**U.S.SECURITIES AND EXCHANGE COMMISSION**

### **Washington,D.C.  20549**

### ** **

**FORM 10-Q**

 

ý** QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**

**SECURITIESEXCHANGE ACT OF 1934**

 

**For the period ended March 31,2004**

 

o** TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE**

**SECURITIESEXCHANGE ACT**

 

#### **For the transitionperiod from                  to                  **

#### ** **

**Commissionfile number 0-25366**

 

**Western Sizzlin Corporation**

(formerly Austins Steak& Saloon, Inc.)

(Exact name ofsmall business issuer as specified in its charter)

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

 

**317Kimball Avenue, N.E.**

**Roanoke,Virginia  24016**

(Address ofprincipal executive offices)

 

**(540)345-3195**

(Issuer’stelephone number)

 

Check whether the issuer(1) filed all reports required to be filed by Section 13 or 15 (d) of theExchange Act during the past 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days. Yes ý  No o

 

Indicate by check markwhether the registrant is an accelerated filer (as defined in Rule 12b-2 of theExchange Act).

Yes oNo ý

 

As of May 17, 2004, therewere 11,908,571 shares of Common stock outstanding.

 

 

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**Western SizzlinCorporation**

**(formerly Austins Steak& Saloon, Inc.)**

**Form 10-Q**

**Three Months EndedMarch 31, 2004**

**Table of Contents**

** **
| **PART  I.  FINANCIAL INFORMATION**                                      |                                                                                                      |
|-------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------|
|                                                                          |                                                                                                      |
| **Item 1.  Financial Statements (Unaudited)**                            |                                                                                                      |
|                                                                          |                                                                                                      |
|                                                                          | Consolidated Balance Sheets  – March 31, 2004 and December 31, 2003                        | 2 |
|                                                                          |                                                                                                      |   |
|                                                                          | Consolidated  Statements of Income - Three Months Ended March 31, 2004 and 2003                      | 3 |
|                                                                          |                                                                                                      |   |
|                                                                          | Consolidated  Statement of Changes in Stockholders’ Equity -  Three Months Ended March 31, 2004 | 4 |
|                                                                          |                                                                                                      |   |
|                                                                          | Consolidated  Statements of Cash Flows - Three Months Ended  March 31, 2004 and 2003                 | 5 |
|                                                                          |                                                                                                      |   |
|                                                                          | Notes to  Consolidated Financial Statements                                                               | 6-11 |
|                                                                          |                                                                                                      |
| **Item  2.  Management’s Discussion and  Analysis of Financial**    |                                                                                                      |
|                                                                          | **Condition  and Results of Operations**                                                                  | 12-16 |
|                                                                          |                                                                                                      |
| **Item  3.  Quantitative and Qualitative  Disclosure about Market Risk** | 16                                                                                                        |
|                                                                          |                                                                                                      |
| **Item 4.  Controls and Procedures**                                     | 16                                                                                                        |
|                                                                          |                                                                                                      |
| **PART II. OTHER INFORMATION**                                                |                                                                                                      |
|                                                                          |                                                                                                      |
| **Item  1.  Legal Proceedings**                                          | 16-17                                                                                                     |
|                                                                          |                                                                                                      |
| **Item  2.  Change in Securities and Use of  Proceeds**                  | 17                                                                                                        |
|                                                                          |                                                                                                      |
| **Item  3.  Defaults Upon Senior Securities**                            | 17                                                                                                        |
|                                                                          |                                                                                                      |
| **Item  4.  Submission of Matters to a Vote of  Security Holders**       | 17                                                                                                        |
|                                                                          |                                                                                                      |
| **Item 5.  Other Information**                                           | 17                                                                                                        |
|                                                                          |                                                                                                      |
| **Item  6.  Exhibits and Reports on Form 8-K**                           | 17                                                                                                        |
|                                                                          |                                                                                                      |
| **Signatures**                                                                | 18                                                                                                        |

 

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**Item 1.  FinancialStatements**

**WESTERN SIZZLINCORPORATION**

**(formerlyAustins Steaks & Saloon, Inc.)**

ConsolidatedBalance Sheets

March 31, 2004 and December 31, 2003

 
|                                                                                                                           |   | **March 31,  2004** |       | **December 31,  2003** |   |
|--------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------|------------|-----------------------------|--------|
|                                                                                                                           |   | **(unaudited)**          |       |                        |   |
| **Assets**                                                                                                                     |   |                     |       |                        |   |
| Current assets:                                                                                                                |   |                     |       |                        |   |
| Cash and cash equivalents                                                                                                      |   | $                        | 1,332,789  |                        | $      | 682,730 |   |
| Short-term investments                                                                                                         |   | 251,426                  |       | 251,426                     |   |
| Trade accounts receivable, less allowance for doubtful  accounts of $354,112 in 2004 and $329,112 in 2003                      |   | 808,630                  |       | 838,931                     |   |
| Current installments of notes receivable                                                                                       |   | 196,106                  |       | 229,273                     |   |
| Other receivables                                                                                                              |   | 48,947                   |       | 43,329                      |   |
| Inventories                                                                                                                    |   | 75,952                   |       | 66,390                      |   |
| Prepaid expenses                                                                                                               |   | 539,055                  |       | 413,824                     |   |
| Deferred income taxes                                                                                                          |   | 382,428                  |       | 382,428                     |   |
| Total current assets                                                                                                           |   | 3,635,333                |       | 2,908,331                   |   |
| Notes receivable, less allowance for doubtful accounts  of $69,645 in 2004 and $69,345 in 2003, excluding current installments |   | 1,189,387                |       | 1,170,804                   |   |
| Property and equipment, net of accumulated  depreciation of $665,018 in 2004 and $527,095 in 2003                              |   | 3,039,199                |       | 3,124,807                   |   |
| Franchise royalty contracts, net of accumulated  amortization of $6,460,527 in 2004 and $6,302,954 in 2003                     |   | 2,993,904                |       | 3,151,477                   |   |
| Goodwill                                                                                                                       |   | 4,310,200                |       | 4,310,200                   |   |
| Financing costs, net of accumulated amortization of  $104,478 in 2004 and $100,100 in 2003                                     |   | 95,732                   |       | 100,110                     |   |
| Deferred income taxes                                                                                                          |   | 1,180,905                |       | 1,280,025                   |   |
| Asset held for sale                                                                                                            |   | 685,761                  |       | 700,278                     |   |
| Other assets                                                                                                                   |   | 37,885                   |       | 148,044                     |   |
|                                                                                                                           |   | $                        | 17,168,306 |                        | $      | 16,894,076 |   |
| **Liabilities and Stockholders’ Equity**                                                                                  |   |                     |       |                        |   |
| Current liabilities:                                                                                                           |   |                     |       |                        |   |
| Current installments of long-term debt                                                                                         |   | 537,414                  |       | 529,645                     |   |
| Accounts payable                                                                                                               |   | 1,172,172                |       | 991,328                     |   |
| Accrued expenses and other                                                                                                     |   | 1,251,370                |       | 1,246,785                   |   |
| Total current liabilities                                                                                                      |   | 2,960,956                |       | 2,767,758                   |   |
| Long-term debt, excluding current installments                                                                                 |   | 3,410,601                |       | 3,548,971                   |   |
| Other long-term liabilities                                                                                                    |   | 107,500                  |       | 50,000                      |   |
| Commitments and contingencies (Note 6)                                                                                         |   |                     |       |                        |   |
| Stockholders’ equity:                                                                                                     |   |                     |       |                        |   |
| Common stock, $.01 par value.  Authorized 20,000,000 shares; 11,908,571  issued and outstanding shares in 2004 and 2003   |   | 119,086                  |       | 119,086                     |   |
| Additional paid-in capital                                                                                                     |   | 8,589,578                |       | 8,589,578                   |   |
| Retained earnings                                                                                                              |   | 1,980,585                |       | 1,818,683                   |   |
| Total stockholders’ equity                                                                                                |   | 10,689,249               |       | 10,527,347                  |   |
|                                                                                                                           |   | $                        | 17,168,306 |                        | $      | 16,894,076 |   |

 

See accompanying notes to consolidated financial statements.

 

2

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**WESTERN SizzliNCORPORATION**

**(formerlyAustins Steaks & Saloon, Inc.)**

ConsolidatedStatements of Income

(Unaudited)

 
|                                 |   | **Three Months  Ended March 31,** |      |
|--------------------------------------|--------|----------------------------------------|-----------|
|                                 |   | **2004**                               |      | **2003** |   |
| Revenues:                            |   |                                   |      |   |   |
| Company-operated restaurants         |   | $                                      | 3,980,245 |   | $ | 3,635,870 |   |
| Franchise operations                 |   | 1,137,397                              |      | 1,163,403 |   |
| Other                                |   | 100,455                                |      | 107,161 |   |
|                                 |   |                                   |      |   |   |
| Total revenues                       |   | 5,218,097                              |      | 4,906,434 |   |
|                                 |   |                                   |      |   |   |
| Costs and expenses:                  |   |                                   |      |   |   |
| Cost of company-operated restaurants |   | 2,722,127                              |      | 2,578,225 |   |
| Cost of franchise operations         |   | 483,726                                |      | 330,855 |   |
| Other cost of operations             |   | 77,753                                 |      | 83,386 |   |
| Restaurant operating expenses        |   | 917,705                                |      | 857,926 |   |
| General and administrative           |   | 415,067                                |      | 518,432 |   |
| Depreciation and amortization        |   | 299,875                                |      | 311,798 |   |
|                                 |   |                                   |      |   |   |
| Total costs and expenses             |   | 4,916,253                              |      | 4,680,622 |   |
|                                 |   |                                   |      |   |   |
| Income from operations               |   | 301,844                                |      | 225,812 |   |
|                                 |   |                                   |      |   |   |
| Other income (expense):              |   |                                   |      |   |   |
| Interest expense                     |   | (100,737                               | )         | (119,299 | ) |
| Interest income                      |   | 19,754                                 |      | 23,565 |   |
| Other                                |   | 40,271                                 |      | 11,212 |   |
|                                 |   |                                   |      |   |   |
|                                 |   | (40,712                                | )         | (84,522 | ) |
|                                 |   |                                   |      |   |   |
| Income before income tax expense     |   | 261,132                                |      | 141,290 |   |
|                                 |   |                                   |      |   |   |
| Income tax expense                   |   | 99,230                                 |      | 54,917 |   |
|                                 |   |                                   |      |   |   |
| Net income                           |   | $                                      | 161,902   |   | $ | 86,373 |   |
|                                 |   |                                   |      |   |   |
| Earnings per share:                  |   |                                   |      |   |   |
| Basic                                |   | .01                                    |      | .01 |   |
| Diluted                              |   | .01                                    |      | .01 |   |

 

See accompanying notes to consolidated financial statements

 

3

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**WESTERN SIZZLINCORPORATION**

**(formerlyAustins Steak & Saloon, Inc.)**

ConsolidatedStatement of Changes in Stockholders’ Equity

Three Months Ended March 31, 2004

 

(Unaudited)

 
|                             |   | **Common Stock** |   | **Additional  Paid-in** |    | **Retained** |   |         |   |
|----------------------------------|--------|------------------|--------|-------------------------|---------|--------------|--------|--------------|--------|
|                             |   | **Shares**       |   | **Dollars**             |    | **Capital**  |   | **Earnings** |   | **Total** |   |
|                             |   |             |   |                    |    |         |   |         |   |   |   |
| Balances, December 31, 2003 |   | 11,908,571       |   | $                       | 119,086 |         | $      | 8,589,578    |   | $ | 1,818,683 |   | $ | 10,527,347 |   |
|                             |   |             |   |                    |    |         |   |         |   |   |   |
| Net income                       |   | —           |   | —                  |    | —       |   | 161,902      |   | 161,902 |   |
| Balances, March 31, 2004    |   | 11,908,571       |   | $                       | 119,086 |         | $      | 8,589,578    |   | $ | 1,980,585 |   | $ | 10,689,249 |   |

 

See accompanying notes to consolidated financial statements.

 

4

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**WESTERN SIZZLINCORPORATION**

**(formerlyAustins Steaks & Saloon, Inc.)**

ConsolidatedStatements of Cash Flows

(Unaudited)

 
|                                                                               |   | **Three-Months Ended  March 31** |      |
|------------------------------------------------------------------------------------|--------|---------------------------------------|-----------|
|                                                                               |   | **2004**                              |      | **2003** |   |
| Cash flows from operating activities:                                              |   |                                  |      |   |   |
|                                                                               |   |                                  |      |   |   |
| Net income                                                                         |   | $                                     | 161,902   |   | $ | 86,373 |   |
| Adjustments to reconcile net income to net cash  provided by operating activities: |   |                                  |      |   |   |
| Depreciation and amortization of property and  equipment                           |   | 137,924                               |      | 142,741 |   |
| Amortization of franchise royalty contracts and  financing costs                   |   | 161,951                               |      | 169,057 |   |
| Loss on sale of property                                                           |   | 484                                   |      | — |   |
| Provision for doubtful accounts                                                    |   | 25,000                                |      | 30,000 |   |
| Provision for deferred income taxes                                                |   | 99,120                                |      | — |   |
| (Increase) decrease in:                                                            |   |                                  |      |   |   |
| Trade accounts receivable                                                          |   | 5,301                                 |      | (143,318 | ) |
| Notes receivable                                                                   |   | 14,584                                |      | 29,211 |   |
| Other receivables                                                                  |   | (5,618                                | )         | 8,872 |   |
| Inventories                                                                        |   | (9,562                                | )         | (4,200 | ) |
| Prepaid expenses                                                                   |   | (125,231                              | )         | (39,086 | ) |
| Income taxes refundable                                                            |   | —                                |      | 23,366 |   |
| Other assets                                                                       |   | 110,159                               |      | (3,057 | ) |
| Increase (decrease) in:                                                            |   |                                  |      |   |   |
| Accounts payable                                                                   |   | 180,844                               |      | 18,705 |   |
| Accrued expenses                                                                   |   | 4,585                                 |      | (88,880 | ) |
| Other long-term liabilities                                                        |   | 57,500                                |      | — |   |
|                                                                               |   |                                  |      |   |   |
| Net cash provided by operating activities                                          |   | 818,943                               |      | 229,784 |   |
|                                                                               |   |                                  |      |   |   |
| Cash flows from investing activities:                                              |   |                                  |      |   |   |
|                                                                               |   |                                  |      |   |   |
| Additions to property and equipment                                                |   | (41,583                               | )         | (7,891 | ) |
| Proceeds from sale of property                                                     |   | 3,300                                 |      | — |   |
|                                                                               |   |                                  |      |   |   |
| Net cash used in investing activities                                              |   | (38,283                               | )         | (7,891 | ) |
|                                                                               |   |                                  |      |   |   |
| Cash flows from financing activities:                                              |   |                                  |      |   |   |
|                                                                               |   |                                  |      |   |   |
| Net decrease in bank overdraft                                                     |   | —                                |      | (332,048 | ) |
| Net decrease in credit line note payable                                           |   | —                                |      | (134,969 | ) |
| Proceeds from note payable                                                         |   | —                                |      | 450,000 |   |
| Payments on long-term debt                                                         |   | (130,601                              | )         | (122,650 | ) |
|                                                                               |   |                                  |      |   |   |
| Net cash used in financing activities                                              |   | (130,601                              | )         | (139,667 | ) |
|                                                                               |   |                                  |      |   |   |
| Net increase in cash and cash equivalents                                          |   | 650,059                               |      | 82,226 |   |
|                                                                               |   |                                  |      |   |   |
| Cash and cash equivalents at beginning of period                                   |   | 682,730                               |      | 131,631 |   |
|                                                                               |   |                                  |      |   |   |
| Cash and cash equivalents at end of period                                         |   | $                                     | 1,332,789 |   | $ | 213,857 |   |

 

See accompanying notes to consolidated financial statements.

 

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**WESTERNSIZZLIN CORPORATION**

**(formerlyAustins Steaks & Saloon, Inc.)**

 

Notes toConsolidated Financial Statements

 

Three Months EndedMarch 31, 2004 and 2003

 

(Unaudited)

 

**(1)****                                 General**

 

The accompanyingunaudited consolidated financial statements of Western Sizzlin Corporation,formerly Austins Steaks & Saloon, Inc., (the “Company”) have been preparedin accordance with accounting principles generally accepted in the UnitedStates of America for interim financial reporting information and the instructionsto Form 10-Q and Article 10 of Regulation S-X.  Accordingly, they do not include all of the information and notesrequired by accounting principles generally accepted in the United States ofAmerica for complete financial statements. In the opinion of management, all material reclassifications andadjustments, consisting of normal recurring accruals, considered necessary fora fair presentation of the results of operations, financial position and cashflows for each period shown have been included.  Operating results for interim periods are not necessarilyindicative of the results for the full year because, among other things, thedining habits of the Company’s customers cannot be certain.  The unaudited consolidated financialstatements and notes are presented as permitted by Form 10-Q and do not containcertain information included in the Company’s annual consolidated financialstatements and notes.  For furtherinformation, refer to the consolidated financial statements and notes theretoincluded in the Company’s annual report on Form 10-K for the year endedDecember 31, 2003.

 

**Recently Issued Accounting Standards**

 

InJanuary 2003, the Financial Accounting Standards Board (“FASB”) issued FIN46, “Consolidation of Variable Interest Entities – an interpretation ofAccounting Research Bulletin (“ARB”) No. 51”. This Interpretation isintended to clarify the application of the majority voting interest requirementof ARB No. 51, “Consolidated Financial Statements”, to certain entities inwhich equity investors do not have the characteristics of a controllingfinancial interest or do not have sufficient equity at risk for the entity tofinance its activities without additional subordinated financial support fromother parties. The controlling financial interest may be achieved througharrangements that do not involve voting interests.

 

Subsequentto issuing FIN 46, the FASB issued FIN 46 (revised) (“FIN 46R”), which replacesFIN 46. Among other things, FIN 46R clarified and changed the definition andapplication of a number of provisions of FIN 46 including de facto agents,variable interests and variable interest entity (“VIE”). FIN 46R also expandedinstances when FIN 46 should not be applied. FIN 46R was issuedDecember 23, 2003 and, for the Company, is effective no later than the endof the first quarter of 2004. FIN 46R may be applied prospectively with acumulative-effect adjustment as of the date on which it is first applied or byrestating previously issued financial statements for one or more years with acumulative-effect adjustment as of the beginning of the first year restated.

 

The Company has a votinginterest in WSI ADRF, Inc. (“ADRF”), an entity formed to develop national,regional and local advertising campaigns and materials for the benefit of theCompany’s franchised and company-owned restaurants.  The company-owned restaurants and substantially all of itsfranchisees are members of ADRF and therefore are required to remit a monthlypayment to ADRF.  These fees, along withcontributions received from certain of the Company’s vendors, are used by ADRFto develop and produce advertising and related materials for the company-ownedrestaurants and the franchisees.  Totalrevenues of ADRF were approximately $582,000 for the year ended December 31,2003.

 

TheCompany determined that ADRF is a variable interest entity but that neither theCompany nor its company-owned stores are the primary beneficiary of ADRF andthat the Company is not obligated to absorb the losses of ADRF, if any.  Accordingly, the results of ADRF are notconsolidated with the Company.   TheCompany’s maximum exposure to loss as a result of its involvement with ADRF islimited to reimbursement of the costs of providing certain personnel

 

6

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andspace to ADRF.  The fee charged to ADRFfor these services was $36,000 for each of the 3-month periods endedMarch 31, 2004 and 2003.

 

As of March 31,2004, there are no other new accounting standards issued, but not yet adoptedby the Company, which are expected to be applicable to the Company’sconsolidated financial position, operating results or financial statementdisclosures.

 

**(2)****                                 StockOptions**

 

The Company applies theintrinsic-value-based method of accounting prescribed by Accounting PrinciplesBoard (APB) Opinion No. 25, *Accounting for Stock Issued to Employees,*and related interpretations including Financial Accounting Standards Board(FASB) Interpretation No. 44,*Accounting for Certain Transactions involving StockCompensation, an interpretation of APB Opinion No. 25*, issued inMarch 2000, to account for its fixed-plan stock options. Under thismethod, compensation expense is recorded on the date of grant only if thecurrent market price of the underlying stock exceeded the exercise price.  SFAS No. 123, *Accounting for Stock-BasedCompensation,* established accounting and disclosure requirementsusing a fair-value-based method of accounting for stock-based employeecompensation plans.  As allowed by SFASNo. 123, the Company has elected to continue to apply the intrinsic-value-basedmethod of accounting described above, and had adopted only the disclosurerequirements of SFAS No. 123.  SFAS No.148, *Accountingfor Stock-Based Compensation – Transition and Disclosure, an amendment of SFASNo. 123,* amends the disclosure requirements of SFAS No.123 torequire prominent disclosures in both annual and interim financial statementsabout the method of accounting for stock-based compensation and the effect ofthe method on reported results.  TheCompany had no grants of stock options for the three-month periods endedMarch 31, 2004 and 2003.

 

The following tableillustrates the effect on net income if the fair-value-based method had beenapplied to all outstanding  and unvestedawards in each period.

 
|                                                                                                                                                  |   | **2004** |    | **2003** |   |
|-------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|---------|----------|--------|
|                                                                                                                                                  |   |     |    |     |   |
| Net Income                                                                                                                                            |   |     |    |     |   |
| As reported                                                                                                                                           |   | $        | 161,902 |     | $      | 86,373 |   |
| Deduct total stock-based employee compensation expense  determined under fair-value based method for all outstanding and unvested  awards, net of tax |   | (4,007   | )       | —   |   |
|                                                                                                                                                  |   |     |    |     |   |
| Pro forma                                                                                                                                             |   | $        | 157,895 |     | $      | 86,373 |   |
|                                                                                                                                                  |   |     |    |     |   |
| Basic and diluted net income per share                                                                                                                |   |     |    |     |   |
| As reported                                                                                                                                           |   | $        | 0.01    |     | $      | 0.01 |   |
| Pro forma                                                                                                                                             |   | $        | 0.01    |     | $      | 0.01 |   |

 

**(3)****         Goodwilland Other Intangible Assets**

 

The Company conforms tothe provisions of Statement of Financial Accounting Standards (SFAS) No. 142,“Goodwill and Other Intangible Assets.” Under SFAS No. 142, goodwill and intangible

 

7

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assets deemed to haveindefinite lives are reviewed for impairment and written down and charged toresults of operations when their carrying amount exceeds their estimated fairvalue. The Company is required to perform impairment tests each year, orbetween yearly tests in certain circumstances, for goodwill. There can be no assurancethat future impairment tests will not result in a charge to earnings.

 

Therewere no changes in the net carrying amount of goodwill for the three monthsended March 31, 2004 or the three-months ended March 31, 2003.

 

*Amortizing Intangible Assets*

 

Franchiseroyalty contracts are amortized on a straight-line basis over fifteen years,the estimated average life of the franchise agreements.  The Company assesses the recoverability ofthis intangible asset by determining whether the amortization of the franchiseroyalty contracts balance over their remaining life can be recovered throughundiscounted future operating cash flows of the acquired operation.  The amount of impairment, if any, ismeasured based on projected discounted future operating cash flows using adiscount rate reflecting the Company’s average cost of funds.

 
|                          |   |                        |      | **As of March 31,  2004**             |      |                          |   |
|-------------------------------|--------|-----------------------------|-----------|--------------------------------------------|-----------|-------------------------------|--------|
|                          |   | **Gross  carrying  amount** |      | **Weighted average  Amortization  Period** |      | **Accumulated  Amortization** |   |
| Amortizing intangible assets: |   |                        |      |                                       |      |                          |   |
| Franchise Royalty Contracts   |   | $                           | 9,454,431 |                                       | 15.0 yrs. |                          | $      | 6,460,527 |   |
|                               |        |                             |           |                                            |           |                               |        |  |  |

 

Aggregate amortizationexpense for amortizing intangible assets for the three-month period endedMarch 31, 2004 was $157,573. Estimated amortization expense is $630,295 per year throughDecember 31, 2009.

 

**(4)****                                 EarningsPer Share**

 

Basic earnings per shareexcludes dilution and is computed by dividing income available to commonstockholders by the weighted-average number of common shares outstanding forthe period.  Diluted earnings per share reflectsthe potential dilution that could occur if securities or other contracts toissue common stock were exercised or converted into common stock or resulted inthe issuance of common stock that then shared in the earnings of the Company.  Stock options for 128,595 shares of commonstock were not included in computing diluted earnings per share for the threemonth periods ended March 31, 2004 and 2003 because the effect of theseoptions is anti-dilutive.

 

8

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The following is a reconciliation of the numerators and denominators ofthe basic and diluted earnings per share computations for the periodsindicated:

 
|                                       |   | **Income**      |    | **Weighted  Average  Shares** |       | **Earnings  Per Share  Amount** |   |
|--------------------------------------------|--------|-----------------|---------|-------------------------------|------------|---------------------------------|--------|
|                                       |   | **(Numerator)** |    | **(Denominator)**             |       |                            |   |
| **Three-months ended March 31, 2004** |   |            |    |                          |       |                            |   |
| Net income - basic and diluted             |   | $               | 161,902 |                          | 11,908,571 |                            | $      | .01 |   |
|                                       |   |            |    |                          |       |                            |   |
| **Three-months ended March 31, 2003** |   |            |    |                          |       |                            |   |
| Net income - basic and diluted             |   | $               | 86,373  |                          | 12,150,099 |                            | $      | .01 |   |

 

**(5)****                                 ReportableSegments**

 

The Company has defined two reportable segments: Company-operatedrestaurants and franchising and other. The Company-operated restaurant segment consists of the operations ofall Company-operated restaurants and derives its revenues from restaurantoperations.  The franchising and othersegment consists primarily of franchise sales and support activities andderives its revenues from sales of franchise and development rights andcollection of royalties from franchisees. Generally, the Company evaluatesperformance and allocates resources based on income from operations beforeincome taxes. Administrative and capital costs are allocated to segments basedupon predetermined rates or actual or estimated resource usage.

 

Reportable segments are business units that provide different productsor services.  Separate management ofeach segment is required because each business unit is subject to differentoperational issues and strategies. Through March 31, 2004, all revenues for each business segment werederived from business activities conducted with customers located in the UnitedStates.  No single external customeraccounted for 10 percent or more of the Company’s consolidated revenues.

 

The following tablesummarizes reportable segment information:

 

9

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|                                     |   | **Three Months  Ended March 31,** |      |
|------------------------------------------|--------|----------------------------------------|-----------|
|                                     |   | **2004**                               |      | **2003** |   |
|                                     |   |                                   |      |   |   |
| Revenues from reportable segments:       |   |                                   |      |   |   |
| Restaurants                              |   | $                                      | 3,980,245 |   | $ | 3,635,870 |   |
| Franchising and other                    |   | 1,237,852                              |      | 1,270,564 |   |
|                                     |   |                                   |      |   |   |
| Total revenues                           |   | $                                      | 5,218,097 |   | $ | 4,906,434 |   |
|                                     |   |                                   |      |   |   |
| Depreciation and amortization:           |   |                                   |      |   |   |
| Restaurants                              |   | $                                      | 126,372   |   | $ | 128,324 |   |
| Franchising and other                    |   | 173,503                                |      | 183,474 |   |
| Total depreciation and amortization      |   | $                                      | 299,875   |   | $ | 311,798 |   |
|                                     |   |                                   |      |   |   |
| Interest expense:                        |   |                                   |      |   |   |
| Restaurants                              |   | $                                      | 100,517   |   | $ | 112,941 |   |
| Franchising and other                    |   | 220                                    |      | 6,358 |   |
|                                     |   |                                   |      |   |   |
| Total interest expense                   |   | $                                      | 100,737   |   | $ | 119,299 |   |
|                                     |   |                                   |      |   |   |
| Interest income:                         |   |                                   |      |   |   |
| Restaurants                              |   | $                                      | 18,714    |   | $ | 22,843 |   |
| Franchising and other                    |   | 1,040                                  |      | 722 |   |
| Total interest income                    |   | $                                      | 19,754    |   | $ | 23,565 |   |
|                                     |   |                                   |      |   |   |
| Income (loss) before income tax expense: |   |                                   |      |   |   |
| Restaurants                              |   | $                                      | 57,039    |   | $ | (145,348 | ) |
| Franchising and other                    |   | 204,093                                |      | 286,638 |   |
|                                     |   |                                   |      |   |   |
| Total income before income tax expense   |   | $                                      | 261,132   |   | $ | 141,290 |   |

 
|                                |   | **March 31,  2004** |      | **March 31,  2003** |   |
|-------------------------------------|--------|--------------------------|-----------|--------------------------|--------|
| Gross fixed assets:                 |   |                     |      |                     |   |
| Restaurants                         |   | $                        | 6,554,742 |                     | $      | 6,531,194 |   |
| Franchising and other               |   | 1,267,618                |      | 1,448,915                |   |
|                                |   |                     |      |                     |   |
| Total gross fixed assets            |   | $                        | 7,822,360 |                     | $      | 7,980,109 |   |
|                                |   |                     |      |                     |   |
| Expenditures for fixed assets:      |   |                     |      |                     |   |
| Restaurants                         |   | $                        | 41,583    |                     | $      | 7,891 |   |
| Franchising and other               |   | —                   |      | —                   |   |
|                                |   |                     |      |                     |   |
| Total expenditures for fixed assets |   | $                        | 41,583    |                     | $      | 7,891 |   |

 

**(6)****                                 Contingencies**

 

In January 2001, theCompany executed a series of Master Lease Agreements (“Agreements”) relating tocertain franchised properties formerly operated by other parties as “Quincy’s”restaurants (“Former Quincy’s”).  Signedcopies of these Agreements were required, pursuant to the terms of thedocument, to be executed by Franchise Financing Corporation of America, nowknown as General Electric Franchise Finance Corporation, (the “Lessor”), to belegally binding; however, no signed copies were ever returned to theCompany.  At the end ofJanuary 2002, there remained only 25 Former Quincy’s operated by Companyfranchisees, the Lessor having taken back, in 2001 and 2002, other restaurantspreviously operated by Company franchisees. The Agreements, incomplete for a lack of signature by the Lessor,provided for rental payments from the Company to the Lessor.  However, the cost of any rental payments waspassed on to the franchisees operating the properties.  On May 15, 2003, the Company sent a letterto the Lessor, providing notice of the Company’s termination of any tenanciesat-will on any remaining Former Quincy’s units effective May 31, 2003.  No response has ever been received fromLessor.

 

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The Company intends tovigorously contest any potential claims asserted by General Electric FranchiseFinance Corporation.  While the Companyhas previously engaged in discussions with the Lessor of the properties toresolve any rental payments claimed by the Lessor under the Agreements, it isnot possible at this time to determine the outcome of these discussions.

 

On March 16, 2004,the Company and Kenneth Greenway settled all existing litigation related to alease dispute. Under the settlement agreement, the Company made a cash paymentof $110,000 and issued a $115,000 note to Mr. Greenway payable monthly overtwenty-four months, plus interest at 2.5%. The Company had accrued $225,000 as of December 31, 2003.  As a result of this settlement, both partiesreceived a final release from all claims under the original lease agreements.

 

The Company is aguarantor of a lease agreement in Lincoln, Nebraska, with monthly rentals ofapproximately $8,200.  The leaseagreement, which runs through February 2014, was assigned by the Companyto a third party in March 1998 and subsequently by the third party toanother party.

 

The assignees apparentlyhave failed to make recent monthly rental, property tax, and associationpayments on the premises.  The Landlordhas taken possession of the premises and is obligated to, and is attempting to,find a replacement tenant.

 

In November 2003,the Company was served with a complaint filed in the District Court ofLancaster County, Nebraska alleging default under various terms and provisionsof the lease agreement and seeking collection of approximately $43,000 inunpaid rent, ad valorem real estate taxes and neighborhood associationassessments as of that date.  TheCompany has asserted a claim against the assignees for any accrued but unpaidobligations under the lease and guaranty for which the Company may be foundliable.  Accordingly, the Company fileda cross-claim against its assignee and a Third-Party Complaint against asubsequent assignee. The litigation is currently in the pretrial discoveryphase and motions for summary judgements have been filed by the plaintiffagainst all defendants, by the Company against its assignee and subsequentassignee, and by the Company’s assignee against its assignee. The Plaintiff hasindicated that he would completely release the defendants for payment of$125,000.  In light of ongoing settlementdiscussions, the Company has accrued $50,000 as of March 31, 2004.  The Company’s maximum exposure throughFebruary 2014 includes rent of approximately $1 million plus any unpaidproperty taxes and association dues.

 

During 2003, the Companywas notified of a claim by MBM Distributors (MBM) involving alleged amountsowed by the Company to MBM.  MBM hasfiled suit in Federal District Court in North Carolina and has recently servedthe Company with that complaint.  Thecomplaint seeks damages in an amount in excess of $800,000.  The Company believes it has factual andlegal defenses to most, if not all, of the claim and is prepared to defend thisaction vigorously.  While the Companybelieves it has a substantial likelihood of prevailing, MBM and the Companycontinue to discuss an informal resolution.

 

The Company is involvedin various other claims and legal actions arising in the ordinary course ofbusiness.  In the opinion of themanagement, the ultimate disposition of these matters will not have a materialadverse effect on the Company’s financial condition, results of operations orliquidity.

 

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**Item2.****           Management’sDiscussion and Analysis of Financial Condition and Results of Operations**

 

**Overview**

 

From time to time, theCompany may publish forward-looking statements relating to certain matters,including anticipated financial performance, business prospects, the futureopening of Company-operated and franchised restaurants, anticipated capitalexpenditures, and other matters.  Allstatements other than statements of historical fact contained in the Form 10-Qor in any other report of the Company are forward-looking statements.  The Private Securities Litigation Reform Actof 1995 provided a safe harbor for forward-looking statements.  In order to comply with the terms of thatsafe harbor, the Company notes that a variety of factors, individually or inthe aggregate, could cause the Company’s actual results and experience todiffer materially from the anticipated results or other expectations expressedin the Company’s forward-looking statements including, without limitation, thefollowing: the ability of the Company or its franchises to obtain suitablelocations 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’soperating regions; laws and government regulations; general business andeconomic conditions; availability of capital; success of operating initiativesand marketing and promotional efforts; and changes in accounting policies.  In addition, the Company disclaims anyintent or obligation to update those forward-looking statements.

 

The Company operated andfranchised a total of 166 restaurants located in 22 states, including 7Company-owned and 159 franchise restaurants as of March 31, 2004.  The restaurants include a family steakhouseconcept, a steak and buffet concept, and the casual dining steakhouse concept.

 

###### **Results of Operations**

###### ** **

Netincome for the three-month period ended March 31, 2004 was $161,902compared to net income of $86,373 for the three-month period endedMarch 31, 2003.

 

The following table setsforth for the periods presented the percentage relationship to total revenuesof certain items included in the consolidated statements of income and certainrestaurant data for the periods presented:

 
|                                 |   | **Three-Months  Ended March 31,** |   |
|--------------------------------------|--------|----------------------------------------|--------|
|                                 |   | **2004**                               |   | **2003** |   |
| Revenues:                            |   |                                   |   |   |   |
| Company-operated restaurants         |   | 76.3                                   | %      | 74.1 | % |
| Franchise royalties and fees         |   | 21.8                                   |   | 23.7 |   |
| Other sales                          |   | 1.9                                    |   | 2.2 |   |
| Total revenues                       |   | 100.0                                  |   | 100.0 |   |
|                                 |   |                                   |   |   |   |
| Cost of company-operated restaurants |   | 52.2                                   |   | 52.5 |   |
| Cost of franchise operations         |   | 9.3                                    |   | 6.7 |   |
| Other cost of operations             |   | 1.5                                    |   | 1.7 |   |
| Restaurant operating expenses        |   | 17.6                                   |   | 17.5 |   |
| General and administrative           |   | 8.0                                    |   | 10.6 |   |
| Depreciation and amortization        |   | 5.6                                    |   | 6.4 |   |
| Total costs and expenses             |   | 94.2                                   |   | 95.4 |   |
|                                 |   |                                   |   |   |   |
| Income from operations               |   | 5.8                                    |   | 4.6 |   |
|                                 |   |                                   |   |   |   |
| Other income (expense)               |   | (0.8                                   | )      | (1.7 | ) |
|                                 |   |                                   |   |   |   |
| Income before income tax expense     |   | 5.0                                    |   | 2.9 |   |
|                                 |   |                                   |   |   |   |
| Income tax expense                   |   | 1.9                                    |   | 1.1 |   |
| Net income                           |   | 3.1                                    | %      | 1.8 | % |

 

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|                                    |   | **Three-Months  Ended March 31,** |   |
|-----------------------------------------|--------|----------------------------------------|--------|
|                                    |   | **2004**                               |   | **2003** |   |
| **Restaurant Data**                     |   |                                   |   |   |   |
| Number of Company-Operated Restaurants: |   |                                   |   |   |   |
| Beginning of period                     |   | 7                                      |   | 7 |   |
| Opened                                  |   | —                                 |   | — |   |
| Closed                                  |   | —                                 |   | — |   |
| Franchised                              |   | —                                 |   | — |   |
| End of period                           |   | 7                                      |   | 7 |   |
|                                    |   |                                   |   |   |   |
| Number of U.S. Franchised Restaurants:  |   |                                   |   |   |   |
| Beginning of period                     |   | 161                                    |   | 186 |   |
| Opened                                  |   | 1                                      |   | — |   |
| Closed                                  |   | (3                                     | )      | (12 | ) |
| End of period                           |   | 159                                    |   | 174 |   |

 

**Revenues**

 

Company-operatedrestaurant revenues increased $344,000 (8.7%) to $4.0 million for thethree-months ended March 31, 2004 as compared to $3.6 million for thecomparable three-month period ended March 31, 2003, due to same storesales increases of 9.47%.  The Companyrestaurants implemented menu price increases effective January 1,2004.  Customer counts increased 2.78%over the prior period.

 

Franchiseand other revenues decreased 2.6% to $1.2 million for the three-months endedMarch 31, 2004 as compared to $1.3 million for the comparable three-monthperiod ended March 31, 2003.  Thedecrease is attributable to fewer franchised units in the system at March 31,2004 as compared to March 31, 2003. System-wide sales for the franchise system for the three-months endedMarch 31, 2004 were $56.7 million. Same store sales for the three-months ended March 31, 2004increased 4.52% over 2003.  The majorityof the units that closed had annual sales volumes of $1.1 million or less.

 

###### **Costsand Expenses**

###### ** **

Costof company-operated restaurants, consisting primarily of food, beverage, andemployee costs increased $144,000 (5.6%) to $2.7 million for the three-monthsended March 31, 2004 from $2.6 million for the three-months endedMarch 31, 2003.  These costsdecreased as a percentage of total revenues from 52.5% in 2003 to 52.2 % in2004.   The increase in the costs wereattributable to increase in food costs due to commodity increases offset bydecreases in labor costs by monitoring staffing requirements more efficiently.

 

Costof franchise operations and other cost of operations was $561,000 (10.8%) forthe three-months ended March 31, 2004 compared to $414,000 (8.4%) in 2003.The increase is attributable to increased personnel costs largely associatedwith the Company’s Chief Executive Officer position being filled July 1,2003.  The position was vacant the firstsix-months of 2003.

 

Restaurantoperating expenses, which include utilities, insurance, maintenance, rent andother such costs of the company-operated restaurants, increased $60,000 (7.0%)for the three-month period ended March 31, 2004 versus the prior year’scomparable period. These expenses as a percentage of total revenues decreasedslightly to 17.3% in 2004 compared to 17.5% in 2003 for the

 

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comparableperiod, due to the relation of the revenue increase to the restaurant operatingexpense increase over the comparable periods.

 

Forthe three months ended March 31, 2004 and 2003, general and administrativeexpenses were $415,000 and $518,000, respectively and as a percentage of totalrevenue were 8.0% and 10.6%, respectively. The decrease is primarily due toinvestment banker consulting fees and also legal fees associated withlitigation matters during the first quarter of 2003.

 

Depreciationand amortization expense was $11,923 (4.0%) less for the three-months endedMarch 31, 2004 versus the three-month period ended March 31, 2003.

 

**Other Income (Expense)**

 

Interest expensedecreased $18,562 for the three-months ended March 31, 2004 versus thethree-month period ended March 31, 2003 due to a lower average principaloutstanding balance as well as lower interest rates in 2004.  Interest income fluctuates according to thelevels of available cash balances.  TheCompany employs a cash management system whereby available balances areinvested on an overnight basis.

 

Income tax expense isdirectly affected by the levels of pretax income. The Company’s effective taxrate was 38.0% and 38.9% for the three-month periods ended March 31, 2004and 2003, respectively.

 

###### **Liquidityand Capital Resources**

###### ** **

As is customary in therestaurant industry, the Company has historically operated with negativeworking capital.  Historically, theCompany has leased the majority of its restaurants and through a strategy ofcontrolled growth has financed operations from operating cash flows, theutilization of the Company’s line of credit and long-term debt provided byvarious lenders.  The Company has apositive working capital of $649,000 and $141,000 at March 31, 2004 andDecember 31, 2003, respectively.

 

Cash flows provided byoperating activities were $819,000 in 2004 compared to $230,000 in 2003. During2004, cash flows provided by operating activities were primarily due to netincome of $162,000 and depreciation and amortization of $300,000, decrease inother assets of $110,000 due to sale of an asset, a note payable of $115,000issued related to a litigation settlement, increase in accounts payables andaccrued expenses of $128,000 offset by increases in prepaid expenses of$125,000. During 2003, cash flows provided by operations were primarily due tonet income of $86,000 and depreciation and amortization of $312,000 offset byincrease in trade accounts receivable. Net cash used in investing activities of$38,000 in 2004 and $8,000 in 2003, was for capital expenditures related toproperty and equipment.  Net cash usedin financing activities of $131,000 in 2004 was for payments on long-termdebt.  During 2003, the cash used infinancing activities was primarily due to payments of long-term debt, decreasesin bank overdraft and credit line, offset by loan proceeds of $450,000.

 

Management believes thatthe Company’s short-term cash requirements will include settlements related tocertain legal proceedings, capital contribution related to a planned jointventure for development of a buffet concept restaurant, and capitalimprovements to Company-operated restaurants.

 

The Company utilizes itsexisting line of credit to provide short-term funding in addition to cash fromoperations.  Management reviewsavailable financing alternatives to provide cash for future expansion,restructure existing debt, and provide additional working capital; however, managementbelieves existing financing will provide adequate funding for cashrequirements.

 

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# **CRITICALACCOUNTING POLICIES**

 

## **Franchise Revenue**

##  

Initialfranchise fees are recognized when all material services have beensubstantially performed by the Company and the restaurant has opened forbusiness.  Franchise royalties, whichare based on a percentage of monthly sales, are recognized as income on theaccrual basis.  Costs associated withfranchise operations are recognized on the accrual basis.

 

## **Accounts and Notes Receivable andAllowance for Doubtful Accounts**

##  

Inconnection with franchise fees charged to our franchisees, we have accounts andnotes receivable outstanding from our franchisees at any given time.  We review outstanding accounts and notesreceivable monthly and record allowances for doubtful accounts as deemedappropriate for certain individual franchisees.  In determining the amount of allowance for doubtful accounts tobe recorded, we consider the age of the receivable, the financial stability ofthe franchisee, discussions that may have been had with the franchisee and ourjudgement as to the overall collectibility of the receivable from thatfranchisee.

 

**Franchise Royalty Contracts**

 

Franchiseroyalty contracts are amortized on a straight-line basis over fifteen years,the estimated average life of the franchise agreements.  The Company assesses the recoverability ofthis intangible asset by determining whether the amortization of the franchiseroyalty contracts balance over their remaining life can be recovered throughundiscounted future operating cash flows of the acquired operation.  The amount of impairment, if any, ismeasured based on projected discounted future operating cash flows using adiscount rate reflecting the Company’s average cost of funds.

 

**Goodwill**

 

Goodwill represents theexcess of purchase price over fair value of net assets of businessesacquired.  The Company applies theprovisions of Statement of Financial Accounting Standards (SFAS) No. 142, *Goodwill andOther Intangible Assets*. Goodwill and intangible assets acquired in a purchase businesscombination and determined to have an indefinite useful life are not amortized,but instead tested for impairment at least annually in accordance with theprovisions of SFAS No. 142.

 

###### **Impactof Inflation**

###### ** **

Theimpact of inflation on the costs of food and beverage products, labor and realestate can affect the Company’s operations. Over the past few years, inflation has had a lesser impact on theCompany’s operations due to the lower rates of inflation in the nation’seconomy and economic conditions in the Company’s market areas.

 

Managementbelieves the Company has historically been able to pass on increased coststhrough certain selected menu price increases and has offset increased costs byincreased productivity and purchasing efficiencies, but there can be noassurance that the Company will be able to do so in the future.  Management anticipates that the average costof restaurant real estate leases and construction cost could increase in thefuture which could affect the Company’s ability to expand.  In addition, mandated health care oradditional increases in the federal or state minimum wages could significantlyincrease the Company’s costs of doing business.

 

##### **Impactof Recently Issued Accounting Standards**

#####  

In January 2003, theFASB issued Interpretation No. 46 *Consolidation of Variable Interest Entities, aninterpretation of ARB No. 51. *ThisInterpretation addresses the consolidation by business enterprises of variableinterest entities as defined in the Interpretation.  The Interpretation applies immediately to variable interestentities created after January 31, 2003, and to variable interests invariable interest entities obtained after January 31, 2003.  The application of this

 

15

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Interpretation did nothave any impact on the Company’s consolidated financial position, results ofoperations or cash flows of the Company. See Note 1 to the Company’sconsolidated financial statements, which are included in Item 1., Part I. for adiscussion of Interpretation No. 46.

 

As of March 31,2004, there are no other new accounting standards issued, but not yet adoptedby the Company, which are expected to be applicable to the Company’sconsolidated financial position, operating results or financial statementdisclosures.

 

**Item 3.****           Quantitativeand Qualitative Disclosure about Market Risk**

 

The Company does notengage in derivative financial instruments or derivative commodityinstruments.  As of March 31, 2004,the Company’s financial instruments are not exposed to significant market riskdue to foreign currency exchange risk. The Company is exposed to market risk related to interest rates, as wellas increased prices in restaurant industry commodities such as beef.

 

Thetable below provides information about the Company’s debt obligations that aresensitive to changes in interest rates. The table presents principal cash flows and related weighted averageinterest rates by expected maturity dates.

 

Debtobligations held for other than trading purposes at March 31, 2004(dollars in thousands):

 

#### **EXPECTEDMATURITY DATE**

 
|                   |   | **2004** |   | **2005** |   | **2006** |   | **2007** |   | **2008** |   | **Thereafter** |   | **Total** |   | **Estimated  Fair Value** |   |
|------------------------|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------|--------|----------------|--------|-----------|--------|---------------------------|--------|
| Long-term  debt        |   |     |   |     |   |     |   |     |   |     |   |           |   |      |   |                      |   |
| Fixed  Rate            |   | $        | 414    |     | $      | 505      |   | $        | 522    |     | $      | 361            |   | $         | 337    |                      | $      | 1,809 |   | $ | 3,948 |   | $ | 3,973 |   |
| Average  Interest Rate |   | 9.93     | %      | 9.94     | %      | 9.94     | %      | 10.02    | %      | 10.06    | %      | 10.07          | %      | 10.00     | %      |                      |   |
|                        |        |          |        |          |        |          |        |          |        |          |        |                |        |           |        |                           |        |  |  |  |  |  |  |  |  |

 

**Item 4.****           Controlsand Procedures**

 

As required by Rule 13a-15under the Securities Exchange Act of 1934, as amended (the “Exchange Act”),within the 90 days prior to the filing date of this report, the Company carriedout an evaluation of the effectiveness of the design and operation of theCompany’s disclosure controls and procedures. This evaluation was carried out under the supervision and with theparticipation of the Company’s management, including the Company’s ChiefExecutive Officer and Company’s Chief Financial Officer.  Based upon that evaluation, the ChiefExecutive Officer and Chief Financial Officer concluded that the Company’sdisclosure controls and procedures are effective.  There have been no significant changes in the Company’s internalcontrols, or in other factors, which could significantly affect internalcontrols subsequent to the date the Company carried out its evaluation.

 

Disclosure controls andprocedures are controls and other procedures that are designed to ensure thatinformation required to be disclosed in Company reports filed or submittedunder the Exchange Act is recorded, processed, summarized and reported withinthe time periods specified in the Securities and Exchange Commission’s rulesand forms. Disclosure controls and procedures include, without limitation,controls and procedures designed to ensure that information required to bedisclosed in Company reports filed under the Exchange Act is accumulated andcommunicated to management, including the Company’s President and ChiefExecutive Officer and the Vice President and Chief Financial Officer, asappropriate, to allow timely decisions regarding required disclosure.

 

# **PART II. OTHER INFORMATION**

# ** **

Item 1.             LegalProceedings

 

The Company is involvedin various other claims and legal actions arising in the ordinary course ofbusiness.  In the opinion of themanagement, the ultimate disposition of these matters will not have a materialadverse effect on the Company’s financial condition, results of operations or

 

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liquidity.  For additional discussion, see Note 6 to theCompany’s consolidated financial statements, which are included in Item 1.,Part I.

 

Item 2.             Change in Securities and Use ofProceeds – N/A

 

Item 3.             Defaults Upon Senior Securities –N/A

 

Item 4.             Submission of Matters to a Vote ofSecurity Holders – N/A

 

Item 5.             OtherInformation – N/A

 

Item 6.             Exhibits and Reports on Form 8-K –

 

a)              Exhibits:

31.1         Section 302Certificate of Chief Executive Officer

31.2         Section 302Certificate of Chief Financial Officer

32.1         Section 906 Officer’sCertification

32.2         Section 906Officer’s Certification

 

b)             Reports on Form 8-K

8-K – FiledFebruary 27, 2004

8-K/A – FiledMarch 5, 2004

 

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# **SIGNATURES**

 

Pursuantto the requirements of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned hereuntoduly authorized.

 

 
|                     |   | **Western Sizzlin Corporation**                         |
|--------------------------|--------|---------------------------------------------------------|
|                     |   | (formerly Austins  Steaks & Saloon, Inc.)           |
|                     |   |                                                    |
|                     |   | By:                                                     | /s*/   James C. Verney* |   |
|                     |   |   James C.  Verney                            |
|                     |   |   President  and Chief Executive Officer      |
|                     |   |                                                    |
|                     |   | By:                                                     | */s/  Robyn B. Mabe* |   |
|                     |   |   Robyn B.  Mabe                              |
|                     |   |   Vice  President and Chief Financial Officer |
|                     |   |                                                    |
| Date:  May 17, 2004 |   |                                                    |
|                          |        |                                                         |  |  |  |  |

 

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