                  4,446,303
                  
                  
                  
                  4,562,228
                  
                  
                  
                  8,565,878
                  
                  
                  
                  8,737,479Costs
      and expenses — restaurant and franchise operations:Company-operated
      restaurants — food, beverage and labor costs
                  
                  
                  2,551,604
                  
                  
                  
                  2,491,597
                  
                  
                  
                  4,932,492
                  
                  
                  
                  4,802,485Restaurant
      occupancy and other
                  
                  
                  590,697
                  
                  
                  
                  573,873
                  
                  
                  
                  1,133,468
                  
                  
                  
                  1,133,811Franchise
      operations — direct support
                  
                  
                  199,161
                  
                  
                  
                  309,386
                  
                  
                  
                  484,343
                  
                  
                  
                  613,921Subleased
      restaurant property expenses
                  
                  
                  —
                  
                  
                  
                  37,188
                  
                  
                  
                  —
                  
                  
                  
                  64,491Corporate
      expenses
                  
                  
                  361,253
                  
                  
                  
                  431,445
                  
                  
                  
                  850,219
                  
                  
                  
                  915,695Depreciation
      and amortization expense
                  
                  
                  95,437
                  
                  
                  
                  263,613
                  
                  
                  
                  193,148
                  
                  
                  
                  528,615Corporate
      litigation fees and expenses
                  
                  
                  3,768
                  
                  
                  
                  20,980
                  
                  
                  
                  30,188
                  
                  
                  
                  158,764Total
      costs and expenses — restaurant and franchise operations
                  
                  
                  3,801,920
                  
                  
                  
                  4,128,082
                  
                  
                  
                  7,623,858
                  
                  
                  
                  8,217,782Equity
      in income of joint venture
                  
                  
                  82,989
                  
                  
                  
                  61,335
                  
                  
                  
                  139,153
                  
                  
                  
                  107,327Income
      from restaurant and franchise operations
                  
                  
                  727,372
                  
                  
                  
                  495,481
                  
                  
                  
                  1,081,173
                  
                  
                  
                  627,024Investment
      advisory fee income
                  
                  
                  83,304
                  
                  
                  
                  —
                  
                  
                  
                  185,110
                  
                  
                  
                  —Net
      realized gains (losses) on sales of marketable securities
                  
                  
                  217,894
                  
                  
                  
                  754
                  
                  
                  
                  535,522
                  
                  
                  
                  (39,852
                  )Net
      unrealized gains (losses) on marketable securities held by limited
      partnerships
                  
                  
                  2,031,243
                  
                  
                  
                  (2,280,461
                  )
                  
                  
                  3,448,921
                  
                  
                  
                  (6,443,124
                  )Amortization
      expense – investment activities
                  
                  
                  (33,811
                  )
                  
                  
                  —
                  
                  
                  
                  (61,517
                  )
                  
                  
                  —Expenses
      of investment activities, including interest of  $16,042 and
      $29,879 for the three month periods and $32,566 and $53,686 for the six
      month periods ended June 30, 2009 and 2008,
    respectively
                  
                  
                  (144,180
                  )
                  
                  
                  (468,406
                  )
                  
                  
                  (263,539
                  )
                  
                  
                  (968,673
                  )Purchase
      obligation adjustment
                  
                  
                  (193,346
                  )
                  
                  
                  —
                  
                  
                  
                  7,643
                  
                  
                  
                  —Income
      (loss) from investment activities
                  
                  
                  1,961,104
                  
                  
                  
                  (2,748,113
                  )
                  
                  
                  3,852,140
                  
                  
                  
                  (7,451,649
                  )Other
      income (expense):Interest
      expense
                  
                  
                  (15,780
                  )
                  
                  
                  (15,748
                  )
                  
                  
                  (31,466
                  )
                  
                  
                  (54,195
                  )Interest
      income
                  
                  
                  37,493
                  
                  
                  
                  11,503
                  
                  
                  
                  71,211
                  
                  
                  
                  32,367Other,
      net
                  
                  
                  29,107
                  
                  
                  
                  (410
                  )
                  
                  
                  29,148
                  
                  
                  
                  192Total
      other income (expense), net
                  
                  
                  50,820
                  
                  
                  
                  (4,655
                  )
                  
                  
                  68,893
                  
                  
                  
                  (21,636
                  )Income
      (loss) before income tax expense (benefit)
                  
                  
                  2,739,296
                  
                  
                  
                  (2,257,287
                  )
                  
                  
                  5,002,206
                  
                  
                  
                  (6,846,261
                  )Income
      tax expense (benefit):Current
                  
                  
                  11,321
                  
                  
                  
                  18,815
                  
                  
                  
                  23,214
                  
                  
                  
                  14,621Deferred
                  
                  
                  70,086
                  
                  
                  
                  39,436
                  
                  
                  
                  360,352
                  
                  
                  
                  (103,035
                  )Total
      income tax expense (benefit)
                  
                  
                  81,407
                  
                  
                  
                  58,351
                  
                  
                  
                  383,566
                  
                  
                  
                  (88,414
                  )Net
      income (loss)
                  
                  
                  2,657,889
                  
                  
                  
                  (2,315,638
                  )
                  
                  
                  4,618,640
                  
                  
                  
                  (6,757,847
                  )(Income)
      losses attributable to redeemable noncontrolling
                    interests
                  
                  
                  (726,422
                  )
                  
                  
                  359,614
                  
                  
                  
                  (394,116
                  )
                  
                  
                  950,828Net
      income (loss) attributable to Western Sizzlin Corporation
                  
                  $
                  1,931,467
                  
                  
                  $
                  (1,956,024
                  )
                  
                  $
                  4,224,524
                  
                  
                  $
                  (5,807,019
                  )Earnings
      (loss) per share (basic and diluted):Net
      income (loss) attributable to Western Sizzlin Corporation –
      basic
                  
                  $
                  .68
                  
                  
                  $
                  (.72
                  )
                  
                  $
                  1.49
                  
                  
                  $
                  (2.14
                  )Net
      income (loss) attributable to Western Sizzlin Corporation -
      diluted
                  
                  $
                  .68
                  
                  
                  $
                  (.72
                  )
                  
                  $
                  1.49
                  
                  
                  $
                  (2.14
                  )
 See
accompanying notes to consolidated financial statements.
  4
 Table of Contents
  WESTERNSIZZLIN CORPORATION
 
 Consolidated
Statement of Changes in Stockholders’ Equity
 Six
Months Ended June 30, 2009
 (Unaudited)
 
 Common stock
                        
                        
                        Treasury stock
                        
                        
                        Additional
                          Paid-
                        
                        
                        Retained
                          Earnings
                          (Accumulated
                        
                        
                        Accumulated
                          Other
                          ComprehensiveShares
                        
                        
                        Dollars
                        
                        
                        Shares
                        
                        
                        Dollars
                        
                        
                        in Capital
                        
                        
                        Deficit)
                        
                        
                        Income (Loss)
                        
                        
                        TotalBalances,
      December31,
      2008
                        
                        
                        2,831,884
                        
                        
                        $
                        28,320
                        
                        
                        
                        9,099
                        
                        
                        $
                        (90,583
                        )
                        
                        $
                        22,235,872
                        
                        
                        $
                        (3,376,054
                        )
                        
                        $
                        (785,003
                        )
                        
                        $
                        18,012,552Net
      income attributable to Western Sizzlin Corporation
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        4,224,524
                        
                        
                        
                        —
                        
                        
                        
                        4,224,524Change
      in unrealized holding gains (losses)
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        446,736
                        
                        
                        
                        446,736Comprehensive
      income
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        4,671,260Balances,
      June 30,2009
                        
                        
                        2,831,884
                        
                        
                        $
                        28,320
                        
                        
                        
                        9,099
                        
                        
                        $
                        (90,583
                        )
                        
                        $
                        22,235,872
                        
                        
                        $
                        848,470
                        
                        
                        $
                        (338,267
                        )
                        
                        $
                        22,683,812
 
 See
accompanying notes to consolidated financial statements.
  5
 Table of Contents
  WESTERNSIZZLIN CORPORATION
 
 Consolidated
Statements of Cash Flows
 Six
Months Ended June 30, 2009 and 2008
 (Unaudited)
 
 Six Months EndedJune
      302009
                  
                  
                  2008Cash
      flows from operating activities:Net
      income (loss)
                  
                  $
                  4,224,524
                  
                  
                  $
                  (5,807,019
                  )Adjustments
      to reconcile net income (loss) to net cash provided by (used in) operating
      activities:Restaurant
      and franchise activities:Depreciation
      and amortization of property and equipment
                  
                  
                  191,790
                  
                  
                  
                  211,637Amortization
      of franchise royalty contracts and other assets
                  
                  
                  —
                  
                  
                  
                  315,148Amortization
      of finance costs
                  
                  
                  668
                  
                  
                  
                  1,828Provision
      for doubtful accounts
                  
                  
                  78,000
                  
                  
                  
                  60,580Equity
      in income of unconsolidated joint venture, net of
      distributions
                    of
      $170,000 in 2009 and $80,000 in 2008
                  
                  
                  30,848
                  
                  
                  
                  (27,326
                  )Provision
      for deferred income taxes (benefit)
                  
                  
                  460,615
                  
                  
                  
                  (170,778
                  )(Increase)
      decrease in current assets and other assets
                  
                  
                  (88,631
                  )
                  
                  
                  86,435Increase
      (decrease) in current liabilities and other liabilities
                  
                  
                  (195,902
                  )
                  
                  
                  217,387477,388
                  
                  
                  
                  694,911Investment
      activities:Change
      in money market investments
                  
                  
                  736,940
                  
                  
                  
                  —Realized
      (gains) losses on sales of marketable securities, net
                  
                  
                  (535,522
                  )
                  
                  
                  39,852Unrealized  (gains)
      losses on marketable securities, net
                  
                  
                  (3,448,921
                  )
                  
                  
                  6,443,124Minority
      interest in net profit (loss) of limited partnership
                  
                  
                  394,116
                  
                  
                  
                  (950,828
                  )Amortization
      expense of investment management customer relationships
                  
                  
                  61,517
                  
                  
                  
                  —Proceeds
      from sales of marketable securities
                  
                  
                  4,898,428
                  
                  
                  
                  91,979Purchases
      of marketable securities
                  
                  
                  (6,664,680
                  )
                  
                  
                  (1,389,438
                  )Decrease
      in due to broker
                  
                  
                  —
                  
                  
                  
                  (341,654
                  )Change
      in purchase obligation
                  
                  
                  (7,643
                  )
                  
                  
                  —Provision
      for deferred income taxes
                  
                  
                  (100,262
                  )
                  
                  
                  67,743Decrease
      in current liabilities
                  
                  
                  —
                  
                  
                  
                  (97,498
                  )(4,666,027
                  )
                  
                  
                  3,863,280Net
      cash provided by (used in) operating activities
                  
                  
                  35,885
                  
                  
                  
                  (1,248,828
                  )Cash
      flows from investing activities:Additions
      to property and equipment
                  
                  
                  (4,581
                  )
                  
                  
                  (12,074
                  )Net
      cash used in investing activities
                  
                  
                  (4,581
                  )
                  
                  
                  (12,074
                  )Cash
      flows from financing activities:Cash
      received from exercise of stock options
                  
                  
                  —
                  
                  
                  
                  59,057Proceeds
      from issuance of long-term debt
                  
                  
                  —
                  
                  
                  
                  2,641,220Payments
      on long-term debt
                  
                  
                  (317,641
                  )
                  
                  
                  (67,822
                  )Proceeds
      from (payments on) line of credit borrowings, net
                  
                  
                  300,000
                  
                  
                  
                  (2,000,000
                  )Capital
      contributions from  noncontrolling interests
                    in
      limited partnerships, net
                  
                  
                  903,009
                  
                  
                  
                  540,000Net
      cash provided by financing activities
                  
                  
                  885,368
                  
                  
                  
                  1,172,455Net
      increase (decrease) in cash and cash equivalents
                  
                  
                  916,672
                  
                  
                  
                  (88,447
                  )Cash
      and cash equivalents at beginning of the period
                  
                  
                  330,998
                  
                  
                  
                  727,378Cash
      and cash equivalents at end of the period
                  
                  $
                  1,247,670
                  
                  
                  $
                  638,931Supplemental
      disclosure of cash flow information:Cash
      payments for interest
                  
                  $
                  64,393
                  
                  
                  $
                  108,448Income
      taxes paid, net of refunds
                  
                  $
                  6,281
                  
                  
                  $
                  32,946Non-cash
      investing and financing activities:Gross
      unrealized (gains) losses from marketable equity
securities
                  
                  $
                  446,736
                  
                  
                  $
                  (315,247
                  )Issuance
      of common stock for marketable securities
                  
                  $
                  —
                  
                  
                  $
                  800,744
 See
accompanying notes to consolidated financial statements.
  6
 Table of Contents
  WESTERNSIZZLIN CORPORATION
 
 Notes to
Consolidated Financial Statements
 Six
Months Ended June 30, 2009 and 2008
 (Unaudited)
 
 (1)
              Introduction
      and Basis of Presentation
 
 Western
Sizzlin Corporation is a holding company which owns a number of subsidiaries,
with its primary business activities conducted through Western Sizzlin Franchise
Corporation and Western Sizzlin Stores, Inc, which franchise and operate
restaurants. Financial decisions are centralized at the holding company level,
and management of operating businesses is decentralized at the business unit
level. The Company’s prime objective centers on achieving above-average returns
on capital in pursuit of maximizing the eventual net worth of its stockholders.
While the Company has historically been principally engaged, and intends at this
time to remain principally engaged, in franchising and operating restaurants, it
has recently made selective investments in other companies. At June 30, 2009,
the Company had 99 franchised, 5 Company-operated and 1 joint venture
restaurants operating in 19 states.
 
 The
consolidated financial statements include the accounts of Western Sizzlin
Corporation and its wholly-owned subsidiaries, Western Sizzlin Franchise
Corporation, The Western Sizzlin Stores, Inc., Western Sizzlin Stores of
Little Rock, Inc., Austins of Omaha, Inc., Western
Investments, Inc., Western Properties, Inc., a majority-owned limited
partnership, Western Acquisitions, L.P., a solely-owned limited partnership,
Western Real Estate, L.P., Western Mustang Holdings, L.L.C., a majority-owned
limited liability company, Mustang Capital Management, L.L.C., a majority-owned
limited partnership, Mustang Capital Advisors, L.P., and two limited
partnerships, Mustang Capital Partners I, L.P. and Mustang Capital Partners II,
L.P., (collectively the Company). All significant intercompany accounts and
transactions have been eliminated in consolidation.
 
 The
accompanying unaudited consolidated financial statements of Western Sizzlin
Corporation, (the “Company”) have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim
financial reporting information and the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and notes required by accounting principles generally accepted in
the United States of America for complete financial statements. In the opinion
of management, all material reclassifications and adjustments, consisting of
normal recurring accruals, considered necessary for a fair presentation of the
results of operations, financial position and cash flows for each period shown
have been included. The unaudited consolidated financial statements and notes
are presented as permitted by Form 10-Q and do not contain certain
information included in the Company’s annual consolidated financial statements
and notes. For further information, refer to the consolidated financial
statements and notes thereto included in the Company’s annual report on
Form 10-K for the year ended December 31, 2008.
 
 (2)
              Summary
      of Significant Accounting Policies
 
 In
September 2006, the FASB issued Statement of Financial Accounting Standards
No. 157 (“SFAS 157”), Fair Value Measurements. SFAS
157 defines fair value, establishes a framework for measuring fair value and
expands disclosures about fair value measurements. SFAS 157 applies under other
accounting pronouncements that require or permit fair value measurements, the
FASB having previously concluded in those accounting pronouncements that fair
value is the relevant measurement attribute. Accordingly, SFAS 157 does not
require any new fair value measurements. Effective January 1, 2008, the
Company adopted the provisions of SFAS 157 for financial assets and liabilities.
The Company applied the provisions of FSP FAS 157-2, Effective Date of FASB Statement
157, which deferred the provisions of SFAS 157 for nonfinancial assets
and liabilities to the first fiscal period beginning after November 28,
2008. The nonfinancial assets for which we deferred adoption include goodwill
and long-lived assets. The Company adopted SFAS 157 for nonfinancial assets and
liabilities that are not measured at fair value on a recurring basis in the
first quarter of 2009. As of June 30, 2009, the Company does not have any
significant non-recurring measurements of nonfinancial assets and nonfinancial
liabilities.
  7
 Table of Contents
 
 In
December 2007, the FASB issued Statement of Financial Accounting Standards
No. 141(R), Business
Combinations(“SFAS 141R”), and Statement of Financial Accounting
Standard No. 160, Noncontrolling Interest in
Consolidated Financial Statements, an amendment of ARB No. 51 (“SFAS 160”).
These new standards significantly change the accounting for and reporting for
business combinations and noncontrolling (minority) interests in consolidated
financial statements. SFAS 141(R) and SFAS 160 are effective for the first
fiscal period beginning on or after December 15, 2008.  Accordingly,
the Company adopted SFAS 141(R) and SFAS 160 in the first quarter of 2009.
SFAS 141R will impact the Company if it completes an acquisition or obtains
additional minority interests after the effective date. SFAS 160 amends ARB 51
to establish accounting and reporting standards for the noncontrolling interest
in a subsidiary and for the deconsolidation of a subsidiary. Among other
requirements, this statement requires that the consolidated net income (loss)
attributable to the parent and the noncontrolling interests be clearly
identified and presented on the face of the consolidated statement of
operations. The redeemable noncontrolling interests reported in the consolidated
balance sheet represent limited partner ownership in investment fund
subsidiaries consolidated into the Company’s financial statements. The limited
partnership agreements of these funds contain certain redemption features that
are not solely within control of the Company. As such, in accordance with EITF
Topic No. D-98, the redeemable noncontrolling interests are classified
outside of stockholders’ equity in the accompanying consolidated balance sheets.
Certain reclassifications resulting from the adoption of SFAS 160 and EITF Topic
No. D-98 have been made to the 2008 amounts to conform to the current
year’s presentation.
 
 In
March 2008, the FASB issued Statement of Financial Accounting Standards
SFAS No. 161 (“SFAS 161”), Disclosures about Derivative
Instruments and Hedging Activities—An Amendment of FASB Statement
No. 133. SFAS 161 applies to all derivative instruments and related
hedged items accounted for under SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities. It requires entities to provide
greater transparency about (a) how and why an entity uses derivative
instruments, (b) how derivative instruments and related hedged items are
accounted for under SFAS 133 and its related interpretations, and
(c) how derivative instruments and related hedged items affect an entity’s
financial position, results of operations, and cash flows. SFAS 161 is
effective for fiscal years and interim periods beginning after November 15,
2008. This standard was adopted in the first quarter of 2009 and did not impact
the Company’s consolidated financial statements.
 
 In
April 2008, the FASB issued FASB Staff Position No. 142-3, Determination of the Useful Life of Intangible
Assets (“FSP 142-3”).  FSP 142-3 amends the factors that should be
considered in developing renewal or extension assumptions used to determine the
useful life of a recognized intangible asset under FASB Statement No. 142,
Goodwill and Other Intangible
Assets and requires enhanced related disclosures.  FSP 142-3 must be
applied prospectively to all intangible assets acquired subsequent to fiscal
years beginning after December 15, 2008.  The Company adopted FSP
142-3 in the first quarter of 2009 but the adoption did not impact the Company’s
consolidated financial statements.
 
 In
April 2009, the FASB issued FSP FAS 157-4, “Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly” (FSP FAS
157-4). FSP FAS 157-4 amends SFAS 157 and provides additional guidance for
estimating fair value in accordance with SFAS 157 when the volume and level of
activity for the asset or liability have significantly decreased and also
includes guidance on identifying circumstances that indicate a transaction is
not orderly for fair value measurements. This FSP is effective for interim and
annual periods ending after June 15, 2009.  The Company adopted
FSP FAS 157-4 in the second quarter of 2009 but the adoption did not impact the
determination of fair value or reporting of its financial results.
 
 In
April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2, “Recognition and Presentation of
Other-Than-Temporary Impairments.”This FSP amends SFAS 115, “Accounting for Certain Investments
in Debt and Equity Securities,” SFAS 124, “Accounting for Certain Investments
Held by Not-for-Profit Organizations,” and EITF Issue No. 99-20,
“Recognition of Interest
Income and Impairment on Purchased Beneficial Interests and Beneficial Interests
That Continue to Be Held by a Transferor in Securitized Financial
Assets,” to make the other-than-temporary impairments guidance more
operational and to improve the presentation of other-than-temporary impairments
in the financial statements. This FSP replaces the existing requirement that the
entity’s management assert it has both the intent and ability to hold an
impaired debt security until recovery with a requirement that management assert
it does not have the intent to sell the security, and it is more likely than not
it will not have to sell the security before recovery of its cost basis. This
FSP provides increased disclosure about the credit and noncredit components of
impaired debt securities that are not expected to be sold and also requires
increased and more frequent disclosures regarding expected cash flows, credit
losses, and an aging of securities with unrealized losses. Although this FSP
does not result in a change in the carrying amount of debt securities, it does
require that the portion of an other-than-temporary impairment not related to a
credit loss for a held-to-maturity security be recognized in a new category of
other comprehensive income and be amortized over the remaining life of the debt
security as an increase in the carrying value of the security. This FSP is
effective for interim and annual periods ending after June 15,
2009.  The Company adopted this new FSP in the second quarter of 2009.
It did not have a significant impact on the determination or reporting of its
financial results but did result in additional disclosures.
  8
 Table of Contents
 
 In
April 2009, the FASB issued FSP FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value
of Financial Instruments,to require an entity to provide interim
disclosure about the fair value of all financial instruments within the scope of
SFAS 107 and to include disclosures related to the methods and significant
assumptions used in estimating those instruments.  This FSP is
effective for interim and annual periods ending after June 15,
2009.  The Company adopted this new FSP in the second quarter of 2009.
(See Note 11)
 
 
 In May
2009, the FASB issued SFAS No. 165, Subsequent Events. This
statement requires management to evaluate subsequent events through the date the
financial statements are either issued, or available to be issued. Companies are
required to disclose the date through which subsequent events have been
evaluated.  SFAS No. 165 is effective for interim or annual financial
periods ending after June 15, 2009.  The Company adopted the
provisions of SFAS No. 165 in the second quarter of 2009.  The
adoption of this statement did not have a material effect on the Company’s
financial statements and related disclosures.
 
 (3)
              Investments
      in Marketable Securities
 
 Investment
and capital allocation decisions of Western Sizzlin Corporation and Western
Acquisitions, LP are made by Mr. Sardar Biglari, the Company’s Chairman and
Chief Executive Officer, under limited authority delegated by the Board of
Directors for Western Sizzlin Corporation, and the management of Western
Acquisitions, LP. The delegated authority includes the authority to borrow funds
in connection with making investments in marketable securities or derivative
securities, subject to Board reporting requirements and various limitations. As
of the date of this filing, Mr. Biglari has authority to manage surplus
cash up to $10 million, and in addition, has authority to borrow a maximum of $5
million. The Company has a margin securities account with a brokerage firm. The
margin account bears interest at the Federal Funds Target Rate quoted by the
Wall Street Journal, plus .5%, or approximately .75% as of the date of this
report, with the minimum and maximum amount of any particular loan to be
determined by the brokerage firm, in its discretion, from time to time. The
margin loan balances at June 30, 2009 and 2008 were $0. The collateral securing
the margin loans are the Company’s holdings in marketable securities. The
minimum and maximum amount of any particular margin may be established by the
brokerage firm, in its discretion, regardless of the amount of collateral
delivered to the brokerage firm, and the brokerage firm may change such minimum
and maximum amounts from time to time.
 
 The
noncontrolling interest holder in Mustang Capital Advisors, LP and Mustang
Capital Management, LLC, has authority to manage the investments in these
particular Funds.
 
 In the
normal course of business, substantially all of the Company’s securities
transactions, money balances and security positions are transacted with a
broker. The Company is subject to credit risk to the extent any broker with whom
they conduct business is unable to fulfill contractual obligations on their
behalf. The Company monitors the financial conditions of such brokers and does
not anticipate any losses from these counterparties.
 
 ·
              Marketable
      Securities held by Western Sizzlin Corporation (the holding
      company)
 
 Marketable
equity securities held by Western Sizzlin Corporation (the holding company) are
held for an indefinite period and thus are classified as available-for-sale.
Available-for-sale securities are recorded at fair value in Investments in
Marketable Securities on the consolidated balance sheet, with the change in fair
value during the period excluded from earnings and recorded, net of tax, as a
component of other comprehensive income (loss). Substantially all of the
marketable securities held by Western Sizzlin Corporation have been in a
continuous loss position for less than twelve months as of June 30,
2009.
  9
 Table of Contents
  Following
is a summary of marketable equity securities held by Western Sizzlin Corporation
(the holding company) as of June 30, 2009 and December 31,
2008:
 Cost
                  
                  
                  Gross
                    Unrealized
                    Gains
                  
                  
                  Gross
                    Unrealized
                    Losses
                  
                  
                  Fair ValueJune
      30, 2009Itex
      Corporation
                  
                  $
                  1,487,631
                  
                  
                  $
                  —
                  
                  
                  $
                  (328,774
                  )
                  
                  $
                  1,158,857Other
                  
                  
                  25,096
                  
                  
                  
                  —
                  
                  
                  
                  (9,493
                  )
                  
                  
                  15,603$
                  1,512,727
                  
                  
                  $
                  —
                  
                  
                  $
                  (338,267
                  )
                  
                  $
                  1,174,460December 
      31, 2008Itex
      Corporation
                  
                  $
                  1,487,631
                  
                  
                  $
                  —
                  
                  
                  $
                  (771,867
                  )
                  
                  $
                  715,764Other
                  
                  
                  25,093
                  
                  
                  
                  —
                  
                  
                  
                  (13,136
                  )
                  
                  
                  11,957$
                  1,512,724
                  
                  
                  $
                  —
                  
                  
                  $
                  (785,003
                  )
                  
                  $
                  727,721
 
 There
were no realized gains or losses from marketable equity securities held by
Western Sizzlin Corporation (the holding company) for the three or six months
ended June 30, 2009 or 2008.
 
 On a
quarterly basis, the Company performs an assessment to determine whether there
have been any events or economic circumstances to indicate that a marketable
equity security with an unrealized loss has suffered other-than-temporary
impairment, pursuant to FSP FAS 115-2 and FAS
124-2.    Western Sizzlin Corporation’s (the holding
company) investments in Itex Corporation account for substantially all of its
unrealized losses at June 30, 2009 and December 31, 2008.  Unrealized
losses on the investments in Itex Corporation did not occur until August 2008.
In management’s judgment, the future earnings potential and underlying business
economics is favorable and the Company intends to hold this position for the
long term.
   ·
              Marketable
      Securities held by Western Acquisitions,
  LP
 
 Western
Investments, Inc., a Delaware corporation and wholly-owned subsidiary,
serves as the general partner of Western Acquisitions, LP, a Delaware limited
partnership that operates as a private investment fund. Through Western
Investments, Inc., Mr. Biglari operates as the portfolio manager to
the fund. Cash contributions from outside investors of $0 and $540,000 for the
six months ended June 30, 2009 and 2008, respectively, were made to the limited
partnership.
 
 As of
June 30, 2009 and December 31, 2008, Western Investments, Inc. owned
85.1% of Western Acquisitions, LP.  As such, Western Acquisitions, LP
has been consolidated into the accompanying financial statements with the 14.9%
ownership by noncontrolling limited partners presented as redeemable
noncontrolling interests on the accompanying consolidated balance sheets
totaling $2,040,150 and $1,396,092 as of June 30, 2009 and December 31,
2008, respectively,  pursuant to EITF 04-05 – Determining Whether a General
Partner, or the General Partners as a Group, Controls a Limited Partnership or
Similar Entity When the Limited Partners have Certain Limited
Rights.
 
 Western
Acquisitions, LP is considered, for GAAP purposes, an investment company under
the AICPA Audit and Accounting Guide Investment Companies. The
Company has retained the specialized accounting for Western Acquisitions, LP
pursuant to EITF Issue No. 85-12, Retention of Specialized Accounting
for Investment in Consolidation. As such, marketable equity securities
held by Western Acquisitions, LP are recorded at fair value in Investments in
Marketable Securities, with unrealized gains and losses resulting from changes
in fair value reflected in the Consolidated Statements of
Operations.
 
 As of
June 30, 2009, Western Acquisitions, LP owns a total of 1,553,545 shares of The
Steak n Shake Company’s common stock.
  10
 Table of Contents
 
 Following
is a summary of marketable equity securities held by Western Acquisitions, LP as
of June 30, 2009 and December 31, 2008:
  As of June
      30, 2009
                  
                  
                  As of December 31, 2008Cost
                  
                  
                  Fair Value
                  
                  
                  Cost
                  
                  
                  Fair ValueThe
      Steak n Shake Co.
                  
                  $
                  19,159,412
                  
                  
                  $
                  13,577,983
                  
                  
                  $
                  19,159,412
                  
                  
                  $
                  9,243,593Other
                  
                  
                  139,881
                  
                  
                  
                  69,892
                  
                  
                  
                  139,881
                  
                  
                  
                  80,737Total
      marketable equity securities
                  
                  $
                  19,299,293
                  
                  
                  $
                  13,647,875
                  
                  
                  $
                  19,299,293
                  
                  
                  $
                  9,324,330
 
 Net
realized gains (losses) and net change in unrealized gains (losses) from
marketable equity securities held by Western Acquisitions, LP were as
follows:
 
 Three
      Months Ended
                    June
      30,
                  
                  
                  Six
      Months Ended
                    June
      30,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Realized
      gains.
                  
                  $
                  —
                  
                  
                  $
                  754
                  
                  
                  $
                  —
                  
                  
                  $
                  —Realized
      losses
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  (39,852
                  )Net
      realized gains (losses) on sales of marketable securities
                  
                  $
                  —
                  
                  
                  $
                  754
                  
                  
                  $
                  —
                  
                  
                  $
                  (39,852
                  )Net
      unrealized gains (losses) on marketable securities
                  
                  $
                  1,827,287
                  
                  
                  $
                  (2,280,461
                  )
                  
                  $
                  4,323,545
                  
                  
                  $
                  (6,443,124
                  )
 
 ·
              Marketable
      Securities held by Mustang Capital Advisors,
  LP
 
 Western
Mustang Holdings, LLC owns a 50.5% controlling interest in Mustang Capital
Advisors, LP (“MCA”) and a 51% controlling interest in its general partner,
Mustang Capital Management, LLC (“MCA”) as July 9, 2008.
 
 MCM owns
a 1% interest in, and serves as general partner of MCA.  MCA is a
registered investment advisor and serves as the investment advisor to, and the
general partner of, Mustang Capital Partners I, LP and Mustang Capital Partners
II, LP (the "Funds”). The Funds are private investment funds organized for the
purpose of trading and investing in securities.
 
 As of
June 30, 2009 and December 31, 2008, MCA ownership interest in the Funds was
4.4% and 5.0%, respectively, with the remaining interests in the Funds held by
various limited partners who are unrelated to the Company.  The
combined equity of the unrelated limited partners in the Funds totaled 95.6% and
95.0% of the net assets of the Funds as of June 30, 2009 and December 31, 2008,
respectively.   As a result of the significant investments in the
Funds by these limited partners, as well as the 49.5% non-controlling interest
in MCA and the 49% non-controlling interest in MCM (which owns 1% of MCA), the
Company owned approximately 2% of the combined net assets of the Funds as of
June 30, 2009 and December 31, 2008.  However, through its majority
interest in MCA, the General Partner of the Funds, the Company controls the
investments and operations of the Funds.  As such, the balance sheets
of the Funds and the results of their operations are included in the
accompanying consolidated financial statements pursuant to EITF 04-05 – Determining Whether a General
Partner, or the General Partners as a Group, Controls a Limited Partnership or
Similar Entity When the Limited Partners have Certain Limited
Rights.
 
 The
assets of the Funds consist primarily of money market investments totaling
$2,998,881 and $3,735,821 as of June 30, 2009 and December 31, 2008,
respectively, (representing 100% of the amounts included in the Company's
consolidated balance sheets under the line item “money market investments” as of
each balance sheet date), and of marketable securities totaling $8,083,575 and
$6,656,428 as of June 30, 2009 and December 31, 2008, respectively,
(representing 35% and 40%, respectively, of the amounts included in the
Company's consolidated balance sheets under the line item “investments in
marketable securities” at each balance sheet date).
 
 The
combined equity of the unrelated limited partners in the Funds and the
non-controlling interests in MCA and MCM totaled $10,565,811 and $9,892,589 as
of June 30, 2009 and December 31, 2008, respectively, and is included in
redeemable noncontrolling interests in the accompanying consolidated balance
sheets.
 
 Western
Mustang Holdings, LLC, is, for GAAP purposes, an investment company under the
AICPA Audit and Accounting Guide Investment Companies. The
Company has retained the specialized accounting for Mustang Capital Advisors, LP
pursuant to EITF Issue No. 85-12, Retention of Specialized Accounting
for Investment in Consolidation. As such, marketable equity securities
held by Mustang Capital Advisors, LP are recorded at fair value in Investments
in Marketable Securities, with unrealized gains and losses resulting from
changes in fair value reflected in the Consolidated Statements of
Operations.
  11
 Table of Contents
 
 Following
is a summary of marketable equity securities held by Western Mustang Holdings,
LLC as of June 30. 2009 and December 31, 2008:
 
 As of
      June 30, 2009
                
                
                As of December 31, 2008Cost
                
                
                Fair Value
                
                
                Cost
                
                
                Fair ValueTotal
      marketable equity securities
                
                $
                9,017,035
                
                
                $
                8,083,575
                
                
                $
                6,621,658
                
                
                $
                6,656,428
 
 Net
realized gains (losses) and net change in unrealized gains (losses) for the six
months ended June 30, 2009, from marketable equity securities held by Mustang
Capital Advisors, LP were as follows:
 Three
      Months Ended
                      June
      30,
                    
                    
                    Six
      Months Ended
                      June
      30,2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008Realized
      gains
                    
                    $
                    289,195
                    
                    
                    $
                    —
                    
                    
                    $
                    646.273
                    
                    
                    $
                    —Realized
      losses
                    
                    
                    (71,301
                    )
                    
                    
                    —
                    
                    
                    
                    (110,751
                    )
                    
                    
                    —Net
      realized gains (losses) on sales of marketable securities
                    
                    $
                    217,894
                    
                    
                    $
                    —
                    
                    
                    $
                    535,522
                    
                    
                    $
                    —Net
      unrealized gains (losses) on marketable securities
                    
                    $
                    1,827,287
                    
                    
                    $
                    —
                    
                    
                    $
                    (874,624
                    )
                    
                    $
                    —
 (4)
              Stock
      Options
 
 The
Company has two stock option plans: the 2005 Stock Option Plan and the 2004
Non-Employee Directors’ Stock Option Plan. The 1994 Incentive and Non-qualified
Stock Option Plan were terminated in 2008 with the exercise of all outstanding
options under this plan during year ended December 31, 2008. Under the 2005
and 2004 Plans, employees and directors may be granted options to purchase
shares of common stock at the fair market value on the date of the
grant.
 
 Options
granted under the 2005 and 2004 Plans vest at the date of the grant. The fair
value of each option award is estimated on the date of grant using the
Black-Scholes option-pricing model. Assumptions utilized in the model are
evaluated and revised, as necessary, to reflect market conditions and experience
on the respective dates of grant. The risk-free interest rate for periods within
the contractual life of the option is based on the U.S. Treasury yield curve in
effect at the time of the grant. Expected volatilities are based on the
historical volatility of the Company’s stock for a period equal to the expected
term of the options. The expected term of the options represents the period of
time that options granted are outstanding and is estimated using historical
exercise and termination experience.
 
 Prior to
the adoption of SFAS No. 123R, the benefit of tax deductions in excess of
recognized stock compensation expense was reported as a reduction of taxes paid
within operating cash flows. SFAS No. 123R requires that such benefits be
recognized as a financing cash flow. The benefits of tax deductions in excess of
recognized stock compensation expense for the three and six months ended June
30, 2009 and 2008 were immaterial.
 
 There
were no options granted during the three or six months ended June 30, 2009 and
2008.
  12
 Table of Contents
 The
following table summarizes stock options outstanding as of June 30, 2009, as
well as activity during the six month period then ended:
 Options
                          Outstanding
                        
                        
                        Exercise Price
                          Per Share
                          Weighted
                          Average
                        
                        
                        Contractual
                          Term
                          Weighted
                          Average
                        
                        
                        Aggregate
                          Intrinsic
                          ValueBalance,
      December 31,2008
                        
                        
                        12,500
                        
                        
                        $
                        7.25
                        
                        
                        
                        1.83
                        
                        
                        $
                        64,284Granted
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Exercised
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Expired/Forfeited
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —
                        
                        
                        
                        —Balance,
      June 30, 2009
                        
                        
                        12,500
                        
                        
                        $
                        7.25
                        
                        
                        
                        1.33
                        
                        
                        $
                        62,534
 
 All
options outstanding at June 30, 2009 are fully vested and exercisable. At June
30, 2009, there were 40,000 shares available for future grants under the plans,
however, on April 25, 2007, the Company’s Board of Directors elected to
suspend future grants under all plans indefinitely.
 
 (5)
              Goodwill
      and Other Intangible Assets
 
 The
Company conforms to the provisions of Statement of Financial Accounting
Standards No. 142 (“SFAS 142”), Goodwill and Other Intangible
Assets. Under SFAS 142, goodwill and intangible assets deemed to have
indefinite lives are reviewed for impairment and written down and charged to
results of operations when their carrying amount exceeds their estimated fair
value. The Company is required to perform impairment tests each year at the end
of the calendar year, or between yearly tests in certain circumstances, for
goodwill. There can be no assurance that future impairment tests will not result
in a charge to earnings.
 
 Amortizing
Intangible Assets
 
 As of June
      30, 2009
              
              As of December 31, 2008Gross
                carrying
                amount
              
              Weighted
                average
                amortization
                period
              
              Accumulated
                amortization
              
              Gross
                carrying
                amount
              
              Weighted
                average
                amortization
                period
              
              Accumulated
                amortizationAmortizing
      intangible assets:Investment
      in management customer relationships
              
              $
              1,420,000
              
              10.5
              
              $
              135,279
              
              $
              1,420,000
              
              10.5
              
              $
              73,762$
              1,420,000
              
              10.5
              
              $
              135,279
              
              $
              1,420,000
              
              10.5
              
              $
              73,762
 
 In
connection with the acquisition of Mustang Capital Advisors, L.P in 2008, the
Company acquired certain customer related intangible assets. The value assigned
to these intangible assets of $1,420,000 was determined based on the present
value of the estimated cash flows to be generated by the assets.
 
 Amortization
expense for amortizing intangible assets for the three and six months ended June
30, 2009 was $33,811 and $61,517, respectively. Franchise royalty contracts,
originally acquired in January 2004, were fully amortized as of
December 31, 2008. The estimated annual amortization expense for the
remaining amortizing intangible asset is $135,240 per year through
2018.
 
 (6)           Debt
 
 At June
30, 2009, there was $300,000 outstanding on a $2,000,000 line of credit with a
bank.  The line is payable on demand, subject to annual renewal by the
bank with a renewal at August 30, 2009, carries an interest rate of prime minus
0.50% (2.75% at June 30, 2009 and at December 31, 2008) and is
collateralized by accounts receivable and the assignment of all franchise
royalty contracts.
 
 In 2008,
the Company’s purchase of the investment in real estate was refinanced through
the issuance of a note payable to a bank of $2,641,220, secured by the land held
for investment.  Interest accrues on the unpaid principal balance at
prime minus 0.5%, or 2.75% as of June 30, 2009.  The Company made one
payment of principal of $264,122 on January 29, 2009, and all remaining
principal and accrued interest is due on January 30,
2010.  Accordingly, the outstanding balance of this debt is classified
as a current liability at June 30, 2009.
  13
 Table of Contents
 
 The
Company has various notes payable to a finance company with interest rates
ranging from 9.82% to 10.07% due in equal monthly installments, including
principal and interest, ranging from $6,591 to $13,487, with a final payment due
on April 13, 2010.  The notes payable require pre-payment
premiums in certain circumstances and contain certain restrictive covenants,
including debt coverage ratios, periodic reporting requirements and maintenance
of operations at certain Company-operated restaurants that collateralize the
notes payable.  The notes payable are collateralized by accounts
receivable, inventory and property and equipment.
 
 (7)           Income
Taxes
 
 The
Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in
Income Taxes, an Interpretation of FASB Statement No. 109 (“FIN
48”), on January 1, 2007.  As of June 30, 2009, the Company has a
recorded liability of $10,826, including interest of $5,510, for such uncertain
tax positions.  The recorded liability was increased by $3,274 during
the three months ended June 30, 2009.
 
 In
assessing the realizability of deferred tax assets, management considers 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.
 
 Management
considers the scheduled reversal of deferred tax liabilities, projected future
taxable income, and tax planning strategies in making this assessment. Based
upon the level of historical taxable income and projections for future taxable
income over the periods which the deferred tax assets are deductible, management
believes it is more likely than not the Company will realize the benefits of
these deductible differences, net of a valuation allowance of $1,048,000,
$2,327,000 and $2,065,000 at June 30, 2009, December 31, 2008 and June 30,
2008, respectively, related to the unrealized losses on marketable
securities.
 
 (8)
              Earnings
      (Loss) Per Share
 
 Basic
earnings (loss) per share excludes dilution and is computed by dividing income
(loss) attributable to Western Sizzlin Corporation by the weighted-average
number of common shares outstanding for the period.  Diluted earnings
per share reflects the potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted into common
stock or resulted in the issuance of common stock that then shared in the
earnings of the Company.
 
 The
following is a reconciliation of the numerators and denominators of the basic
and diluted earnings (loss) per share computations for the periods
indicated:
 
 Income (Loss)
                          (Numerator)
                        
                        Weighted
                          Average
                          Shares
                          (Denominator)
                        
                        Earnings
                          (Loss)
                          Per Share
                          AmountThree
      months ended June 30, 2009Net
      income — basic
                        
                        $
                        1,931,467
                        
                        2,831,884
                        
                        $
                        .68Net
      income — diluted
                        
                        $
                        1,931,467
                        
                        2,835,085
                        
                        $
                        .68Three
      months ended June 30, 2008Net
      loss — basic
                        
                        $
                        (1,956,024
                        )
                        2,730,236
                        
                        $
                        (.72
                        )Net
      loss — diluted
                        
                        $
                        (1,956,024
                        )
                        2,730,236
                        
                        $
                        (.72
                        )
 
 
 
 Income (Loss)
                          (Numerator)
                        
                        Weighted
                          Average
                          Shares
                          (Denominator)
                        
                        Earnings
                          (Loss)
                          Per Share
                          AmountSix
      months ended June 30, 2009Net
      income — basic
                        
                        $
                        4,224,524
                        
                        2,831,884
                        
                        $
                        1.49Net
      income — diluted
                        
                        $
                        4,224,524
                        
                        2,837,388
                        
                        $
                        1.49Six
      months ended June 30, 2008Net
      loss — basic
                        
                        $
                        (5,807,019
                        )
                        2,713,431
                        
                        $
                        (2.14
                        )Net
      loss — diluted
                        
                        $
                        (5,807,019
                        )
                        2,713,431
                        
                        $
                        (2.14
                        )
 
 For the
three and six months ended June 30, 2008, the Company excluded from the loss per
share calculation all common stock equivalents because the effect on loss per
share was anti-dilutive.
  14
 Table of Contents
 
 (9)
              Reportable
      Segments
 
 The
Company has organized segment reporting with additional information to reflect
how the Company views its business activities.  The Company-operated
Restaurant segment consists of the operations of all Company-operated
restaurants and derives its revenues from restaurant operations.  The
Franchising segment consists primarily of franchise sales and support activities
and derives its revenues from sales of franchise and development rights and
collection of royalties from franchisees. The Investment Activity segment
consists of investment activities and certain direct expenses associated with
legal matters. The Company does not allocate certain expenses to any business
segment.  These costs include expenses of the following functions:
legal, accounting, stockholder relations, personnel not directly related to a
segment, information systems and other headquarter activities.  These
unallocated expenses are designated as unallocated corporate expenses. Certain
other expenses (such as sublease property expense and claims settlement and
legal fees associated with a lawsuit) are also not allocated to any reportable
segment.
 
 The
following table summarizes reportable segment information:
  15
 Table of Contents
  Three Months
                                                
                                                
                                                Six MonthsEnded June 30
                                                
                                                
                                                Ended June 302009
                                                
                                                
                                                2008
                                                
                                                
                                                2009
                                                
                                                
                                                2008Revenues
      from reportable segments:Restaurants
                                                
                                                $
                                                3,551,693
                                                
                                                
                                                $
                                                3,490,292
                                                
                                                
                                                $
                                                6,714,120
                                                
                                                
                                                $
                                                6,616,402Franchising
                                                
                                                
                                                894,610
                                                
                                                
                                                
                                                1,071,936
                                                
                                                
                                                
                                                1,851,758
                                                
                                                
                                                
                                                2,121,077Total
      revenues
                                                
                                                $
                                                4,446,303
                                                
                                                
                                                $
                                                4,562,228
                                                
                                                
                                                $
                                                8,565,878
                                                
                                                
                                                $
                                                8,737,479Depreciation
      and amortization:Restaurants
                                                
                                                $
                                                88,315
                                                
                                                
                                                $
                                                97,750
                                                
                                                
                                                $
                                                177,980
                                                
                                                
                                                $
                                                197,107Franchising
                                                
                                                
                                                7,122
                                                
                                                
                                                
                                                165,863
                                                
                                                
                                                
                                                15,168
                                                
                                                
                                                
                                                165,863Total
      depreciation and amortization
                                                
                                                $
                                                95,437
                                                
                                                
                                                $
                                                263,613
                                                
                                                
                                                $
                                                193,148
                                                
                                                
                                                $
                                                528,615Income
      from restaurant and franchise operations:Restaurants
      and equity in joint venture
                                                
                                                $
                                                404,066
                                                
                                                
                                                $
                                                388,407
                                                
                                                
                                                $
                                                609,333
                                                
                                                
                                                $
                                                590,326Franchising
                                                
                                                
                                                688,327
                                                
                                                
                                                
                                                596,687
                                                
                                                
                                                
                                                1,352,247
                                                
                                                
                                                
                                                1,175,648Subleased
      properties expenses
                                                
                                                
                                                —
                                                
                                                
                                                
                                                (37,188
                                                )
                                                
                                                
                                                —
                                                
                                                
                                                
                                                (64,491
                                                )Unallocated
      expenses
                                                
                                                
                                                (3,768
                                                )
                                                
                                                
                                                (20,980
                                                )
                                                
                                                
                                                (30,188
                                                )
                                                
                                                
                                                (158,764
                                                )Corporate
                                                
                                                
                                                (361,253
                                                )
                                                
                                                
                                                (431,445
                                                )
                                                
                                                
                                                (850,219
                                                )
                                                
                                                
                                                (915,695
                                                )Total
      income from restaurant and franchise
                                                  operations:
                                                
                                                $
                                                727,372
                                                
                                                
                                                $
                                                495,481
                                                
                                                
                                                $
                                                1,081,173
                                                
                                                
                                                $
                                                627,024Income
      (loss) from investment activities:Investment
      advisory fee income
                                                
                                                $
                                                83,304
                                                
                                                
                                                $
                                                —
                                                
                                                
                                                $
                                                185,110
                                                
                                                
                                                $
                                                —Net
      realized gains (losses) on sales of marketable securities
                                                
                                                
                                                228,566
                                                
                                                
                                                
                                                754
                                                
                                                
                                                
                                                546,194
                                                
                                                
                                                
                                                (39,852
                                                )Net
      unrealized gains ( losses) on marketable securities held by limited
      partnership
                                                
                                                
                                                2,020,571
                                                
                                                
                                                
                                                (2,280,461
                                                )
                                                
                                                
                                                3,438,249
                                                
                                                
                                                
                                                (6,443,124
                                                )Amortization
      expense – investment activities
                                                
                                                
                                                (33,811
                                                )
                                                
                                                
                                                —
                                                
                                                
                                                
                                                (61,517
                                                )
                                                
                                                
                                                —Expenses
      of investment activities
                                                
                                                
                                                (144,180
                                                )
                                                
                                                
                                                (468,406
                                                )
                                                
                                                
                                                (263,539
                                                )
                                                
                                                
                                                (968,673
                                                )Purchase
      obligation adjustment
                                                
                                                
                                                (193,346
                                                )
                                                
                                                
                                                —
                                                
                                                
                                                
                                                7,643
                                                
                                                
                                                
                                                —Total
      income (loss) from investment activities
                                                
                                                $
                                                1,961,104
                                                
                                                
                                                $
                                                (2,748,113
                                                )
                                                
                                                $
                                                3,852,140
                                                
                                                
                                                $
                                                (7,451,649
                                                )Interest
      Expense:Restaurants
                                                
                                                $
                                                15,780
                                                
                                                
                                                $
                                                15,748
                                                
                                                
                                                $
                                                31,466
                                                
                                                
                                                $
                                                54,195Total
      interest expense
                                                
                                                $
                                                15,780
                                                
                                                
                                                $
                                                15,748
                                                
                                                
                                                $
                                                31,466
                                                
                                                
                                                $
                                                54,195Interest
      Income:Corporate
                                                
                                                $
                                                37,493
                                                
                                                
                                                $
                                                11,503
                                                
                                                
                                                $
                                                71,211
                                                
                                                
                                                $
                                                32,367Total
      interest income
                                                
                                                $
                                                37,493
                                                
                                                
                                                $
                                                11,503
                                                
                                                
                                                $
                                                71,211
                                                
                                                
                                                $
                                                32,367
 
 
 
 June
      30,
                  
                  
                  December 31,2009
                  
                  
                  2008Total
      assets:Restaurants
                  
                  $
                  7,247,640
                  
                  
                  $
                  6,523,219Franchising
                  
                  
                  1,836,895
                  
                  
                  
                  1,920,513Corporate
                  
                  
                  1,522,676
                  
                  
                  
                  1,203,830Investment
      activities
                  
                  
                  31,092,811
                  
                  
                  
                  26,305,261Total
      assets
                  
                  $
                  41,700,022
                  
                  
                  $
                  35,952,823
 
 June
      30,
                  
                  
                  December 31,2009
                  
                  
                  2008Total
      goodwill:Restaurants
                  
                  $
                  3,539,057
                  
                  
                  $
                  3,539,057Franchising
                  
                  
                  771,143
                  
                  
                  
                  771,143Investment
      activities
                  
                  
                  685,062
                  
                  
                  
                  685,062Total
      goodwill
                  
                  $
                  4,995,262
                  
                  
                  $
                  4,995,262
  16
 Table of Contents
  (10)
              Fair
      Value Measurements
 
 Effective
January 1, 2008, the Company adopted Statement of Financial Accounting
Standards No. 159 (“SFAS 159”), The Fair Value Option for Financial
Assets and Financial Liabilities.  SFAS 159 permits entities to
choose to measure many financial instruments and certain other items at fair
value. The Company did not elect the fair value reporting option for any assets
and liabilities not previously recorded at fair value.
 
 Effective
January 1, 2008, the Company adopted the provisions of Statement of
Financial Accounting Standards No. 157 (“SFAS 157”), Fair Value Measurements,applicable to all financial assets and liabilities and for nonfinancial
assets and liabilities recognized or disclosed at fair value in the consolidated
financial statements on a recurring basis (at least annually). SFAS 157
defines fair value as the exchange price that would be received for an asset or
paid to transfer a liability (an exit price) in the principal or most
advantageous market for the asset or liability in an orderly transaction between
market participants on the measurement date. The standard also establishes a
fair value hierarchy which requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value.
SFAS 157 describes three levels of inputs that may be used to measure fair
value:
 
 Level
      1
              Quoted
      market prices in active markets for identical assets or
      liabilities.Level
      2
              Observable
      market-based inputs or unobservable inputs that are corroborated by market
      data.Level
      3
              Unobservable
      inputs that are not corroborated by market
data.
 
 At June
30, 2009 and December 31, 2008, the Company’s investments in marketable
securities are carried at fair value, based on quoted market prices, in the
consolidated balance sheets and are classified within Level 1 of the fair value
hierarchy, with the exception of $1.5 million that have been valued, in the
absence of observable market prices, by Mustang Capital Advisors,
LP.  The Funds investments in Level 1 securities are freely tradable
and are listed on a national securities exchange or reported on the NASDAQ
national market at their last sales price as of the last business day of the
period.
 
 Approximately
$1.5 million of the investments held by Mustang Capital Advisors, LP have been
classified within Level 2 of the fair value hierarchy and have been valued, in
the absence of observable market prices, by the management of Mustang Capital
Advisors, LP.  Fair value is determined using valuation methodologies
after giving consideration to a range of observable factors including last known
sales price; any current bids or offers on the stock; comparisons to publicly
traded stocks with appropriate discounts for liquidity; size of position;
control data research; and current market conditions. Those estimated values do
not necessarily represent the amounts that may be ultimately realized due to the
occurrence of future circumstances that can not be reasonably determined.
Because of the inherent uncertainty of valuation, those estimated values may be
materially higher or lower than the values that would have been used had a ready
market for the securities existed.
 
 The
Company’s investments in marketable securities are measured at fair value on a
recurring basis.  There have been no changes in inputs during the
period ended June 30, 2009.
 
  (11)
              Fair
      Value of Financial Instruments
   The
following table presents the carrying amounts and estimated fair values of the
Company’s financial instruments at June 30, 2009 and December 31, 2008.
SFAS No. 107, Disclosures
about Fair Value of Financial Instruments, defines the fair value of a
financial instrument as the amount at which the instrument could be exchanged in
a current transaction between willing parties:
  June
      30, 2009
                                    
                                    
                                    December
      31, 2008Carrying
                                      amount
                                    
                                    
                                    Fair
                                      value
                                    
                                    
                                    Carrying
                                      amount
                                    
                                    
                                    Fair
                                      valueFinancial
      assets:Cash
      and cash equivalents
                                    
                                    $
                                    1,247,670
                                    
                                    
                                    $
                                    1,247,670
                                    
                                    
                                    $
                                    330,998
                                    
                                    
                                    $
                                    330,998Money
      market investments
                                    
                                    
                                    2,998,881
                                    
                                    
                                    
                                    2,998,881
                                    
                                    
                                    
                                    3,735,821
                                    
                                    
                                    
                                    3,735,821Trade-accounts
      receivable
                                    
                                    
                                    1,016,879
                                    
                                    
                                    
                                    1,016,879
                                    
                                    
                                    
                                    1,064,389
                                    
                                    
                                    
                                    1,064,389Notes
      receivable
                                    
                                    
                                    628,097
                                    
                                    
                                    
                                    618,486
                                    
                                    
                                    
                                    648,902
                                    
                                    
                                    
                                    642,239Other
      receivables
                                    
                                    
                                    72,762
                                    
                                    
                                    
                                    72,762
                                    
                                    
                                    
                                    78,982
                                    
                                    
                                    
                                    78,982Investments
      in marketable securities
                                    
                                    
                                    22,905,910
                                    
                                    
                                    
                                    22,905,910
                                    
                                    
                                    
                                    16,708,479
                                    
                                    
                                    
                                    16,708,479Financial
      liabilities:Note
      payable - line of credit
                                    
                                    
                                    300,000
                                    
                                    
                                    
                                    283,019
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    —Long-term
      debt
                                    
                                    
                                    2,889,871
                                    
                                    
                                    
                                    2,755,472
                                    
                                    
                                    
                                    3,207,512
                                    
                                    
                                    
                                    3,294,575Accounts
      payable
                                    
                                    
                                    657,478
                                    
                                    
                                    
                                    657,478
                                    
                                    
                                    
                                    812,839
                                    
                                    
                                    
                                    812,839Accrued
      expenses and other
                                    
                                    
                                    1,380,120
                                    
                                    
                                    
                                    1,380,120
                                    
                                    
                                    
                                    1,423,092
                                    
                                    
                                    
                                    1,423,092Other
      liabilities
                                    
                                    
                                    1,182,780
                                    
                                    
                                    
                                    1,182,780
                                    
                                    
                                    
                                    1,208,147
                                    
                                    
                                    
                                    1,208,147
  17
 Table of Contents
  The
following methods and assumptions were used to estimate the fair value of each
class of financial instruments:
   Cash and
cash equivalents, trade accounts receivable, other receivables, notes
payable-line of credit, due to broker, accounts payable, accrued expenses and
other liabilities: The carrying amounts approximate fair value because of the
short maturity of those instruments.
   Notes
receivable: The fair value is determined as the present value of expected future
cash flows discounted at the interest rate which approximates the rate currently
offered by local lending institutions for loans of similar terms to companies
with comparable credit risk.
   Long-term
debt: The fair value of the Company’s long-term debt is estimated by discounting
the future cash flows of each instrument at rates which approximate those
currently offered to the Company for similar debt instruments of comparable
maturities by the Company’s lenders.
  There
were no changes to the methods or significant assumptions used to estimate fair
values for the period ended June 30, 2009.
 
 
 (12)           Commitments
and Contingencies
 
 Commitments
 
 The
limited partners of the two investment funds managed by Mustang Capital
Advisors, LP can redeem their investments annually.  The limited
partners of Western Acquisitions. LP can redeem their investments after two
years from contribution dates.  The earliest redemption date for a
Western Acquisitions, LP limited partner is August 2009.
 
 The
Company has a severance provision contained within the Employment Agreement with
its Chief Financial Officer. The agreement provides certain termination benefits
in the event that employment with the Company is terminated without cause and
upon a change of control. Under the terms of the agreement, in the event of
termination without cause the executive will receive termination benefits equal
to six months of the executive’s annual base salary in effect on the termination
date and the continuation of health and welfare benefits through the termination
date of the agreement. Under a change of control, the executive will receive
termination benefits equal to one year of the executive’s base salary in effect
on the change of control date and the continuation of health and welfare
benefits through the termination date of the agreement.
 
 The
Company has a severance provision contained within the Employment Agreement with
the President of one of its subsidiaries, Western Sizzlin Franchise Corporation.
The agreement provides for an automatic renewal of one year unless the Company
or the executive provides notice of termination as specified in the agreement.
Under the terms of the agreement, in the event of termination without cause, the
executive will receive termination benefits on a graduated percentage of base
salary and continuation of health and welfare benefits based on length of
service.
 
 In
connection with the acquisition of controlling interests in Mustang Capital
Advisors, LP and Mustang Capital Management, LLC, the Company is obligated to
purchase the noncontrolling interest holder’s ownership upon the occurrence of
certain events.  The purchase obligation will ultimately be settled in
cash and shares of the Company’s common stock.  The Company is
accounting for this purchase obligation pursuant to Statement of Financial
Accounting Standards No. 150 (As Amended) - Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity.The
resulting liability is reported in other long-term liabilities on the
accompanying consolidated balance sheet.  The change in the purchase
obligation liability for the second quarter of 2009 is an increase of
$193,346.
 
 Contingencies
 
 The
Company accrues for an obligation for contingencies, including estimated legal
costs, when a loss is probable and the amount is reasonably
estimable.  As facts concerning contingencies become known to the
Company, the Company reassesses its position with respect to accrued liabilities
and other expenses.  These estimates are subject to change as events
evolve and as additional information becomes available during the litigation
process.
  18
 Table of Contents
 
 Little
Rock, Arkansas Lease
 
 In
September 2006, the Company was served with a lawsuit filed in the Circuit
Court of Pulaski County, Arkansas, captioned Parks Land Company, LLP, et al. v.
Western Sizzlin Corporation, et al. The plaintiffs are owners/landlords
of four restaurant premises located in the Little Rock, Arkansas metropolitan
area which had been leased pursuant to a single ten year lease agreement. 
The Company occupied these locations for a period of time, but before
the end of the lease, subleased each of these premises to various
operators.  The ten year lease agreement expired on June 30,
2006.   In the lawsuit the plaintiffs sought recovery
of alleged damages for certain repair and maintenance expenses on the
premises, for the replacement of certain equipment, for diminution of property
value, and for loss of rental income, as well as interest and
costs.  The case was tried to a 12 person jury in Little Rock,
starting February 12, 2008.   The jury returned a
verdict for the plaintiffs on February 20, 2008, in the amount of
$689,526.  On February 29, 2008, the Circuit Court of Pulaski
County, Arkansas entered judgment on the jury’s verdict in the case against the
Company in the amount of $689,666 plus plaintiff’s legal costs.  On
appeal by the Company, on May 14, 2009, the Arkansas Supreme Court reversed and
remanded the case for a new trial.  On June 25, 2009, the Arkansas
Supreme Court issued a per curiam order denying Parks Land Company’s petition
for a rehearing.  As previously reported, the Company has accrued
$900,000 related to this loss contingency. There has been no change in the
Company’s loss contingency accrual of $900,000 since December 31,
2007.
 
 Other
 
 The
Company is involved in various other claims and legal actions arising in the
ordinary course of business.  In the opinion of the management, the
ultimate disposition of these matters will not have a material adverse effect on
the Company’s financial condition, results of operations or
liquidity.
 
 (13)           Investment
in Unconsolidated Joint Venture
 
 The
Company is a partner in a 50/50 joint venture with a franchisee for a restaurant
in Harrisonburg, Virginia.  During October 2005, the joint
venture entered into a loan agreement for $3.05 million and the Company
guaranteed 50% of the loan obligation.  The estimated fair value of
the guarantee of approximately $30,000 is recorded in other long-term
liabilities and in investments in unconsolidated joint venture on the
accompanying consolidated balance sheets at June 30, 2009 and December 31,
2008.  The term of the guarantee extends through July 1, 2026 and
the Company would be required to perform under the guarantee should the joint
venture not to be able to meet its scheduled principal and interest
payments.  Pursuant to the joint venture agreement, a cash
contribution of $300,000 from each 50/50 partner was also made at the closing of
this financing.  The Company is accounting for the investment using
the equity method and the Company’s share of the net income of the joint venture
is reported in the accompanying statements of operations as equity in earnings
of unconsolidated joint venture.
 
 Financial
Data
 
 The
following is selected financial information for the joint venture as of and for
the three and six months ended June 30, 2009 and 2008,
respectively:
 
 
 
 Three Months
                      Ended June 30,
                    
                    
                    Six Months
                      Ended June 30,2009
                    
                    
                    2008
                    
                    
                    2009
                    
                    
                    2008(unaudited)
                    
                    
                    (unaudited)
                    
                    
                    (unaudited)
                    
                    
                    (unaudited)Statement of Operations Data:Total
      revenues
                    
                    $
                    1,354,894
                    
                    
                    $
                    1,218,393
                    
                    
                    $
                    2,622,966
                    
                    
                    $
                    2,423,335Cost
      of food
                    
                    
                    552,017
                    
                    
                    
                    496,971
                    
                    
                    
                    1,076,172
                    
                    
                    
                    986,474Payroll
      expense
                    
                    
                    360,131
                    
                    
                    
                    347,202
                    
                    
                    
                    708,949
                    
                    
                    
                    700,542Gross
      profit
                    
                    
                    442,746
                    
                    
                    
                    374,220
                    
                    
                    
                    837,845
                    
                    
                    
                    763,319Marketing
      and operating expense
                    
                    
                    55,291
                    
                    
                    
                    43,283
                    
                    
                    
                    101,366
                    
                    
                    
                    91,051General
      and administrative
                    
                    
                    120,200
                    
                    
                    
                    112,424
                    
                    
                    
                    255,426
                    
                    
                    
                    224,092Depreciation
      and amortization
                    
                    
                    51,320
                    
                    
                    
                    50,549
                    
                    
                    
                    102,530
                    
                    
                    
                    100,919Interest
                    
                    
                    49,958
                    
                    
                    
                    53,282
                    
                    
                    
                    100,218
                    
                    
                    
                    107,364Net
      income
                    
                    
                    165,977
                    
                    
                    
                    122,667
                    
                    
                    
                    278,305
                    
                    
                    
                    214,653
  19
 Table of Contents
  June 30, 2009
                  
                  
                  June 30, 2008Balance
      Sheet Data:Cash
                  
                  $
                  94,095
                  
                  
                  $
                  193,635Prepaid
      expenses
                  
                  
                  17,796
                  
                  
                  
                  16,854Inventory
                  
                  
                  19,310
                  
                  
                  
                  20,421Land,
      equipment and building improvements, net
                  
                  
                  3,466,480
                  
                  
                  
                  3,657,761Loan
      costs,
      net
                  
                  
                  9,658
                  
                  
                  
                  11,183Total
      assets
                  
                  
                  3,714,254
                  
                  
                  
                  3,900,776Loan
      payable
                  
                  
                  2,851,797
                  
                  
                  
                  3,046,061Accounts
      payable and accrued expenses
                  
                  
                  273,904
                  
                  
                  
                  204,745Members’
      equity
                  
                  
                  487,694
                  
                  
                  
                  604,644
 
 (14)
              Impact
      of Recently Issued Accounting
Standards
 
 In
May 2007, the FASB issued FASB Staff Position No. FIN 46(R)-7, Application of FASB Interpretation
No. 46(R) to Investment Companies (“FSP FIN 46(R)-7”) which
provides clarification on the applicability of FIN 46(R), as revised, to the
accounting for investments by entities that apply the accounting guidance in the
AICPA Audit and Accounting Guide, Investment
Companies.  FSP FIN 46(R)-7 amends FIN 46(R), as revised, to
make permanent the temporary deferral of the application of FIN 46(R), as
revised, to entities within the scope of the guide under Statement of Position
(“SOP”) No. 07-1, Clarification of the Scope of the
Audit and Accounting GuideInvestment Companies and Accounting by Parent Companies
and Equity Method Investors for Investments in Investment Companies (“SOP
07-1”).  FSP FIN 46(R)-7 is effective upon adoption of SOP
07-1.  The adoption of FSP FIN 46(R)-7 is not expected to have a
material impact on the Company.
 
 SOP 07-1,
issued in June 2007, addresses whether the accounting principles of the
AICPA Audit and Accounting Guide Investment Companies may be
applied to an entity by clarifying the definition of an investment company and
whether those accounting principles may be retained by a parent company in
consolidation or by an investor in the application of the equity method of
accounting.  SOP 07-1, as originally issued, was to be effective for
fiscal years beginning on or after December 15, 2007 with earlier
adoption encouraged.  In February 2008, the FASB issued FSP SOP
07-1-1, Effective Date of
AICPA Statement of Position 07-01, to indefinitely defer the effective
date of SOP 07-01.
 
 The
Company’s majority-owned subsidiaries, Western Acquisitions, LP and Mustang
Capital Advisors, LP, are investment companies as currently defined in the AICPA
Audit and Accounting Guide, Investment
Companies.  The Company has retained the specialized accounting
for Western Acquisitions, LP and Mustang Capital Advisors, LP pursuant to EITF
85-12, Retention of
Specialized Accounting for Investments in Consolidation.  As
such, marketable equity securities held by Western Acquisitions, LP and Mustang
Capital Advisors, LP are recorded at fair value in Investments in Marketable
Securities in the consolidated financial statements, with unrealized gains and
losses resulting from the change in fair value reflected in the Consolidated
Statement of Operations. The Company intends to monitor future developments
associated with this Statement in order to assess the impact, if any, which may
result.
 
 In June
2009, the FASB issued FAS Statements No. 166, Accounting for Transfers of
Financial Assets, and No. 167, Amendments to FASB Interpretation
No. 46(R), which significantly change the accounting for transfers of
financial assets and the criteria for determining whether to consolidate a
variable interest entity (“VIE”).  SFAS No. 166 eliminates the
qualifying special purpose entity (“QSPE”) concept, establishes conditions for
reporting a transfer of a portion of a financial asset as a sale, clarifies the
financial-asset derecognition criteria, revises how interests retained by the
transferor in a sale of financial assets initially are measured, and removes the
guaranteed mortgage securitization recharacterization
provisions.  SFAS No. 167 requires reporting entities to evaluate
former QSPEs for consolidation, changes the approach to determining a VIE’s
primary beneficiary from a mainly quantitative assessment to an exclusively
qualitative assessment designed to identify a controlling financial interest,
and increases the frequency of required reassessments to determine whether a
company is the primary beneficiary of a VIE. These statements require additional
year-end and interim disclosures for public and nonpublic companies that are
similar to the disclosures required by FSP FAS 140-4 and FIN 46(R)-8, Disclosures by Public Entities
(Enterprises) about Transfers of Financial Assets and Interests in Variable
Interest Entities.  The statements are effective January 1,
2010.  The Company is currently evaluating these new statements but
does not believe that they will have a significant impact on the determination
or reporting of our financial results.
  20
 Table of Contents
 
 In June
2009, the FASB issued SFAS No.168, TheFASBAccountingStandardsCodification and the Hierarchy of
Generally Accepted Accounting Principles—a replacement of FASB Statement No.
162.  The codification will become the source of authoritative GAAP
recognized by the FASB to be applied by nongovernmental entities.  Rules
and interpretive releases of the SEC under authority of federal securities laws
are also sources of authoritative GAAP for SEC registrants.  On the
effective date of SFAS No. 168, the codification will supersede all
then-existing non-SEC accounting and reporting standards.  All other
non-grandfathered non-SEC accounting literature not included in the codification
will become nonauthoritative.  SFAS No. 168 is effective for financial
statements issued for interim and annual periods ending after September 15,
2009.   SFAS 168 will not have a material impact on our financial
statements.
 
 
 (15)
              Subsequent
      Events
 
 In
accordance with the provisions of SFAS No. 165, the Company has evaluated
subsequent events through August 11, 2009, which is the date these financial
statements were issued.  All subsequent events requiring recognition
as of June 30, 2009, have been incorporated into the consolidated financial
statements presented herein.
 
 
 Item2.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
 
 Overview
 
 The
following discussion may include forward-looking statements including
anticipated financial performance, business prospects, the future opening of
Company-operated and franchised restaurants, anticipated capital expenditures,
and other matters.  All statements other than statements of historical
fact are forward-looking statements.  Section 27A of the
Securities Act of 1933 (as amended) and Section 21E of the Securities
Exchange Act of 1934 (as amended) provide safe harbors for forward-looking
statements.  In order to comply with the terms of these safe harbors,
the Company notes that a variety of factors, individually or in the aggregate,
could cause the Company’s actual results and experience to differ materially
from the anticipated results or other expectations expressed in the Company’s
forward-looking statements including, without limitation, the following: the
ability of the Company or its franchises to obtain suitable locations for
restaurant development; consumer spending trends and habits; competition in the
restaurant segment with respect to price, service, location, food quality and
personnel resources; weather conditions in the Company’s operating regions; laws
and government regulations; general business and economic conditions;
availability of capital; success of operating initiatives and marketing and
promotional efforts; and changes in accounting policies.  In addition,
the Company disclaims any intent or obligation to update those forward-looking
statements.
 
 Western
Sizzlin Corporation is a holding company owning subsidiaries engaged in a number
of diverse business activities.  The Company’s primary business
activities are conducted through Western Sizzlin Franchise Corporation and
Western Sizzlin Stores, Inc., which franchise and operate 105 restaurants
in 19 states, including five Company-owned, 99 franchise restaurants, and one
joint venture restaurant.  The Company currently operates and/or
franchises the following concepts:  Western Sizzlin, Western Sizzlin
Wood Grill, Great American Steak & Buffet, and Quincy
Steakhouses.
 
 Financial
decisions are centralized at the holding company level, and management of
operating businesses is decentralized at the business unit
level.  Investment and all other capital allocation decisions are made
for the Company and its subsidiaries by Mr. Sardar Biglari, Chairman and
Chief Executive Officer.
 
 While the
Company has historically been principally engaged, and intends at this time to
remain principally engaged, in franchising and operating restaurants, its recent
investment activities could bring it within the definition of an “investment
company” and require it to register as an investment company under the
Investment Company Act of 1940.  The Board of Directors has adopted a
policy requiring management to restrict the Company’s operations and investment
activities to avoid becoming an investment company, until and unless the Board
approves otherwise.  Although the Company does not presently intend to
change its principal business, and the Board has not approved any such change,
the Company has expanded its investment activities, and may decide in the future
to register as an investment company under the Investment Company
Act.  Under certain circumstances, if it is successful in investment
activities, then the Company may inadvertently fall within the definition of an
investment company, in which event it may be required to register as an
investment company.  If the Company decides or is required to register
as an investment company, then it would become subject to various provisions of
the Investment Company Act and the regulations adopted under such Act, which are
very extensive and could adversely affect its operations.
  21
 Table of Contents
 
 The
Company seeks to invest, at the holding company and through subsidiaries,
including Western Acquisitions, L.P., in stocks of businesses at prices below
their intrinsic business value.  The Company’s preferred strategy is
to allocate a meaningful amount of capital in each investee, resulting in
concentration.  The carrying values of these investments are exposed
to market price fluctuations, which may be accentuated by a concentrated equity
portfolio.  A significant decline in the price of major investments
may produce a large decrease in the Company’s net earnings and its stockholders’
equity (See Note 3 to the Company’s consolidated financial statements included
in Item 1 of this report).
 
 The
consolidated financial statements include the accounts of Western Sizzlin
Corporation and its wholly-owned subsidiaries, Western Sizzlin Franchise
Corporation, The Western Sizzlin Stores, Inc., Western Sizzlin Stores of
Little Rock, Inc., Austins of Omaha, Inc., Western
Investments, Inc., Western Properties, Inc., a majority-owned limited
partnership, Western Acquisitions, L.P., a solely-owned limited partnership,
Western Real Estate, L.P. and Western Mustang Holdings, L.L.C. (collectively the
Company). All significant intercompany accounts and transactions have been
eliminated in consolidation.
 
 Results
of Operations
 
 Net
income attributable to Western Sizzlin Corporation for the three and six months
ended June 30, 2009 was $1,931,467 and $4,224,524 compared to net loss
attributable to Western Sizzlin Corporation of ($1,956,024) and ($5,807,019) for
the three and six months ended June 30, 2008.  The significant
improvement was primarily attributable to targeted reduced expenses in
restaurant and franchise operations and improvements in the performance of
investment activities.  Income from investment activities that
impacted net income (loss) attributable to Western Sizzlin Corporation,
excluding income (losses) attributable to noncontrolling interests, for the
three and six months ended June 30, 2009 was $1,234,682 and $3,458,024 compared
to net loss from investment activities of ($2,388,499) and ($6,500,821) for the
three and six months ended June 30, 2008.   This improvement in
results of investment activities was largely due to recoveries in marketable
securities over the prior period.
 
 The
following table sets forth for the periods presented the percentage relationship
to total revenues of certain items included in the consolidated statements of
income and certain restaurant data for the periods presented:
 
 Three Months
                  
                  
                  Six MonthsEnded June 30,
                  
                  
                  Ended June 30,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Revenues:Company-operated
      restaurants
                  
                  
                  79.9
                  %
                  
                  
                  76.5
                  %
                  
                  
                  78.4
                  %
                  
                  
                  75.7
                  %Franchise
      operations
                  
                  
                  20.1
                  
                  
                  
                  23.5
                  
                  
                  
                  21.6
                  
                  
                  
                  24.3Total
      revenues
                  
                  
                  100.0
                  
                  
                  
                  100.0
                  
                  
                  
                  100.0
                  
                  
                  
                  100.0Costs
      and expenses — restaurant and franchise operations:Company-operated
      restaurants — food, beverage and labor costs
                  
                  
                  57.4
                  
                  
                  
                  54.6
                  
                  
                  
                  57.6
                  
                  
                  
                  55.0Restaurant
      occupancy and other
                  
                  
                  13.3
                  
                  
                  
                  12.6
                  
                  
                  
                  13.2
                  
                  
                  
                  13.0Franchise
      operations — direct support
                  
                  
                  4.5
                  
                  
                  
                  6.8
                  
                  
                  
                  5.7
                  
                  
                  
                  7.0Subleased
      restaurant property expenses
                  
                  
                  —
                  
                  
                  
                  .8
                  
                  
                  
                  —
                  
                  
                  
                  .7Corporate
      expenses
                  
                  
                  8.1
                  
                  
                  
                  9.4
                  
                  
                  
                  9.9
                  
                  
                  
                  10.5Depreciation
      and amortization expense
                  
                  
                  2.1
                  
                  
                  
                  5.8
                  
                  
                  
                  2.3
                  
                  
                  
                  6.1Corporate
      litigation fees and expenses
                  
                  
                  .1
                  
                  
                  
                  .5
                  
                  
                  
                  .04
                  
                  
                  
                  1.8Total
      costs and expenses — restaurant and franchise operations
                  
                  
                  85.5
                  
                  
                  
                  90.5
                  
                  
                  
                  89.1
                  
                  
                  
                  94.1Equity
      in income of joint venture
                  
                  
                  1.9
                  
                  
                  
                  1.3
                  
                  
                  
                  1.6
                  
                  
                  
                  1.2Income
      from restaurant and franchise operations
                  
                  
                  16.4
                  
                  
                  
                  10.8
                  
                  
                  
                  12.5
                  
                  
                  
                  7.1Investment
      advisory fee income
                  
                  
                  1.9
                  
                  
                  
                  —
                  
                  
                  
                  2.2
                  
                  
                  
                  —Net
      unrealized gains (losses) on marketable securities held by limited
      partnerships
                  
                  
                  45.4
                  
                  
                  
                  (50.0
                  )
                  
                  
                  40.1
                  
                  
                  
                  (73.7
                  )Net
      realized gains (losses) on sales of marketable securities
                  
                  
                  5.1
                  
                  
                  
                  —
                  
                  
                  
                  6.4
                  
                  
                  
                  (.5
                  )Amortization
      expense – investment activities
                  
                  
                  (.8
                  )
                  
                  
                  —
                  
                  
                  
                  (.7
                  )
                  
                  
                  —Expense
      of investment activities
                  
                  
                  (3.2
                  )
                  
                  
                  (10.3
                  )
                  
                  
                  (3.1
                  )
                  
                  
                  (11.1
                  )Purchase
      obligation adjustment
                  
                  
                  (4.3
                  )
                  
                  
                  —
                  
                  
                  
                  .1Loss
      from investment activities
                  
                  
                  44.1
                  
                  
                  
                  (60.3
                  )
                  
                  
                  45.0
                  
                  
                  
                  (85.3
                  )Other
      income (expense):Interest
      expense
                  
                  
                  (.4
                  )
                  
                  
                  (.3
                  )
                  
                  
                  (.4
                  )
                  
                  
                  (.6
                  )Interest
      income
                  
                  
                  .8
                  
                  
                  
                  .3
                  
                  
                  
                  .8
                  
                  
                  
                  .4Other,
      net
                  
                  
                  .7
                  
                  
                  
                  —
                  
                  
                  
                  .4
                  
                  
                  
                  —Total
      other income (expense), net
                  
                  
                  .11
                  
                  
                  
                  —
                  
                  
                  
                  .8
                  
                  
                  
                  (.2
                  )Income
      (loss) before income tax (benefit)
                  
                  
                  61.6
                  
                  
                  
                  (49.5
                  )
                  
                  
                  58.3
                  
                  
                  
                  (78.4
                  )Income
      tax expense (benefit):Current
                  
                  
                  .3
                  
                  
                  
                  .4
                  
                  
                  
                  .3
                  
                  
                  
                  .2Deferred
                  
                  
                  1.6
                  
                  
                  
                  .9
                  
                  
                  
                  4.2
                  
                  
                  
                  (1.2
                  )Total
      income tax expense (benefit)
                  
                  
                  1.8
                  
                  
                  
                  1.3
                  
                  
                  
                  4.5
                  
                  
                  
                  (1.0
                  )Net
      income (loss)
                  
                  
                  59.8
                  
                  
                  
                  (50.8
                  )
                  
                  
                  53.8
                  
                  
                  
                  (77.3
                  )(Income)
      losses attributable to redeemable noncontrolling interests
                  
                  
                  (16.3
                  )
                  
                  
                  7.9
                  
                  
                  
                  (4.6
                  )
                  
                  
                  10.9Net
      income (loss) attributable to Western Sizzlin Corporation
                  
                  
                  43.5
                  
                  
                  
                  (42.9
                  )
                  
                  
                  49.2
                  
                  
                  
                  (66.4
                  )
  22
 Table of Contents
  Three Months
                
                Six MonthsEnded June 30,
                
                Ended June 30,2009
                
                2008
                
                2009
                
                2008Restaurant
      DataNumber
      of Company-Operated Restaurants:Beginning
      of period
                
                5
                
                5
                
                5
                
                5Opened
                
                —
                
                —
                
                —
                
                —Closed
                
                —
                
                —
                
                —
                
                —Franchised
                
                —
                
                —
                
                —
                
                —End
      of period
                
                5
                
                5
                
                5
                
                5Number
      of U.S. Franchised Restaurants:Beginning
      of period
                
                100
                
                115
                
                104
                
                116Opened
                
                —
                
                —
                
                —
                
                —Closed
                
                (1
                )
                (4
                )
                (5
                )
                (5
                )End
      of period
                
                99
                
                111
                
                99
                
                111Number
      of Joint Venture Restaurants:Beginning
      of period
                
                1
                
                1
                
                1
                
                1Opened
                
                —
                
                —
                
                —
                
                —Closed
                
                —
                
                —
                
                —
                
                —End
      of period
                
                1
                
                1
                
                1
                
                1
 
 Revenues
 
 Total
revenues decreased 2.5% to $4.45 million for the three months ended
June 30, 2009 from $4.56 million for the three months ended June 30,
2008. Total revenues decreased 2.0% to $8.57 million for the six months ended
June 30, 2009 from $8.74 million for the six months ended June 30,
2008.  The decreases in total revenues were due to the decreases in
franchise revenues over the same periods, which were partially offset by
increases in company operated restaurant revenues, as further described
below.
 
 Company-operated
restaurant revenues increased 1.8% to $3.56 million for the three months ended
June 30, 2009 as compared to $3.49 million for the three months ended
June 30, 2008. Company-operated restaurant revenues increased 1.5% to $6.71
million for the six months ended June 30, 2009 as compared to $6.62 million
for the six months ended June 30, 2008.
 
 Franchise
revenues decreased 16.5% to $895,000 for the three months ended June 30,
2009 as compared to $1.07 million for the three months ended June 30, 2008.
Franchise revenues decreased 12.7% to $1.85 million for the six months ended
June 30, 2009 as compared to $2.12 million for the six months ended
June 30, 2008.  The overall decrease in franchise revenues is
attributable to fewer franchised units in the system during the relevant periods
in 2009 as compared to the relevant periods in 2008.  Same store sales
at franchise operations for the three and six months ended June 30, 2009,
experienced overall decreases of 4.41% and 3.92%, respectively, compared to the
same periods in 2008.
 
 Costs
and Expenses —restaurant and franchise operations
 
 Costs of
Company-operated restaurants, consisting primarily of food, beverage, and labor
costs increased $60,000 (2.4%) to $2.55 million for the three months ended
June 30, 2009 from $2.49 million for the three months ended June 30,
2008.   These costs for the three month period as a percentage of
Company-operated restaurants revenue were 71.8% and 71.4% for the three months
ended June 30, 2009 and 2008, respectively.  Costs of
Company-operated restaurants increased $130,000 (2.7%) to $4.93 million for the
six months ended June 30, 2009 from $4.80 million for the six months ended
June 30, 2008.   These costs for the six month period as a
percentage of Company-operated restaurants revenue were 73.5% and 72.6% for the
six months ended June 30, 2009 and 2008, respectively.  These
costs have increased due to the rising costs of commodities.
 
 Restaurant
occupancy and other, which include utilities, insurance, maintenance, rent and
other such costs of the Company-operated restaurants, increased by $17,000
(2.9%) for the three months ended June 30, 2009 versus the prior year’s
comparable period. These costs for the three month period increased as a
percentage of Company-operated restaurant revenues from 16.4% in 2008 to 16.6%
in 2009.  Restaurant occupancy and other remained relatively flat for
the six months ended June 30, 2009 compared to the same period in
2008.  These costs for the six month period decreased slightly as a
percentage of Company-operated restaurant revenues from 17.1% in 2008 to 16.9%
in 2009.
  23
 Table of Contents
 
 Cost of
franchise operations direct support expense decreased by $110,000 and $130,000
for the three and six months ended June 30, 2009 versus the prior years’
comparable periods.  The decreases were largely attributable to
targeted expense reductions for 2009.
 
 Subleased
properties include net costs associated with subleasing former Company-operated
restaurants and maintenance of vacant premises.  There were no such
expenses for the three and six months ended June 30, 2009 and were $37,188 and
$64,491 for the three and six months ended June 30, 2008.  Subleasing
arrangements expired at the end of 2008.
 
 Unallocated
corporate expenses consist of certain expenses not allocated to any business
segment.  These expenses include legal, accounting, stockholder
relations, personnel not directly related to a segment, information systems, and
other headquarter’s activities.  These expenses decreased by $70,000
and $65,000 for the three and six month periods ended June 30, 2009 versus
the prior year’s comparable periods.  The decreases are a result of
managing expenses at the corporate level. and targeted expense reductions for
2009.
 
 Depreciation
and amortization expense decreased $168,000 and $335,000 for the three and six
months period ended June 30, 2009 versus the prior year’s comparable
periods.  The variance is largely attributable to franchise royalty
contracts being fully amortized as of December 31, 2008.
 
 Corporate
litigation fees decreased by $17,000 for the three months ended June 30,
2009 versus the prior year’s comparable period and decreased $129,000 for the
six months ended June 30, 2009 versus the prior year’s comparable
period.  These expenses relate to legal fees associated with the trial
and appeal of the lawsuit involving the Company in Little Rock,
Arkansas.  (See Note 12 to the Company’s consolidated financial
statements included in Item 1 of this report).
 
 Equity
in income of Joint Venture
 
 Equity in
income of joint venture increased $22,000 for the three months ended June 30,
2009, versus the prior year’s comparable period  and increased $32,000
for the six months ended June 30, 2009, versus the prior year’s comparable
period due to increased performance of the restaurant during the relevant
periods in 2009.  (See Note 13 to the Company’s consolidated financial
statements included in Item 1 of this report)
 
 Income
(Loss) from Investment Activities
 
 Investment
activities include investment advisory fee income of $83,000 and $185,000 for
the three and six months ended June 30, 2009, respectively, and $0 for the
comparable periods in 2008.  Net realized gains (losses) on sales of
marketable securities were $218,000 and $536,000 for the three and six months
ended June 20, 2009, respectively, and $750 and ($40,000) for the three and six
months ended June 30, 2008.  Net unrealized gains (losses) on
marketable securities held by the limited partnerships, Western Acquisitions,
L.P. and Mustang Capital Advisors, L.P., were $2.0 million and $3.5 million for
the three and six months ended June 30, 2009 and ($2.3 million) and ($6.4
million) for the three and six months ended June 30,
2008.   Amortization expense associated with investment
activities of $34,000 and $ $62,000 were recorded in the three and six months
ended June 30, 2009, respectively, and $0 for the comparable periods in
2008.  Purchase obligation adjustments of ($193,000) and $7,643 were
recorded in the three and months ended June 30, 2009, respectively and $0 for
the comparable periods in 2008. Expenses associated with investment activities
were $144,000 and $264,000 for the three and six months ended June 30, 2009,
respectively, and $468,000 and $969,000 for the three and six months ended June
30, 2008.  The decrease in expenses for the relevant periods in 2009
versus the prior year’s comparable period is attributable to expenses in 2008
associated with the Steak n Shake proxy contest, the ITEX tender offer, and
other investment related activities.  There were no management fees
charged or collected from outside investors by Western Acquisitions LP in first
six months of 2009 or 2008.
 
 Other
Income (Expense)
 
 Interest
expense increased $30 and decreased $23,000 for the three and six months ended
June 30, 2009 over the comparable period in
2008.    Interest income fluctuates according to the levels
of available cash balances.
 
 Other
income increased by $30,000 both for the three and six months ended June 30,
2009 over the comparable periods in 2008.
  24
 Table of Contents
 
 Income
tax expense is directly affected by the levels of pretax income and the
valuation allowance established on deferred tax assets. The Company’s effective
tax rate was 3.0% and 2.6% for the three months ended June 30, 2009 and
2008, respectively and 7.7% and (1.3%) for the six months ended June 30,
2009 and 2008, respectively.  The provisions for deferred income taxes
for the three and six month periods ended June 30, 2009 includes provision
decreases for the valuation allowance of $706,000 and $1,279,000, respectively,
which decreased the Company’s effective tax rate for the periods.
 
 Cash
and Cash Equivalents
 
 As of
June 30, 2009, the Company had $1.25 million of cash and cash equivalents
compared to $331,000 as of December 31, 2008.
 
 Investment
of Available Capital
 
 The
Company’s cash flows from restaurant and franchise activities have exceeded its
working capital, financing and capital investment needs of its restaurant and
franchise operations, and management expects that the Company’s cash flows will
continue to exceed its operating cash needs for the foreseeable
future.  The Company regularly evaluates how best to use available
capital to increase stockholder value.  The Company may pursue
investments in the form of acquisitions, joint ventures and partnerships where
the Company believes attractive returns can be obtained.  Further, the
Company may determine under certain market conditions that available capital is
best utilized to fund investments that it believes offers the Company attractive
return opportunities, whether or not related to its ongoing business
activities.
 
 As
previously discussed in Note 3 to the Company’s consolidated financial
statements included in Item 1 of this report, the Company’s Board of Directors
has delegated authority to direct investment of the Company’s surplus cash to
its Chairman, Sardar Biglari, subject to Board reporting requirements and
various limitations that have been or may be from time to time adopted by the
Board of Directors.  These investments may include significant and
highly concentrated direct investments with respect to the equity securities of
public companies.  Any such investments will involve risks, and
stockholders should recognize that the Company’s balance sheet may change
depending on the performance of investments.  Furthermore, such
investments could be subject to volatility that may affect both the recorded
value of the investments as well as the Company’s periodic
earnings.
 
 Operating
Activities and Cash Flows
 
 The
Company provided approximately $36,000 and used $1.2 million in operating cash
flows for the six months ended June 30, 2009 and 2008, respectively,
including the purchase of marketable securities of $6.7 million and $1.4 million
in the six months ended June 30, 2009 and 2008,
respectively.  Proceeds from sales of marketable securities were $4.9
million and $92,000 for the six months ended June 30, 2009 and 2008,
respectively. Net unrealized gains (losses) on marketable securities were $3.5
million and ($6.4 million) for the six months ended June 30, 2009 and 2008,
respectively. Net realized gains (losses) were $536,000 and ($40,000) for the
six months ended June 30, 2009 and 2008, respectively.  The Company’s
primary source of operating cash flows is the operating profits generated from
Company’s restaurant and franchise operations.  Adjustments to
reconcile net income (loss) to net cash provided by restaurant and franchise
activities were approximately $477,000 and $695,000 for the six months ended
June 30, 2009 and 2008, respectively.  Adjustments to reconcile
net income (loss) to net cash provided by (used in) investment activities were
approximately ($4.6 million) and $3.9 million for the six months ended
June 30, 2009 and 2008, respectively.
 
 Investing
Activities
 
 During
the six months ended June 30, 2009 and 2008, the Company spent $4,600 and
$12,100 on capital expenditures on Company restaurants.
 
 Financing
Activities
 
 The
Company made scheduled payments on long-term debt of $318,000 and $68,000 for
the six months ended June 30, 2009 and 2008,
respectively.  During the first half of 2009, proceeds of $350,000
were received from borrowings on the line of credit and $50,000 of payments were
made on the line of credit.  Also during the first half of 2009, net
capital contributions were received from noncontrolling interests in limited
partnerships of $903,000.  During the same period in 2008, $59,000
were received from the exercise of stock options, proceeds of $2.6 million were
received from the issuance of a note payable, capital contributions of $540,000
were received from minority interests in the limited partnership, and payment of
$2 million was made on the line of credit.
  25
 Table of Contents
 
 Certain
notes payable require pre-payment premiums in certain
circumstances.  In addition, certain notes payable contain certain
restrictive covenants including debt coverage ratios, periodic reporting
requirements and maintenance of operations at certain Company-operated
restaurants that collateralize the notes payable. At June 30, 2009, the
Company was in compliance with all covenants on the notes payable.
 
 Liquidity
 
 The
Company’s primary sources of liquidity are cash generated from operations and,
if needed, borrowings under its existing line of credit. The Company continually
reviews its available financing alternatives.  In addition, the
Company may consider, on an opportunistic basis, strategic decisions to create
value and improve operational performance.
 
 
 CONTRACTUAL
OBLIGATIONS
 
 The table
below sets forth a summary of contractual obligations that will impact future
liquidity as of June 30, 2009:
 
 Payment due by periodContractual Obligations
                  
                  2009
                  
                  
                  2010
                  
                  
                  2011
                  
                  
                  2012
                  
                  
                  2013
                  
                  
                  Thereafter
                  
                  
                  TotalsLong-term
      debt
                  
                  $
                  2,792,547
                  
                  
                  $
                  62,214
                  
                  
                  $
                  134,189
                  
                  
                  $
                  148,342
                  
                  
                  $
                  52,579
                  
                  
                  
                  —
                  
                  
                  $
                  2,889,871Operating
      leases
                  
                  
                  331,734
                  
                  
                  
                  639,880
                  
                  
                  
                  367,611
                  
                  
                  
                  399,171
                  
                  
                  
                  405,086
                  
                  
                  
                  766,908
                  
                  
                  
                  2,910,390Interest
      expense (1)
                  
                  
                  66,483
                  
                  
                  
                  40,459
                  
                  
                  
                  27,655
                  
                  
                  
                  13,501
                  
                  
                  
                  1,101
                  
                  
                  
                  
                  
                  
                  
                  149,199Tax
      obligations (2)
                  
                  
                  10,826
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  10,826Other
      long-termliabilities
      (3)
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  —
                  
                  
                  
                  308,397
                  
                  
                  
                  308,397Totals
                  
                  $
                  3,201,590
                  
                  
                  $
                  742,553
                  
                  
                  $
                  529,455
                  
                  
                  $
                  561,014
                  
                  
                  $
                  458,766
                  
                  
                  $
                  1,075,305
                  
                  
                  $
                  6,568,683
 
 
 (1)
              Reflects
      future interest payments through scheduled maturity dates based upon
      average borrowing rates, outstanding debt balances and scheduled principal
      payments on long-term debt.  Interest on the Company’s variable
      rate debt is based on the interest rate in effect at June 30,
      2009.
 
 (2)
              Reflects
      recognized liabilities for uncertain tax positions under the provision FIN
      48.  (See Note 7 to the Company’s consolidated financial
      statements included in Item 1 of this
report)
 
 (3)
              Reflects
      the cash portion of the Company’s purchase obligation to purchase the
      ownership percentage of the minority interest holder of Mustang Capital
      Advisors, LP.
 
 CRITICAL
ACCOUNTING ESTIMATES
 
 The
discussion and analysis of financial condition and results of operations is
based on the consolidated financial statements and accompanying notes that have
been prepared in accordance with United States generally accepted accounting
principles.  The preparation of these consolidated financial
statements requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the consolidated financial statements and
the reported amounts of revenues and expenses during the reporting
period.  Actual results could differ from those
estimates.
 
 Application
of the critical accounting policies discussed below requires significant
judgments by management, often as a result of the need to make estimates of
matters that are inherently uncertain.  If actual results were to
differ materially from the estimates made, the reported results could be
materially affected.  The Company is not currently aware of any
reasonably likely events or circumstance that would result in materially
different results. The Company’s senior management has reviewed the critical
accounting policies and estimates and the Management’s Discussion and Analysis
regarding them with the Audit and Finance Committee of the Board of
Directors.
  26
 Table of Contents
 
 The
following are areas requiring significant judgments and estimates due to
uncertainties as of the reporting date: trade accounts and notes receivables and
the allowance for doubtful accounts, investments, determination of useful lives
and the evaluation of any impairment of long-lived assets (including franchise
royalty contracts, investment management contracts and limited partnership
agreements, goodwill and property and equipment), commitments and contingencies,
and income taxes.
 
 Trade
Accounts and Notes Receivable and the Allowance for Doubtful
Accounts
 
 The
Company collects royalties, and in some cases rent, from
franchisees.  The Company views trade accounts and notes receivable
and the related allowance for doubtful accounts as a critical accounting
estimate since the allowance for doubtful accounts is based on judgments and
estimates concerning the likelihood that individual franchisees will pay the
amounts included as receivables from them.  In determining the amount
of allowance for doubtful accounts to be recorded for individual franchisees,
the Company considers the age of the receivable, the financial stability of the
franchisee, discussions that may have occurred with the franchisee and a
judgment as to the overall collectability of the receivable from the
franchisee.  In addition, the Company establishes an allowance for all
other receivables for which no specific allowances are deemed
necessary.  If average sales or the financial health of franchisees
were to deteriorate, the Company might have to increase the allowance for
doubtful accounts.
 
 Investments
 
 Marketable
equity securities held by Western Sizzlin Corporation are held for an indefinite
period and thus are classified as available-for-sale. Available-for-sale
securities are recorded at fair value in Investments in Marketable Securities on
the consolidated balance sheet, with the change in fair value during the period
excluded from earnings and recorded net of tax as a component of other
comprehensive income (loss).  Fair value is determined through the use
of quoted market values on national exchanges.  On a quarterly basis,
the Company performs an assessment to determine whether there have been any
events or economic circumstances to indicate that a marketable equity security
with an unrealized loss has suffered other-than-temporary impairment, pursuant
to FSP FAS 115-2 and FAS 124-2.
 
 Western
Acquisitions, LP and Mustang Capital Advisors, LP are, for GAAP purposes,
investment companies under the AICPA Audit and Accounting Guide Investment
Companies.  The Company has retained the specialized accounting
for Western Acquisitions, LP and Mustang Capital Advisors, LP pursuant to EITF
Issue No. 85-12, Retention of Specialized Accounting
for Investments in Consolidation.  As such, marketable equity
securities held by Western Acquisitions, LP and Mustang Capital Advisors, LP are
recorded at fair value in Investments in Marketable Securities, with unrealized
gains and losses resulting from the change in fair value reflected in the
Statement of Operations.  Fair value is primarily determined through
the use of quoted market values on national exchanges.
 
 Long-lived
Assets, Franchise Royalty Contracts and Goodwill
 
 The
Company views the determination of the carrying value of long-lived assets,
franchise royalty contracts, goodwill, investment management contracts and
limited partnership agreements as critical accounting estimates since it must
evaluate the estimated economic useful life in order to properly depreciate or
amortize the long-lived assets, franchise royalty contracts, and investment
management contracts and limited partnership agreements and because it must
consider if the value of any of the long-lived assets have been impaired,
requiring adjustments to the carrying value.  Goodwill is not subject
to amortization but is subject to at least an annual impairment test to
determine if the carrying amount exceeds its fair value.
 
 Economic
useful life is the duration of time the asset is expected to be productively
employed, which may be less than its physical life.  The estimated
economic useful lives of long-lived assets are monitored to determine if they
continue to be appropriate in light of changes in business
circumstances.
 
 The
Company must also consider whether long-lived assets (including property and
equipment and intangible assets) have been impaired to the extent that we must
recognize a loss on such impairment, including goodwill impairment. The Company
evaluates its long-lived assets for impairment at the restaurant, franchise and
investment company levels on an annual basis or whenever changes or events
indicate that the carrying value may not be recoverable. The Company assesses
impairment of each level of assets based on the operating cash flows of the
restaurant, franchise and investment operations and our plans for each
restaurant unit, franchisee contract, or investments. Generally, all units with
negative cash flows from operations for the most recent twelve months at each
quarter end are included in the Company’s assessment. In performing our
assessment, the Company must make assumptions regarding estimated future cash
flows, including estimated proceeds from similar asset sales, and other factors
to determine both the recoverability and the estimated fair value of the
respective assets. If the long-lived assets of a restaurant are not recoverable
based upon estimated future, undiscounted cash flows, the Company writes the
assets down to their fair value. If these estimates or their related assumptions
change in the future, the Company may be required to record additional
impairment charges.
  27
 Table of Contents
 
 The
Company evaluates goodwill for impairment on an annual basis during the fourth
quarter of each year, or more frequently if an event occurs that triggers an
interim impairment test.  The Company determines the fair values of
our reporting units using the discounted cash flow method.  This
method uses projections of cash flows from each of the reporting
units.  Several of the key assumptions in estimating future cash flows
include periods of operations, projections of operating profits, and weighted
average cost of capital.  These assumptions are derived from the
Company’s internal budgets and consideration of available market
data.  The factors which contribute the greatest variability in our
estimates of fair values are the weighted average cost of capital and estimates
of future operating profits.
 
 Purchase
Obligation
 
 In
connection with our acquisition of a controlling interest in Mustang Capital
Advisors, LP and Mustang Capital Management, LLC, the Company is obligated to
purchase the minority interest holders ownership percentage upon the occurrence
of certain events.  The purchase obligation will ultimately be settled
in cash and shares of the Company’s common stock.  The Company is
accounting for this purchase obligation pursuant to Statement of Financial
Accounting Standards No. 150 (As Amended) - Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity.The
resulting liability is reported in other long-term liabilities on the
accompanying financial statements.
 
 Commitments
and Contingencies
 
 The
Company views accounting for contingencies as a critical accounting estimate
since loss contingencies arising from claims, assessments, litigation, fines and
penalties and other sources require judgment as to any probable liabilities
incurred.  Actual results could differ from the expected results
determined based on such estimates.
 
 Income
Taxes
 
 The
Company records valuation allowances against deferred tax assets, when
necessary, in accordance with SFAS No. 109, “Accounting for Income Taxes.”
Realization of deferred tax assets is dependent on future taxable earnings and
is therefore uncertain. The Company assesses the likelihood that deferred tax
assets in each of the jurisdictions in which it operates will be recovered from
future taxable income. Deferred tax assets do not include future tax benefits
that the Company deems likely not to be realized.
 
 In
July 2006, the FASB issued FASB Interpretation Number 48, Accounting for Uncertainty in Income
Taxes, an Interpretation of FASB Statement No. 109,(“FIN
48”).  FIN 48 prescribes a recognition threshold and measurement
attributes for the financial statement recognition and measurement of a tax
position taken in a tax return.  The Company must determine whether it
is “more-likely-than-not” that a tax position will be sustained upon
examination, including resolution of any related appeals or litigation
processes, based on the technical merits of the position.  Once it is
determined that a position meets the more-likely-than-not recognition threshold,
the position is measured to determine the amount of benefit to recognize in the
financial statements.  FIN 48 applies to all tax positions related to
income taxes subject to FASB Statement No. 109.
 
 OTHER
 
 Impact
of Inflation
 
 The
impact of inflation on the costs of food and beverage products, labor and real
estate can affect the Company’s operations.  Management believes the
Company has historically been able to pass on increased costs through certain
selected menu price increases and has offset increased costs by increased
productivity and purchasing efficiencies, but there can be no assurance that the
Company will be able to do so in the future.  Management anticipates
that the average cost of restaurant real estate leases and construction cost
could increase in the future which could affect the Company’s ability to
expand.  In addition, mandated health care or additional increases in
the federal or state minimum wages could significantly increase the Company’s
costs of doing business.
  28
 Table of Contents
 
 Item3.  Quantitative and Qualitative
Disclosure about Market Risk
 
 As of
June 30, 2009, the Company’s financial instruments are not exposed to
significant market risk due to foreign currency exchange
risk.  However, the Company is exposed to market risk related to
changes in market prices of marketable securities, interest rates related to
certain debt obligations, and commodity risks.
 
 Market
Price Risk
 
 The
Company’s marketable securities are currently concentrated in a few investments.
A change in market prices exposes the Company to market risk related to the
investments in marketable securities.  As of June 30, 2009, the
Company held $23 million in available-for-sale marketable securities. A
hypothetical 10% decline in the market value of those securities would result in
$2.3 million of unrealized losses and a corresponding decline in their fair
values at June 30, 2009.  This hypothetical decline would not affect
the Company’s cash flows unless the securities were disposed of.
 
 Interest
Rate Risk
 
 The
Company has exposure to interest rate risk related to certain instruments
entered into for other than trading purposes. Specifically, borrowings under the
loan associated with the Texas land purchase and revolving credit facility bear
interest at variable rates based on the prime rate minus .5%.  The
nature and amount of borrowings under the credit facility may vary as a result
of future business requirements, market conditions and other
factors.
 
 Commodity
Price Risk
 
 The
Company purchases certain food products such as beef, poultry, pork, eggs and
coffee, and utilities such as gas and electricity, which are affected by
commodity pricing and are, therefore, subject to price volatility caused by
weather, production problems, delivery difficulties and other factors that are
outside of the Company’s control and which are generally unpredictable. Changes
in commodity prices affect the Company and competitors generally and often
simultaneously. In general, the Company purchases food products and utilities
based upon market prices established with vendors. Although many of the items
purchased are subject to changes in commodity prices, the majority of our
purchasing arrangements are structured to contain features that minimize price
volatility by establishing fixed pricing and/or price ceilings and floors. The
Company uses these types of purchase arrangements to control costs as an
alternative to using financial instruments to hedge commodity prices. The
Company has determined that our purchasing agreements do not qualify as
derivative financial instruments or contain embedded derivative instruments. In
many cases, the Company believes it will be able to address commodity cost
increases which are significant and appear to be long-term in nature by
adjusting our menu pricing or changing our product delivery strategy. However,
competitive circumstances could limit such actions and, in those circumstances,
increases in commodity prices could lower its margins. Because of the often
short-term nature of commodity pricing aberrations and our ability to change
menu pricing or product delivery strategies in response to commodity price
increases, the Company believes that the impact of commodity price risk is not
significant.
 
 The
Company has established a policy to identify, control and manage market risks
which may arise from changes in interest rates, commodity prices and other
relevant rates and prices.
 
 Item4.  Controls and
Procedures
 
 Evaluation
of Disclosure Controls and Procedures
 
 Based on
an evaluation of the Company’s disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(c) under the Securities Exchange Act
of 1934, as amended),  the Company’s  Chief Executive
Officer and Chief Financial Officer have concluded that its disclosure controls
and procedures were effective as of June 30, 2009.
 
 Changes
in Internal Control Over Financial Reporting
 
 There
have been no changes in its internal control over financial reporting that
occurred during the current quarter ended June 30, 2009 that have materially
affected, or that are reasonably likely to materially affect, the internal
control over financial reporting.
  29
 Table of Contents
 
 PARTII. OTHER INFORMATION
 
 Item1.    Legal
Proceedings
 
 In
addition to those proceedings discussed in Note 12 to the Company’s consolidated
financial statements included in Item 1 of this report, the Company is involved
in various other claims and legal actions which are routine litigation matters
incidental to the business.  In the opinion of the management, the
ultimate disposition of these other matters will not have a material adverse
effect on the Company’s financial condition, results of operations or
liquidity.
 
 Item1A. Risk
Factors
 
 An
investment in the common stock of any company involves a degree of
risk.  Investors should consider carefully the risks and uncertainties
described in the Company’s Annual Report on Form 10-K filed with the SEC,
and those other risks described elsewhere in this report, before deciding
whether to purchase our common stock.  Additional risks and
uncertainties not currently known to us or that we currently deem immaterial may
also become important factors that may harm the Company’s business, financial
condition, and results of operations.  The occurrence of risk factors
could harm the Company’s business, financial condition, and results of
operations for company operations, as well as franchised
operations.  The trading price of the Company’s common stock could
decline due to any of these risks and uncertainties, and stockholders may lose
part or all of their investment.
 
 Item6.    Exhibits:
 
 31.1
                Certification
      of Chief Executive Officer pursuant to
  Rule 13a-14(a).31.2
                Certification
      of Chief Financial Officer pursuant to
  Rule 13a-14(a).32.1
                Certification
      of Chief Executive Officer pursuant to 18 U.S.C.
      Section 1350.32.2
                Certification
      of Chief Financial Officer pursuant to 18 U.S.C.
      Section 1350.
 
 30
 Table of Contents
 
 SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
 
 Western
      Sizzlin CorporationBy:
              /s/
      Sardar BiglariSardar
      BiglariPresident
      and Chief Executive OfficerBy:
              /s/
      Robyn B. MabeRobyn
      B. MabeVice
      President and Chief Financial OfficerDate:
      August 11, 2009
 
 31