** **

**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

** **

**FORM 10-Q**

** **

| **(Mark One)**                                                                                                                                                                            |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                                      |   |
| **x**                                                                                                                                                                                     | **QUARTERLY REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF  1934** |
| ** **                                                                                                                                                                                | ** ** |
| **For the quarterly  period ended March 31, 2008, or**                                                                                                                               |
| ** **                                                                                                                                                                                | ** ** |
| **o**                                                                                                                                                                                     | **TRANSITION REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF  1934** |
| ** **                                                                                                                                                                                | ** ** |
| **For the transition  period from                            to** |

** **

**Commission file number 0-25366**

** **

**Western Sizzlin Corporation**

(Exact Name ofRegistrant as Specified in Its Charter)

 
| **Delaware**                                                       | ** ** | **86-0723400**                        |
|--------------------------------------------------------------------|------------|---------------------------------------|
| (State or Other  Jurisdiction of Incorporation or Organization)    |       | (I.R.S. Employer  Identification No.) |
|                                                               |       |                                  |
| **416  South Jefferson Street, Suite 600, Roanoke, Virginia** | ** ** | **24011**                             |
| (Address of Principal  Executive Offices)                          |       | (Zip Code)                            |

 

**(540)345-3195**

(Registrant’sTelephone Number Including Area Code)

 

Indicate by check mark whether the registrant: (1) hasfiled all reports required to be filed by Section 13 or 15 (d) of theSecurities Exchange Act of 1934 during the preceding 12 months (or for suchshorter period that the registrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past 90 days.  Yes x  No o

 

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

 
| Large accelerated filer  o                     |   | Accelerated filer o          |
|------------------------------------------------|--------|-----------------------------------|
|                                           |   |                              |
| Non-accelerated  filer  x                 |   | Smaller reporting  company o |
| (Do not check if a  smaller reporting company) |   |                              |

 

Indicate by check markwhether the registrant is a shell company (as defined in Rule 12b-2 of theExchange Act). o Yes xNo

 

As of May 15, 2008,there were 2,696,625 sharesof common stock outstanding.

 

 

----

 

**WesternSizzlin Corporation**

** **

**Form 10-QThree Months Ended March 31, 2008Table of Contents**

 
| ** **                                                                                                     | **Page**   |
|----------------------------------------------------------------------------------------------------------------|------------|
| ** **                                                                                                     | ** ** |
| **PART I. FINANCIAL  INFORMATION**                                                                        | ** ** |
| ** **                                                                                                     | ** ** |
| **Item 1. Financial  Statements (Unaudited)**                                                                  | ** ** |
|                                                                                                           |       |
| Consolidated Balance  Sheets — March 31, 2008 and December 31, 2007                             | 3          |
|                                                                                                           |       |
| Consolidated  Statements of Operations — Three Months Ended March 31, 2008 and 2007                  | 4          |
|                                                                                                           |       |
| Consolidated  Statement of Changes in Stockholders’ Equity — Three Months Ended  March 31, 2008 | 5          |
|                                                                                                           |       |
| Consolidated  Statements of Cash Flows — Three Months Ended March 31, 2008 and 2007                  | 6          |
|                                                                                                           |       |
| Notes to  Consolidated Financial Statements                                                                    | 7-15       |
| ** **                                                                                                     | ** ** |
| **Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of  Operations**       | 16-23      |
| ** **                                                                                                     | ** ** |
| **Item 3.  Quantitative and Qualitative Disclosure about Market Risk**                                         | 23-24      |
| ** **                                                                                                     | ** ** |
| **Item 4T. Controls  and Procedures**                                                                          | 25         |
| ** **                                                                                                     | ** ** |
| **PART II. OTHER  INFORMATION**                                                                           | ** ** |
| ** **                                                                                                     | ** ** |
| **Item 1. Legal Proceedings**                                                                                  | 25         |
| ** **                                                                                                     | ** ** |
| **Item 1.A. Risk Factors**                                                                                     | 25         |
| ** **                                                                                                     | ** ** |
| **Item 4.  Submission of Matters to a Vote of Security Holders**                                               | 25-26      |
| ** **                                                                                                     | ** ** |
| **Item 6. Exhibits**                                                                                           | 26         |
| ** **                                                                                                     | ** ** |
| **Signatures**                                                                                                 | 27         |
| ** **                                                                                                     | ** ** |
| **Exhibit Index**                                                                                         | 28         |

 

2

----

 

** **

**PART I. FINANCIAL INFORMATIONWESTERN SIZZLIN CORPORATION**

** **

**Consolidated Balance Sheets**

**March 31,2008 and December 31, 2007**

 
| ** **                                                                                                                                                          | ** ** | **March 31,  2008** | ** ** | **December 31,  2007** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                                                          | ** ** | **(unaudited)**          | ** ** | ** **                  | ** ** |
| **Assets**                                                                                                                                                          | ** ** | ** **               | ** ** | ** **                  | ** ** |
| Current assets:                                                                                                                                                     |       |                     |       |                        |       |
| Cash and cash equivalents                                                                                                                                           |       | $                        | 765,929    |                        | $          | 727,378 |   |
| Trade accounts receivable, net of allowance for doubtful accounts of  $224,957 in 2008 and $198,425 in 2007                                                         |       | 940,826                  |       | 994,085                     |       |
| Current installments of notes receivable, less allowance for impaired  notes of $58,622 in 2008 and $50,904 in 2007                                                 |       | 212,246                  |       | 219,501                     |       |
| Other receivables                                                                                                                                                   |       | 70,250                   |       | 132,283                     |       |
| Income taxes receivable                                                                                                                                             |       | 126,089                  |       | 90,161                      |       |
| Inventories                                                                                                                                                         |       | 85,424                   |       | 73,017                      |       |
| Prepaid expenses                                                                                                                                                    |       | 231,486                  |       | 228,396                     |       |
| Deferred income taxes                                                                                                                                               |       | 409,620                  |       | 404,334                     |       |
| Total current assets                                                                                                                                                |       | 2,841,870                |       | 2,869,155                   |       |
| Notes receivable, less allowance for impaired notes receivable of  $11,283 in 2008 and $15,501 in 2007, excluding current installments                              |       | 588,235                  |       | 625,231                     |       |
| Property and equipment,  net                                                                                                                                        |       | 1,776,430                |       | 1,877,694                   |       |
| Investment in real estate                                                                                                                                           |       | 3,745,152                |       | 3,745,152                   |       |
| Investments in marketable  securities                                                                                                                               |       | 12,351,542               |       | 15,896,865                  |       |
| Franchise royalty contracts, net of accumulated amortization of  $8,981,709 in 2008 and $8,824,135 in 2007                                                          |       | 472,722                  |       | 630,296                     |       |
| Goodwill                                                                                                                                                            |       | 4,310,200                |       | 4,310,200                   |       |
| Financing costs, net of  accumulated amortization of $193,637 in 2008 and $192,832 in 2007                                                                          |       | 6,574                    |       | 7,378                       |       |
| Investment in  unconsolidated joint venture                                                                                                                         |       | 350,988                  |       | 304,996                     |       |
| Deferred income taxes                                                                                                                                               |       | 401,379                  |       | 235,655                     |       |
| Other assets                                                                                                                                                        |       | 6,105                    |       | 6,450                       |       |
|                                                                                                                                                                |       | $                        | 26,851,197 |                        | $          | 30,509,072 |   |
| **Liabilities and Stockholders’ Equity**                                                                                                                       | ** ** | ** **               | ** ** | ** **                  | ** ** |
| Current liabilities:                                                                                                                                                |       |                     |       |                        |       |
| Note payable — line of credit                                                                                                                                  |       | $                        | —     |                        | $          | 2,000,000 |   |
| Due to broker                                                                                                                                                       |       | —                   |       | 342,022                     |       |
| Current installments of long-term debt                                                                                                                              |       | 101,848                  |       | 118,783                     |       |
| Current installment of long-term debt, secured by land held for  investment                                                                                         |       | 264,122                  |       | —                      |       |
| Accounts payable                                                                                                                                                    |       | 830,474                  |       | 733,983                     |       |
| Accrued expenses and other                                                                                                                                          |       | 1,217,317                |       | 1,283,237                   |       |
| Total current liabilities                                                                                                                                           |       | 2,413,761                |       | 4,478,025                   |       |
|                                                                                                                                                                |       |                     |       |                        |       |
| Long-term debt, excluding  current installments                                                                                                                     |       | 539,895                  |       | 566,272                     |       |
| Long-term debt, secured by  land held for investment, excluding current installments                                                                                |       | 2,377,098                |       | —                      |       |
| Other long-term  liabilities                                                                                                                                        |       | 93,318                   |       | 89,039                      |       |
|                                                                                                                                                                |       | 5,424,072                |       | 5,133,336                   |       |
|                                                                                                                                                                |       |                     |       |                        |       |
| Minority interest                                                                                                                                                   |       | 1,822,533                |       | 1,873,748                   |       |
| Commitments and  contingencies                                                                                                                                      |       |                     |       |                        |       |
| Stockholders’ 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 4,000,000 shares;  issued and outstanding 2,696,625 in 2008 and 2007                                                |       | 26,967                   |       | 26,967                      |       |
| Additional paid-in capital                                                                                                                                          |       | 20,415,785               |       | 20,415,785                  |       |
| Retained earnings (accumulated deficit)                                                                                                                             |       | (872,806                 | )          | 2,978,189                   |       |
| Accumulated other comprehensive income — unrealized holding gains,  net of taxes                                                                               |       | 34,646                   |       | 81,047                      |       |
| Total stockholders’ equity                                                                                                                                     |       | 19,604,592               |       | 23,501,988                  |       |
|                                                                                                                                                                |       | $                        | 26,851,197 |                        | $          | 30,509,072 |   |

 

Seeaccompanying notes to consolidated financial statements.

 

3

----

 

**WESTERNSIZZLIN CORPORATION**

** **

**ConsolidatedStatements of Operations**

**Three Months Ended March 31,2008 and 2007**

**(Unaudited)**

** **
| ** **                                                                  | ** ** | **Three Months Ended** | ** ** |
|-----------------------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                                  | ** ** | **March 31,**     | ** ** |
| ** **                                                                  | ** ** | **2008**               | ** ** | **2007** | ** ** |
| Revenues:                                                                   |       |                   |       |   |   |
| Company-operated restaurants                                                |       | $                      | 3,126,110  |   | $ | 3,048,300 |   |
| Franchise operations                                                        |       | 1,049,141              |       | 1,081,390 |   |
|                                                                        |       |                   |       |   |   |
| Total revenues                                                              |       | 4,175,251              |       | 4,129,690 |   |
|                                                                        |       |                   |       |   |   |
| Costs and expenses —  restaurant and franchise operations:             |       |                   |       |   |   |
| Company-operated restaurants — food, beverage and labor costs          |       | 2,310,888              |       | 2,263,659 |   |
| Restaurant occupancy and other                                              |       | 559,938                |       | 602,966 |   |
| Franchise operations — direct support                                  |       | 304,535                |       | 274,450 |   |
| Subleased restaurant property expenses                                      |       | 27,303                 |       | 19,644 |   |
| Corporate expenses                                                          |       | 484,250                |       | 388,603 |   |
| Depreciation and amortization expense                                       |       | 265,002                |       | 265,934 |   |
| Claims settlement and legal fees associated with lawsuit                    |       | 137,784                |       | 14,459 |   |
| Total costs and expenses — restaurant and franchise operations         |       | 4,089,700              |       | 3,829,715 |   |
|                                                                        |       |                   |       |   |   |
| Equity in income of joint  venture                                          |       | 45,992                 |       | 13,702 |   |
| Income from restaurant and franchise operations                             |       | 131,543                |       | 313,677 |   |
|                                                                        |       |                   |       |   |   |
| Net realized loss on sales  of marketable securities                        |       | (40,606                | )          | — |   |
| Net unrealized losses on  marketable securities held by limited partnership |       | (4,162,663             | )          | — |   |
| Expenses of investment  activities, including interest of $23,808 in 2008   |       | (500,267               | )          | (61,897 | ) |
| Loss from investment activities                                             |       | (4,703,536             | )          | (61,897 | ) |
|                                                                        |       |                   |       |   |   |
| Other income (expense):                                                     |       |                   |       |   |   |
| Interest expense                                                            |       | (38,447                | )          | (20,324 | ) |
| Interest income                                                             |       | 20,864                 |       | 16,578 |   |
| Other, net                                                                  |       | 602                    |       | 3,697 |   |
| Total other income (expense), net                                           |       | (16,981                | )          | (49 | ) |
|                                                                        |       |                   |       |   |   |
| Income (loss) before income tax expense and minority interest               |       | (4,588,974             | )          | 251,731 |   |
|                                                                        |       |                   |       |   |   |
| Income tax expense (benefit):                                               |       |                   |       |   |   |
| Current                                                                     |       | (4,194                 | )          | 9,927 |   |
| Deferred                                                                    |       | (142,571               | )          | 91,847 |   |
| Total income tax expense (benefit)                                          |       | (146,765               | )          | 101,774 |   |
| Minority interest in net  loss of limited partnership                       |       | 591,214                |       | — |   |
| Net income (loss)                                                           |       | $                      | (3,850,995 | ) | $ | 149,957 |   |
|                                                                        |       |                   |       |   |   |
| Earnings (loss) per share  (basic and diluted):                             |       |                   |       |   |   |
| Net income (loss)                                                           |       | $                      | (1.43      | ) | $ | .08 |   |

** **

**Seeaccompanying notes to consolidated financial statements.**

 

4

----

 

** **

**WESTERNSIZZLIN CORPORATION**

** **

**ConsolidatedStatement of Changes in Stockholders’ EquityThree Months Ended March 31, 2008(Unaudited)**

** **
| ** **                                                  | ** ** | **Common Stock** | ** ** | ** **  | ** ** | **Retained**                     | ** ** | **Accumulated**                      | ** ** | ** **                       | ** ** |
|-------------------------------------------------------------|------------|-----------------------|------------|-------------|------------|----------------------------------|------------|--------------------------------------|------------|----------------------------------|------------|
| ** **                                                  | ** ** | **Shares**            | ** ** | **Dollars** | ** ** | **Additional  Paid-in  Capital** | ** ** | **Earnings  (Accumulated  Deficit)** | ** ** | **Other  Comprehensive  Income** | ** ** | **Total** | ** ** |
| Balances,  December 31, 2007                           |       | 2,696,625             |       | $           | 26,967     |                             | $          | 20,415,785                           |       | $                                | 2,978,189  |   | $ | 81,047 |   | $ | 23,501,988 |   |
| Net loss                                                    |       |                  |       |        |       |                             |       | (3,850,995                           | )          |                             |       | (3,850,995 | ) |
| Change in unrealized holding gains, net of taxes of $28,439 |       |                  |       |        |       |                             |       |                                 |       | (46,401                          | )          | (46,401 | ) |
| Comprehensive loss                                          |       |                  |       |        |       |                             |       |                                 |       |                             |       | (3,897,396 | ) |
| Balances, March 31,  2008                              |       | 2,696,625             |       | $           | 26,967     |                             | $          | 20,415,785                           |       | $                                | (872,806)  |   | $ | 34,646 |   | $ | 19,604,592 |   |

 

Seeaccompanying notes to consolidated financial statements.

 

5

----

 

**WESTERN SIZZLIN CORPORATION**

 

**Consolidated Statements of Cash Flows**

**ThreeMonths Ended March 31, 2008 and 2007**

**(Unaudited)**

** **

** **
| ** **                                                                            | ** ** | **Three Months Ended** | ** ** |
|---------------------------------------------------------------------------------------|------------|------------------------|------------|
| ** **                                                                            | ** ** | **March 31**      | ** ** |
| ** **                                                                            | ** ** | **2008**               | ** ** | **2007** | ** ** |
| Cash flows from operating  activities:                                                |       |                   |       |   |   |
|                                                                                  |       |                   |       |   |   |
| Net income (loss)                                                                     |       | $                      | (3,850,995 | ) | $ | 149,957 |   |
|                                                                                  |       |                   |       |   |   |
| Adjustments to reconcile  net income (loss) to net cash used in operating activities: |       |                   |       |   |   |
|                                                                                  |       |                   |       |   |   |
| Restaurant and franchise activities:                                                  |       |                   |       |   |   |
| Depreciation and amortization of property and equipment                               |       | 106,278                |       | 107,317 |   |
| Amortization of franchise royalty contracts and other assets                          |       | 157,574                |       | 157,574 |   |
| Amortization of finance costs                                                         |       | 805                    |       | 1,041 |   |
| Provision for doubtful accounts                                                       |       | 30,000                 |       | 30,000 |   |
| Equity in income of unconsolidated joint venture                                      |       | (45,992                | )          | (13,702 | ) |
| Share-based compensation                                                              |       | —                 |       | 5,920 |   |
| Provision for deferred income taxes (benefit)                                         |       | (173,000               | )          | 91,847 |   |
| (Increase) decrease in current assets and other assets                                |       | 78,461                 |       | (219,200 | ) |
| Increase in current liabilities and other liabilities                                 |       | 110,533                |       | 6,462 |   |
|                                                                                  |       | 264,659                |       | 167,259 |   |
| Investment activities:                                                                |       |                   |       |   |   |
| Realized losses on sales of marketable securities, net                                |       | 40,606                 |       |   |   |
| Unrealized losses on marketable securities, net                                       |       | 4,162,663              |       | — |   |
| Minority interest in net loss of limited partnership                                  |       | (591,214               | )          | — |   |
| Proceeds from sales of marketable securities                                          |       | 70,809                 |       | — |   |
| Purchase of marketable securities                                                     |       | (803,595               | )          | (384,244 | ) |
| Decrease in due to broker                                                             |       | (342,022               | )          | — |   |
| Provision for deferred income taxes                                                   |       | 30,429                 |       | — |   |
| Decrease in current liabilities                                                       |       | (75,683                | )          | — |   |
|                                                                                  |       | 2,491,993              |       | (384,244 | ) |
|                                                                                  |       |                   |       |   |   |
| Net cash used in operating activities                                                 |       | (1,094,343             | )          | (67,028 | ) |
|                                                                                  |       |                   |       |   |   |
| Cash flows from investing  activities:                                                |       |                   |       |   |   |
| Repayments on advances to joint venture                                               |       | —                 |       | 25,400 |   |
| Additions to property and equipment                                                   |       | (5,014                 | )          | (1,433 | ) |
| Net cash provided by (used in) investing activities                                   |       | (5,014                 | )          | 23,967 |   |
|                                                                                  |       |                   |       |   |   |
|                                                                                  |       |                   |       |   |   |
| Cash flows from financing  activities:                                                |       |                   |       |   |   |
| Cash received from exercise of stock options                                          |       | —                 |       | 17,000 |   |
| Proceeds from issuance of long-term debt                                              |       | 2,641,220              |       | — |   |
| Payments on long-term debt                                                            |       | (43,312                | )          | (39,264 | ) |
| Payments on line of credit borrowings                                                 |       | (2,000,000             | )          | — |   |
| Capital contributions from minority interests in limited partnership                  |       | 540,000                |       | — |   |
|                                                                                  |       |                   |       |   |   |
| Net cash provided by (used in) financing activities                                   |       | 1,137,908              |       | (22,264 | ) |
|                                                                                  |       |                   |       |   |   |
| Net increase (decrease) in cash and cash equivalents                                  |       | 38,551                 |       | (65,325 | ) |
|                                                                                  |       |                   |       |   |   |
| Cash and cash equivalents  at beginning of the period                                 |       | 727,378                |       | 2,344,644 |   |
|                                                                                  |       |                   |       |   |   |
| Cash and cash equivalents  at end of the period                                       |       | $                      | 765,929    |   | $ | 2,279,320 |   |
|                                                                                  |       |                   |       |   |   |
| Supplemental disclosure of  cash flow information:                                    |       |                   |       |   |   |
| Cash payments for interest                                                            |       | $                      | 62,615     |   | $ | 20,651 |   |
| Adoption of FIN-48 (non-cash)                                                         |       | $                      | —     |   | $ | 118,675 |   |
| Income taxes paid, net of refunds                                                     |       | $                      | 31,734     |   | $ | 2,485 |   |

 

See accompanying notes toconsolidated financial statements.

 

6

----

 

** **

**WESTERNSIZZLIN CORPORATION**

** **

Notes to Consolidated Financial Statements

Three Months Ended March 31, 2008 and 2007

(Unaudited)

 

**(1)****                                ****Introduction and Basis ofPresentation**

 

**Western Sizzlin Corporation is aholding company which owns a number of subsidiaries, with its primary businessactivities conducted through Western Sizzlin Franchise Corporation and WesternSizzlin Stores, Inc, which franchise and operate restaurants. Financialdecisions are centralized at the holding company level, and management of operatingbusinesses is decentralized at the business unit level. The Company’s primeobjective centers on achieving above-average returns on capital in pursuit ofmaximizing the eventual net worth of its stockholders. While the Company hashistorically been principally engaged, and intends at this time to remainprincipally engaged, in franchising and operating restaurants, it has recentlymade selective investments in other companies. At March 31, 2008, the Company had 115 franchised, 5Company-operated and 1 joint venture restaurant operating in 20 states.**

** **

**The consolidated financialstatements include the accounts of Western Sizzlin Corporation and itswholly-owned subsidiaries, Western Sizzlin Franchise Corporation, The WesternSizzlin 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., and asolely-owned limited partnership, Western Real Estate, L.P. (collectively theCompany). All significant intercompany accounts and transactions have beeneliminated in consolidation**.

** **

The accompanyingunaudited consolidated financial statements of Western Sizzlin Corporation,(the “Company”) have been prepared in accordance with accounting principlesgenerally accepted in the United States of America for interim financialreporting information and the instructions to Form 10-Q and Article 10of Regulation S-X.  Accordingly, they donot include all of the information and notes required by accounting principlesgenerally accepted in the United States of America for complete financialstatements.  In the opinion ofmanagement, all material reclassifications and adjustments, consisting ofnormal recurring accruals, considered necessary for a fair presentation of theresults of operations, financial position and cash flows for each period shownhave been included. The unaudited consolidated financial statements and notesare presented as permitted by Form 10-Q and do not contain certaininformation included in the Company’s annual consolidated financial statementsand notes.  For further information,refer to the consolidated financial statements and notes thereto included inthe Company’s annual report on Form 10-K for the year ended December 31,2007.

 

Certainreclassifications have been made to the 2007 consolidated statements ofoperations to place it on a basis comparable with 2008 information.

 

**(2)****                                ****Summary of Significant AccountingPolicies**

 

Effective January 1,2008, the Company adopted Statement of Financial Accounting Standards No. 159(“SFAS 159”), *The Fair Value Option for Financial Assetsand Financial Liabilities*. SFAS 159 permits entities to choose to measure many financialinstruments and certain other items at fair value. We did not elect the fairvalue reporting option for any assets and liabilities not previously recordedat fair value.

 

Effective January 1,2008, the Company adopted the provisions of Statement of Financial AccountingStandards  No. 157 (“SFAS 157”), *Fair Value Measures,*applicable to allfinancial assets and liabilities and for nonfinancial assets and liabilitiesrecognized or disclosed at fair value in the consolidated financial statementson a recurring basis (at least annually). SFAS 157 defines fair value asthe exchange price that would be received for an asset or paid to transfer aliability (an exit price) in the principal or most advantageous market for theasset or liability in an orderly transaction between market participants on themeasurement date. The standard also establishes a fair value hierarchy whichrequires an entity to maximize the use of observable inputs and minimize theuse of unobservable inputs when measuring fair value. SFAS 157 describesthree levels of inputs that may be used to measure fair value:

 

7

----

 

 
| **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 March 31, 2008,the Company’s investments in marketable securities are carried at fair value,based on quoted market prices, in the consolidated balance sheets andclassified within Level 1 of the fair value hierarchy.

 

There have been no othermaterial changes to the Company’s significant accounting policies and estimatesfrom the information provided in Form 10-K for the fiscal year ended December 31,2007.

 

**(3)****                                ****Stock Options**

 

TheCompany has three stock option plans: the 2005 Stock Option Plan, the 2004Non-Employee Directors’ Stock Option Plan, and the 1994 Incentive andNon-qualified Stock Option Plan. Options are no longer granted under the 1994Plan and only 7,500 options granted to James C. Verney remain outstanding underthat plan.  Under the 2005 and 2004Plans, employees and directors may be granted options to purchase shares ofcommon stock at the fair market value on the date of the grant.  During the year ended December 31, 2006,under the provisions of the plans, the contract terms of stock options forresigning directors were reduced and have been reflected in the computations ofthe weighted average contractual term of the outstanding options.  Since this modification did not increase thevalue of the awards, the modification had no impact on compensationexpense.  On February 10, 2007, theCompany received a letter from Sardar Biglari, Chairman and Chief ExecutiveOfficer, stating his desire not to receive future stock option grants under the2004 Non-Employee Directors’ Stock Option Plan and to cancel all stock optionspreviously granted to him.  The Companyhas complied with the request.  There wasno material financial statement impact in canceling previously granted stockoptions.

 

Optionsgranted under the 2005 and 2004 Plans vest at the date of the grant.  The fair value of each option award isestimated on the date of grant using the Black-Scholes option-pricing model.Assumptions utilized in the model are evaluated and revised, as necessary, toreflect market conditions and experience on the respective dates of grant. Therisk-free interest rate for periods within the contractual life of the optionis based on the U.S. Treasury yield curve in effect at the time of thegrant.  Expected volatilities are basedon the historical volatility of the Company’s stock for a period equal to theexpected term of the options.  Theexpected term of the options represents the period of time that options grantedare outstanding and is estimated using historical exercise and terminationexperience.

 

Priorto the adoption of SFAS No. 123R, the benefit of tax deductions in excessof recognized stock compensation expense was reported as a reduction of taxespaid within operating cash flows.  SFAS No. 123Rrequires that such benefits be recognized as a financing cash flow.  The benefits of tax deductions in excess ofrecognized stock compensation expense for the three months ended March 31,2008 and 2007 were immaterial.

 

There were 1,000 stockoptions granted during the three month period ended March 31, 2007, all atan estimated fair value of $5.92.  Therewere no stock options granted during the three month period ended March 31,2008.

 

Thefair values of options granted during the three months ended March 31,2007 were estimated on the date of grant using the Black-Scholes option pricingmodel based on the following weighted average assumptions in the table below:

 

| Expected term (years)   |   | 5      |   |
|-------------------------|--------|--------|--------|
| Risk-free interest rate |   | 4.50   | %      |
| Volatility              |   | 78.83  | %      |
| Dividend yield          |   | — |   |

 

The following tablesummarizes stock options outstanding as of March 31, 2008, as well asactivity during the three month period then ended:

 

8

----

 

| ** **                       | ** ** | **Options  Outstanding** | ** ** | **Exercise Price  Per Share  Weighted  Average** | ** ** | **Contractual  Term  Weighted  Average** | ** ** | **Aggregate  Intrinsic  Value** | ** ** |
|----------------------------------|------------|--------------------------|------------|------------------------------------------------------------|------------|------------------------------------------|------------|---------------------------------|------------|
| Balance,  December 31, 2007 |       | 36,000                   |       | $                                                          | 7.10       |                                     | 5.85       |                            | $          | 374,264 |   |
| Granted                          |       | —                   |       | —                                                     |       | —                                   |       | —                          |       |
| Exercised                        |       | —                   |       | —                                                     |       | —                                   |       | —                          |       |
| Expired/Forfeited                |       | —                   |       | —                                                     |       | —                                   |       | —                          |       |
| Balance,  March 31, 2008    |       | 36,000                   |       | $                                                          | 7.10       |                                     | 5.60       |                            | $          | 313,064 |   |

 

All options outstandingat March 31, 2008 are fully vested and exercisable.  At March 31, 2008, there were 40,000shares available for future grants under the plans, however, on April 25,2007, the Company’s Board of Directors elected to suspend future grants underall plans indefinitely.

 

**(4)****                                ****Investments in MarketableSecurities**

 

Allinvestment and capital allocation decisions are made by Mr. SardarBiglari, the Company’s Chairman and Chief Executive Officer, under limitedauthority delegated by the Board of Directors. The delegated authority includes the authority to borrow funds inconnection with making investments in marketable securities or derivativesecurities, subject to Board reporting requirements and variouslimitations.  As of the date of thisfiling, Mr. Biglari has authority to manage surplus cash up to $10million, and in addition, has authority to borrow a maximum of $5 million.  The Company has a margin securities accountwith a brokerage firm. The margin account bears interest at the Federal FundsTarget Rate quoted by the Wall Street Journal, plus .5%, or approximately 2.50%as of the date of this report, with the minimum and maximum amount of anyparticular loan to be determined by the brokerage firm, in its discretion, fromtime to time.  The collateral securingthe margin loans would be the Company’s holdings in marketable securities.  The minimum and maximum amount of anyparticular margin may be established by the brokerage firm, in its discretion,regardless of the amount of collateral delivered to the brokerage firm, and thebrokerage firm may change such minimum and maximum amounts from time to time.

 

Marketableequity securities held by Western Sizzlin Corporation are held for anindefinite period and thus are classified as available-for-sale.Available-for-sale securities are recorded at fair value in Investments inMarketable Securities on the consolidated balance sheet, with the change infair value during the period excluded from earnings and recorded, net of tax,as a component of other comprehensive income.

 

Followingis a summary of marketable equity securities held by Western SizzlinCorporation as of March 31, 2008 and December 31, 2007:

 

| ** **                | ** ** | **Cost** | ** ** | **Gross Unrealized  Gains** | ** ** | **Gross Unrealized  Losses** | ** ** | **Fair Value** | ** ** |
|---------------------------|------------|----------|------------|-----------------------------|------------|------------------------------|------------|----------------|------------|
| March 31,  2008:     |       | $        | 605,689    |                        | $          | 54,004                       |       | $              | —     |   | $ | 659,693 |   |
|                      |       |     |       |                        |       |                         |       |           |       |
| December   31, 2007: |       | $        | 605,689    |                        | $          | 128,845                      |       | $              | —     |   | $ | 734,534 |   |

 

Therewere no realized gains or losses from marketable equity securities held by WesternSizzlin Corporation for the three months ended March 31, 2008 and 2007.

 

InApril 2007, the Company formed Western Investments, Inc., a Delawarecorporation and wholly-owned subsidiary to serve as the general partner ofWestern Acquisitions, L.P., a Delaware limited partnership that operates as aprivate investment fund.  Through WesternInvestments, Inc., Mr. Biglari operates as the portfolio manager tothe fund.  During the third quarter of2007, the Company contributed cash along with its holdings in the common stockof The Steak n Shake Company to Western Investments, Inc., which in turncontributed these assets to Western Acquisitions, L.P.  During the third and fouth quarters of the yearended December 31, 2007, cash contributions from outside investors of$2,225,000 were made to the limited partnership.  During the quarter ended March 31, 2008,cash contributions from outside investors of $540,000 were made to the limitedpartnership.

 

Asof March 31, 2008, Western Investments, Inc. owned 84.60% of WesternAcquisitions, L.P.  As such, WesternAcquisitions, L.P. has been consolidated into the accompanying financialstatements with the 15.40% ownership by minority limited partners presented asminority interest on the accompanying consolidated balance sheet as of March 31,2008.   Western Acquisitions, L.P. is,for GAAP purposes, an investment company under the AICPA 

 

9

----

 

Auditand Accounting Guide *Investment Companies*.  The Company has retained the specializedaccounting for Western Acquisitions, L.P. pursuant to EITF Issue No. 85-12,*Retention of Specialized Accounting for Investmentin Consolidation*.  As such,marketable equity securities held by Western Acquisitions, L.P. are recorded atfair value in Investments in Marketable Securities, with unrealized gains andlosses resulting from changes in fair value reflected in the ConsolidatedStatements of Operations.  Net unrealizedlosses in marketable securities held by the limited partnership totaled $4,162,663and $-0- for the quarters ended March 31, 2008 and 2007, respectively.

 

Followingis a summary of marketable equity securities held by Western Acquisitions, L.P.as of March 31, 2008 and December 31, 2007, of which all are in theUnited States:

 

 

| ** **                          | ** ** | **As of March 31, 2008** | ** ** | **As of December 31, 2007** | ** ** |
|-------------------------------------|------------|-------------------------------|------------|----------------------------------|------------|
| ** **                          | ** ** | **Cost**                      | ** ** | **Fair Value**                   | ** ** | **Cost** | ** ** | **Fair Value** | ** ** |
| The  Steak n Shake Co.              |       | $                             | 18,583,089 |                             | $          | 11,548,792 |   | $ | 17,902,714 |   | $ | 15,046,851 |   |
| Other                               |       | 150,465                       |       | 143,057                          |       | 138,660 |   | 115,480 |   |
|                                |       |                          |       |                             |       |   |   |   |   |
| Total  Marketable Equity Securities |       | $                             | 18,733,554 |                             | $          | 11,691,849 |   | $ | 18,041,374 |   | $ | 15,162,331 |   |

 

Realizedgains, net, and net change in unrealized losses from marketable equitysecurities held by Western Acquisitions, L.P. were as follows:

 

| ** **                                                                  | ** ** | **Three Months Ended  March 31, 2008** | ** ** |
|-----------------------------------------------------------------------------|------------|---------------------------------------------|------------|
| Realized  gains                                                             |       | $                                           | —     |   |
| Realized  losses                                                            |       | (40,606                                     | )          |
| Net realized loss on sales of marketable  securities                        |       | $                                           | (40,606    | ) |
|                                                                        |       |                                        |       |
| Net unrealized losses on marketable securities  held by limited partnership |       | $                                           | (4,162,663 | ) |

 

**(5)****                                ****Investment in Real Estate**

 

OnDecember 13, 2007, Western Real Estate, L.P., a newly-formed Delawarelimited partnership, managed by Western Properties, Inc., a newly-formedDelaware corporation and wholly-owned subsidiary of the Company, purchasedapproximately 23 acres of real property located in Bexar County, Texas, fromunaffiliated third parties.  Western Properties, Inc., serves as thegeneral partner of Western Real Estate, L.P., which intends to operate as aprivate real estate investment fund. Land held for investment by Western Real Estate, L.P. at December 31,2007 and March 31, 2008 of $3,745,152 is recorded at cost. The land wasoriginally purchased using available cash and a $2,000,000 draw on the Company’sexisting line of credit.  On February 1,2008, the purchase was refinanced through the issuance of a note payableof  $2,641,220, secured by the land heldfor investment.   Interest accrues on theunpaid principal balance at prime minus 0.5%, or 4.75% as of March 31,2008 (4.50% as of the date of this filing), with one payment of principal of$264,122 due on January 29, 2009, and all remaining principal and accruedinterest due on January 30, 2010.

 

**(6)****                                ****Goodwill and Other IntangibleAssets**

 

The Company conforms tothe provisions of Statement of Financial Accounting Standards No. 142 (“SFAS142”), *Goodwill and Other Intangible Assets*.  Under SFAS 142, goodwill and intangibleassets deemed to have indefinite lives are reviewed for impairment and writtendown and charged to results of operations when their carrying amount exceedstheir estimated fair value. The Company is required to perform impairment testseach year, or between yearly tests in certain circumstances, for goodwill.There can be no assurance that future impairment tests will not result in acharge to earnings.

 

There were no changes in the net carrying amount ofgoodwill for the three months ended March 31, 2008 and 2007.

 

*AmortizingIntangible Assets*

 

Franchise royalty contracts are amortized on astraight-line basis over fifteen years, the estimated average life of thefranchise agreements.  The Companyassesses the recoverability of this intangible asset by determining whether theamortization of the franchise royalty contracts over their remaining life canbe recovered through undiscounted future operating cash flows of the acquiredoperation.  The amount of impairment, ifany, is measured based on 

 

10

----

 

projected discounted future operating cash flows usinga discount rate reflecting the Company’s average cost of funds.  There were no impairments to goodwill in thequarters ended March 31, 2008 and 2007, respectively.

 

| ** **                     | ** ** | **As of ****March 31, 2008** | ** ** |
|--------------------------------|------------|--------------------------------------------------|------------|
| ** **                     | ** ** | **Gross  carrying  amount**                      | ** ** | **Weighted average  amortization  period** | ** ** | **Accumulated  amortization** | ** ** |
| Amortizing intangible  assets: |       |                                             |       |   |   |   |   |
| Franchise  Royalty Contracts   |       | $                                                | 9,454,431  |   | 15.0 yrs. |   | $ | 8,981,709 |   |
|                                |            |                                                  |            |  |  |  |  |  |  |

 

Aggregate amortizationexpense for amortizing intangible assets for the three month period ended March 31,2008 was $157,574. Estimated amortization expense is $472,722 through December 31,2008, at which time the franchise royalty contracts will be fully amortized.

 

**(7)****                                ****Income Taxes**

 

The Company adopted theprovisions of FASB Interpretation No. 48*, Accountingfor Uncertainty in Income Taxes*, an Interpretation of FASB StatementNo. 109 (“FIN 48”), on January 1, 2007.  As of March 31,2008, the Company has a recorded liability of $16,829, including interest of$7,808, for such uncertain tax positions. The recorded liability was reduced by $11,627 during the three monthsended March 31, 2008, as the Company continues to settle its estimatedobligations for lesser amounts.

 

Inassessing the realizability of deferred tax assets, management considerswhether it is more likely than not that some portion or all of the deferred taxassets will not be realized. The ultimate realization of deferred tax assets isdependent upon the generation of future taxable income during the periods inwhich those temporary differences become deductible.

 

Managementconsiders the scheduled reversal of deferred tax liabilities, projected futuretaxable income, and tax planning strategies in making this assessment. Basedupon the level of historical taxable income and projections for future taxableincome over the periods which the deferred tax assets are deductible,management believes it is more likely than not the Company will realize thebenefits of these deductible differences, net of a valuation allowance of$1,433,000 and $0 at March 31, 2008 and 2007, respectively, related to theunrealized losses of marketable securities. The provision for deferred income taxes for the three months ended March 31,2008 includes a provision for the valuation allowance of $1,313,000, whichnegatively impacted the Company’s effective tax rate for the quarter.

 

**(8)****                                ****Earnings (Loss) Per Share**

 

Basic earnings (loss) pershare excludes dilution and is computed by dividing income (loss) available tocommon stockholders by the weighted-average number of common shares outstandingfor the period.  Diluted earnings pershare reflects the potential dilution that could occur if securities or othercontracts to issue common stock were exercised or converted into common stockor resulted in the issuance of common stock that then shared in the earnings ofthe Company

 

The following is areconciliation of the numerators and denominators of the basic and dilutedearnings (loss) per share computations for the periods indicated:

 

| ** **                                  | ** ** | **Income (Loss)  (Numerator)** | ** ** | **Weighted  Average  Shares  (Denominator)** | ** ** | **Earnings  (Loss)  Per Share  Amount** | ** ** |
|---------------------------------------------|------------|-------------------------------------|------------|----------------------------------------------|------------|----------------------------------------------|------------|
| **Three months ended  March 31, 2008** | ** ** | ** **                          | ** ** | ** **                                   | ** ** | ** **                                   | ** ** |
| Net  loss — basic                      |       | $                                   | (3,850,995 | )                                            | 2,696,625  |                                         | $          | (1.43 | ) |
| Net  loss — diluted                    |       | $                                   | (3,850,995 | )                                            | 2,696,625  |                                         | $          | (1.43 | ) |
|                                        |       |                                |       |                                         |       |                                         |       |
| **Three  months ended March 31, 2007** | ** ** | ** **                          | ** ** | ** **                                   | ** ** | ** **                                   | ** ** |
| Net  income — basic                    |       | $                                   | 149,957    |                                         | 1,788,039  |                                         | $          | .08 |   |
| Net  income — diluted                  |       | $                                   | 149,957    |                                         | 1,792,182  |                                         | $          | .08 |   |

 

11

----

 

 

For the three monthsended March 31, 2008, the Company excluded from the loss per sharecalculation all common stock equivalents because the effect on loss per sharewas anti-dilutive.

 

**(9)****                                ****Reportable Segments**

 

The Company has organized segmentreporting with additional information to reflect how the Company views itsbusiness activities.  TheCompany-operated Restaurant segment consists of the operations of allCompany-operated restaurants and derives its revenues from restaurantoperations.  The Franchising segmentconsists primarily of franchise sales and support activities and derives itsrevenues from sales of franchise and development rights and collection ofroyalties from franchisees. The Investment Activity segment consists ofinvestment activities and certain direct expenses associated with legalmatters. The Company does not allocate certain expenses to any businesssegment.  These costs include expenses ofthe following functions: legal, accounting, stockholder relations, personnelnot directly related to a segment, information systems and other headquarteractivities.  These unallocated expensesare designated as unallocated corporate expenses. Certain other expenses (suchas sublease property expense, impairment and other charges, gains on settlementof insurance claims, and claims settlement and legal fees associated with alawsuit) are also not allocated to any reportable segment.

 

The following tablesummarizes reportable segment information:

 

| ** **                                                                  | ** ** | **Three Months**         | ** ** |
|-----------------------------------------------------------------------------|------------|-------------------------------|------------|
| ** **                                                                  | ** ** | **Ended March 31,** | ** ** |
| ** **                                                                  | ** ** | **2008**                      | ** ** | **2007** | ** ** |
| Revenues  from reportable segments:                                         |       |                          |       |   |   |
| Restaurants                                                                 |       | $                             | 3,126,110  |   | $ | 3,048,300 |   |
| Franchising                                                                 |       | 1,049,141                     |       | 1,081,390 |   |
| Total revenues                                                              |       | $                             | 4,175,251  |   | $ | 4,129,690 |   |
| Depreciation  and amortization:                                             |       |                          |       |   |   |
| Restaurants                                                                 |       | $                             | 99,357     |   | $ | 100,495 |   |
| Franchising                                                                 |       | 165,645                       |       | 165,439 |   |
| Total depreciation and amortization                                         |       | $                             | 265,002    |   | $ | 265,934 |   |
| Interest  Expense:                                                          |       |                          |       |   |   |
| Restaurants                                                                 |       | $                             | 38,447     |   | $ | 20,324 |   |
| Total interest expense                                                      |       | $                             | 38,447     |   | $ | 20,324 |   |
| Interest  Income:                                                           |       |                          |       |   |   |
| Corporate                                                                   |       | $                             | 20,864     |   | $ | 16,578 |   |
| Total interest income                                                       |       | $                             | 20,864     |   | $ | 16,578 |   |
| Income  (loss) from restaurant and franchise operations:                    |       |                          |       |   |   |
| Restaurants and equity in joint venture                                     |       | $                             | 201,919    |   | $ | 94,882 |   |
| Franchising                                                                 |       | 578,961                       |       | 641,501 |   |
| Subleased properties and other unallocated  expenses                        |       | (165,087                      | )          | (34,103 | ) |
| Corporate                                                                   |       | 484,250                       |       | (388,603 | ) |
| Total income from restaurant and franchise  operations:                     |       | $                             | 131,543    |   | $ | 313,677 |   |
|                                                                        |       |                          |       |   |   |
| Loss  from investment activities:                                           |       |                          |       |   |   |
| Net realized losses on sales of marketable  securities                      |       | $                             | (40,606)   |   | $ | — |   |
| Net unrealized losses on marketable securities  held by limited partnership |       | (4,162,663                    | )          | — |   |
| Expenses of investment activities                                           |       | (500,267                      | )          | (61,897 | ) |
| Total income (loss) from investment activities                              |       | $                             | (4,703,536 | ) | $ | (61,897 | ) |

 

| ** **            | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|-----------------------|------------|--------------------|------------|-----------------------|------------|
| ** **            | ** ** | **2008**           | ** ** | **2007**              | ** ** |
| Total  assets:        |       |               |       |                  |       |
| Restaurants           |       | $                  | 6,106,139  |                  | $          | 6,032,635 |   |
| Franchising           |       | 2,404,528          |       | 2,803,432             |       |
| Corporate             |       | 2,243,836          |       | 2,030,988             |       |
| Investment activities |       | 16,096,694         |       | 19,642,017            |       |
| Total assets          |       | $                  | 26,851,197 |                  | $          | 30,509,072 |   |

 

12

----

 

| ** **       | ** ** | **March 31,** | ** ** | **December 31,** | ** ** |
|------------------|------------|--------------------|------------|-----------------------|------------|
| ** **       | ** ** | **2008**           | ** ** | **2007**              | ** ** |
| Total  goodwill: |       |               |       |                  |       |
| Restaurants      |       | $                  | 3,540,200  |                  | $          | 3,540,200 |   |
| Franchising      |       | 770,000            |       | 770,000               |       |
| Total goodwill   |       | $                  | 4,310,200  |                  | $          | 4,310,200 |   |

 

**(10)****                         ****Commitments and Contingencies**

 

**Commitments**

 

WesternInvestments, Inc. is the general partner of Western Acquisitions,L.P.  Limited partnership interests inWestern Acquisitions, L.P. are either Class A or Class B.  The classes are identical except that Class Ainterests must be held for two years, whereas Class B interests are heldfor five years.  Additionally, WesternInvestments, Inc., will, at the end of the five year period, reimburse theholders of Class B interests for the first 30% of any cumulative netlosses they may suffer.  As of March 31,2008, Western Acquisitions, L.P., did not have any limited partners holding Class Binterests.  As of March 31, 2008and December 31, 2007, minority limited partners holding Class Ainterests held 15.40% and 12.43% ownership, respectively.

 

Subsequent to March 31,2008,  the Company completed its exchangeoffer for shares of ITEX Corporation on May 13, 2008.  Based upon a preliminary tally by theexchange agent for the offer, a total of 873,862 shares of ITEX common stockwere validly tendered in the offer and not withdrawn. The Company has acceptedfor exchange of all ITEX shares validly tendered, at the exchange ratio of oneshare of ITEX common stock for .06623 shares of the Company’s common stock.After the completed exchange, the Company owns approximately 1,574,576 sharesof ITEX common stock.

 

The Company has signed a term sheet to purchase a controlling interestin Mustang Capital Advisors, LP and Mustang Capital Management, LLC.  Under the proposed transaction which wasannounced in a press release on March 28, 2008, the Company will purchasea 50.5% limited partnership interest in Mustang Capital Advisors and a 51%membership interest in Mustang Capital Management, LLC which owns a 1% interestin Mustang Capital Advisors as its general partner.  The total purchase price for these interestswill be $1,173,000, consisting of $300,000 in cash and $873,000 in shares ofthe Company’s common stock.  Thetransaction is subject to definitive documentation.  As of March 31, 2008, Mustang CapitalAdvisors, LP, through its funds and managed accounts, holds a total of 7.4% ofthe Company’s common stock which will be distributed to its limited partnersprior to the closing of the proposed transaction.

 

**Contingencies**

 

The Company accrues an obligation for contingencies, including estimatedlegal costs, when a loss is probable and the amount is reasonablyestimable.  As facts concerningcontingencies become known to the Company, the Company reassesses its positionwith respect to accrued liabilities and other expenses.  These estimates are subject to change asevents evolve and as additional information becomes available during thelitigation process.

 

Little Rock, Arkansas Lease

 

In September 2006, theCompany was served with a lawsuit filed in the Circuit Court of Pulaski County,Arkansas, captioned *Parks Land Company, LLLP,et al. v. Western Sizzlin Corporation, et al.* The plaintiffs areowners/landlords of four restaurant premises located in the Little Rock,Arkansas metropolitan area which had been leased pursuant to a single lease agreementand previously occupied by the Company. Most recently, each of these premises had been subleased to variousoperators.  The lease agreement expiredpursuant to its terms on June 30, 2006. The plaintiffs claimed in their lawsuit damages allegedly owed forcertain repair and maintenance expenses on the premises, for the replacement ofcertain equipment, for diminution of property value, and for loss of rentalincome, as well as interest and costs. On February 12, 2008, this case came before the Court fortrial. On February 20, 2008, a 12 member jury returned a plaintiffs’verdict in the amount of $689,526.  On February 29,2008, the Circuit Court of Pulaski County, Arkansas entered judgment in thecase against the Company in the amount of $689,666 plus plaintiff’s legalcosts.  The Company disagrees with theresult of the trial and has filed post-trial motions, seeking new trial orjudgment notwithstanding the verdict.  Inthe event the Court denies 

 

13

----

 

the post-judgment relief,the Company will consider an appeal.  Therehas been no change in the Company’s loss contingency accrual since December 31,2007.

 

Other

 

TheCompany is involved in various other claims and legal actions arising in theordinary course of business.  In theopinion of the management, the ultimate disposition of these matters will nothave a material adverse effect on the Company’s financial condition, results ofoperations or liquidity.

 

**(11)****                         ****Investment in UnconsolidatedJoint Venture**

 

The Company is apartner in a 50/50 joint venture with a franchisee for a new restaurant inHarrisonburg, Virginia.  During October 2005,the joint venture entered into a loan agreement for $3.05 million and theCompany guaranteed 50% of the loan obligation. The estimated fair value of the guarantee of approximately $30,000 isrecorded in other long-term liabilities and in investments in unconsolidatedjoint venture on the accompanying consolidated balance sheets at March 31,2008 and 2007.  The term of the guaranteeextends through July 1, 2026 and the Company would be required to performunder the guarantee should the joint venture not to be able to meet itsscheduled principal and interest payments. Pursuant to the joint venture agreement, a cash contribution of $300,000from each 50/50 partner was also made at the closing of this financing.  The Company is accounting for the investmentusing the equity method and the Company’s share of the net income of the jointventure is reported in the accompanying statements of operations as equity inearnings of unconsolidated joint venture. The restaurant opened for business on December 14, 2006.

 

**FinancialData**

 

The following is selectedfinancial information for the joint venture as of and for the three monthsended March 31, 2008 and 2007, respectively:

 
| ** **                                                  | ** ** | **Three Months  Ended** | ** ** | **Three Months  Ended** | ** ** |
|-------------------------------------------------------------|------------|------------------------------|------------|-------------------------|------------|
| ** **                                                  | ** ** | **March 31, 2008** | ** ** | **March 31, 2007** | ** ** |
| ** **                                                  | ** ** | **(unaudited)**              | ** ** | **(unaudited)**         | ** ** |
| **Statement  of Operations Data:**                          | ** ** | ** **                   | ** ** | ** **              | ** ** |
| Total  revenues                                             |       | $                            | 1,204,942  |                    | $          | 1,329,125 |   |
| Cost  of food                                               |       | 489,503                      |       | 595,493                 |       |
| Payroll  expense                                            |       | 353,340                      |       | 420,819                 |       |
| Gross  profit                                               |       | 362,099                      |       | 312,813                 |       |
| Marketing  and smallware expense                            |       | 47,768                       |       | 56,603                  |       |
| General  and administrative                                 |       | 111,669                      |       | 117,149                 |       |
| Depreciation  and amortization                              |       | 50,460                       |       | 49,699                  |       |
| Interest                                                    |       | 54,082                       |       | 55,496                  |       |
| Net  income                                                 |       | 91,986                       |       | 27,403                  |       |
| **Balance  Sheet Data:**                                    | ** ** | ** **                   | ** ** | ** **              | ** ** |
| Cash                                                        |       | $                            | 334,166    |                    | $          | 183,820 |   |
| Prepaid  expenses                                           |       | 18,899                       |       | 37,134                  |       |
| Inventory                                                   |       | 21,187                       |       | 21,331                  |       |
| Land,  leasehold improvements, and construction in progress |       | 3,702,795                    |       | 3,897,437               |       |
| Loan  costs, net                                            |       | 11,565                       |       | 13,090                  |       |
| Total  assets                                               |       | 4,089,417                    |       | 4,153,839               |       |
| Loan  payable                                               |       | 3,092,720                    |       | 3,270,327               |       |
| Accounts  payable and accrued expenses                      |       | 354,720                      |       | 342,313                 |       |
| Members’  equity                                       |       | 641,977                      |       | 262,363                 |       |

 

**(12)****                         ****Impact of Recently IssuedAccounting Standards**

 

InSeptember 2006, the FASB issued Statement of Financial AccountingStandards No. 157 (“SFAS 157”), *Fair Value Measures*.SFAS 157 defines fair value, establishes a framework for measuring fair valueand expands disclosures about fair value measurements. SFAS 157 applies underother accounting pronouncements that require or permit fair value measurements,the FASB having previously concluded in those accounting pronouncements that 

 

14

----

 

fairvalue is the relevant measurement attribute. Accordingly, SFAS 157 does notrequire any new fair value measurements. Effective January 1, 2008, the Company adopted the provisions ofSFAS 157 for financial assets and liabilities. The Company applied theprovisions of FSP FAS 157-2, *Effective Date of FASBStatement 157*, which defers the provisions of SFAS 157 fornonfinancial assets and liabilities to the first fiscal period beginning after November 28,2008.  The nonfinancial assets for whichwe have deferred adoption include goodwill. The Company is required to adopt SFAS 157 for nonfinancial assets andliabilities that are not measured at fair value on a recurring basis in thefirst quarter of 2009 and is still evaluating the impact on the ConsolidatedFinancial Statements.

 

In May 2007,the FASB issued FASB Staff Position No. FIN 46(R)-7, *Applicationof FASB Interpretation No. 46(R) to Investment Companies* (“FSPFIN 46(R)-7”) which provides clarification on the applicability of FIN 46(R),as revised, to the accounting for investments by entities that apply theaccounting guidance in the AICPA Audit and Accounting Guide, *Investment Companies*. FSP FIN 46(R)-7 amends FIN 46(R), as revised, to make permanent thetemporary deferral of the application of FIN 46(R), as revised, to entitieswithin the scope of the guide under Statement of Position (“SOP”) No. 07-1,*Clarification of the Scope of the Audit andAccounting Guide*Investment Companies *andAccounting by Parent Companies and Equity Method Investors for Investments inInvestment 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 notexpected to have a material impact on the Company.

 

SOP07-1, issued in June 2007, addresses whether the accounting principles ofthe AICPA Audit and Accounting Guide *Investment Companies*may be applied to an entity by clarifying the definition of an investmentcompany and whether those accounting principles may be retained by a parentcompany in consolidation or by an investor in the application of the equitymethod of accounting.  SOP 07-1, asoriginally issued, was to be effective for fiscal years beginning on or after December 15, 2007with earlier adoption encouraged.  In February 2008,the FASB issued FSP SOP 07-1-1, *Effective Date of AICPAStatement of Position 07-01*, to indefinitely defer the effectivedate of SOP 07-01.   The Company’smajority-owned subsidiary, Western Acquisitions, L.P., is an investment companyas currently defined in the AICPA Audit and Accounting Guide, *Investment Companies*. The Company has retained the specialized accounting for WesternAcquisitions, L.P. pursuant to EITF 85-12, *Retention of SpecializedAccounting for Investments in Consolidation*.  As such, marketable equity securities held byWestern Acquisitions, L.P. are recorded at fair value in Investments inMarketable Securities in the consolidated financial statements, with unrealizedgains and losses resulting from the change in fair value reflected in theConsolidated Statement of Operations. The Company intends to monitor futuredevelopments associated with this Statement in order to assess the impact, ifany, which may result.

 

In December 2007,the FASB issued Statement of Financial Accounting Standards No. 141(R), *Business Combinations*(“SFAS 141R”), and Statement ofFinancial Accounting Standard No. 160, *Noncontrolling Interest inConsolidated Financial Statements, an amendment of  ARB**No. 51*(“SFAS 160”).  These new standards willsignificantly change the accounting for and reporting for business combinationsand noncontrolling (minority) interests in consolidated financialstatements.  SFAS 141(R) and SFAS160 are required to be adopted simultaneously and are effective for the firstannual reporting period beginning on or after December 15, 2008.  These standards will impact the Company if itcompletes an acquisition or obtains additional minority interests after theeffective date.  SFAS 160 amends ARB 51to establish accounting and reporting standards for the noncontrolling interestin a subsidiary and for the deconsolidation of a subsidiary. It clarifies thata noncontrolling interest in a subsidiary, which is sometimes referred to asminority interest, is an ownership interest in the consolidated entity thatshould be reported as equity in our Consolidated Financial Statements.Among other requirements, this statement requires that the consolidated netincome attributable to the parent and the noncontrolling interest be clearlyidentified and presented on the face of the consolidated income statement. SFAS160 is effective for the first fiscal period beginning on or after December 15,2008.  The Company is required to adopt SFAS 160 in the first quarter of2009 and is currently evaluating the impact of adopting SFAS 160 on itsConsolidated Financial Statements.

 

In March 2008, theFASB issued Statement of Financial Accounting Standards SFAS No. 161 (“SFAS161”), *Disclosures about DerivativeInstruments and Hedging Activities—An Amendment of FASB Statement No. 133*.SFAS applies to all derivative instruments and related hedged items accountedfor under SFAS No. 133, *Accounting forDerivative Instruments and Hedging Activities*. It requires entitiesto provide greater transparency about (a) how and why an entity usesderivative instruments, (b) how derivative instruments and related hedgeditems are accounted for under SFAS 133 and its related interpretations,and (c) how derivative instruments and related hedged items affect anentity’s financial position, results of operations, and cash flows.SFAS 161 is effective for fiscal years and interim periods beginning afterNovember 15, 2008. This standard is not expected to have a material impacton the Company’s consolidated financial statements.

 

15

----

 

 

**Item 2.****          ****Management’s Discussionand Analysis ofFinancial Condition and Results of Operations**

 

**Overview**

 

The following discussionmay include forward-looking statements including anticipated financialperformance, business prospects, the future opening of Company-operated andfranchised restaurants, anticipated capital expenditures, and othermatters.  All statements other thanstatements of historical fact are forward-looking statements.  Section 27A of the Securities Act of1933 (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 thesesafe harbors, 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’s operatingregions; laws and government regulations; general business and economicconditions; availability of capital; success of operating initiatives andmarketing and promotional efforts; and changes in accounting policies.  In addition, the Company disclaims any intentor obligation to update those forward-looking statements.

 

Western SizzlinCorporation is a holding company owning subsidiaries engaged in a number ofdiverse business activities.  The Company’sprimary business activities are conducted through Western Sizzlin FranchiseCorporation and Western Sizzlin Stores, Inc., which franchise and operate121 restaurants in 20 states, including five Company-owned, 115 franchiserestaurants, and one joint venture restaurant. The Company currently operates and/or franchises the followingconcepts:  Western Sizzlin, WesternSizzlin Wood Grill, Western Sizzlin Express, Great American Steak &Buffet, and Quincy Steakhouses.

 

Financialdecisions are centralized at the holding company level, and management of operatingbusinesses is decentralized at the business unit level.  Investment and all other capital allocationdecisions are made for the Company and its subsidiaries by Mr. SardarBiglari, Chairman and Chief Executive Officer. The Company’s primary objective centers on achieving above averagereturns on capital in pursuit of maximizing the eventual net worth of itsstockholders.

 

While the Company hashistorically been principally engaged, and intends at this time to remainprincipally engaged, in franchising and operating restaurants, its recentinvestment activities could bring it within the definition of an “investmentcompany” and require it to register as an investment company under theInvestment Company Act of 1940.  TheBoard of Directors has adopted a policy requiring management to restrict theCompany’s operations and investment activities to avoid becoming an investmentcompany, until and unless the Board approves otherwise.  Although the Company does not presentlyintend to change its principal business, and the Board has not approved anysuch change, the Company has expanded its investment activities, and may decidein the future to register as an investment company under the Investment CompanyAct.  Under certain circumstances, if itis successful in investment activities, then the Company may inadvertently fallwithin the definition of an investment company, in which event it may berequired to register as an investment company. If the Company decides or is required to register as an investmentcompany, then it would become subject to various provisions of the InvestmentCompany Act and the regulations adopted under such Act, which are veryextensive and could adversely affect its operations.

 

The Company seeks toinvest, at the holding company and through subsidiaries, including WesternAcquisitions, L.P., in stocks of businesses at prices below their intrinsicbusiness value.  The Company’s preferredstrategy is to allocate a meaningful amount of capital in each investee,resulting in concentration.  The carryingvalues of these investments are exposed to market price fluctuations, which maybe accentuated by a concentrated equity portfolio.  A significant decline in the price of majorinvestments may produce a large decrease in the Company’s net earnings and itsstockholders’ equity (See Note 4 to the consolidated financial statements).

 

The consolidatedfinancial statements include the accounts of Western Sizzlin Corporation andits wholly-owned subsidiaries, Western Sizzlin Franchise Corporation, WesternSizzlin 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., and asolely-owned limited partnership, Western Real Estate, L.P. (collectively theCompany).

 

16

----

 

In 2007, the Companyformed Western Investments, Inc., a Delaware corporation and wholly-ownedsubsidiary to serve as the general partner of Western Acquisitions, L.P., aDelaware limited partnership that operates as a private investment fund:  Western Acquisitions, L.P. is, for generallyaccepted accounting principles (GAAP) purposes, an investment company under theAmerican Institute of Certified Public Accountants (AICPA) Audit and AccountingGuide *Investment Companies*.  The Company has retained the specializedaccounting for Western Acquisitions, L.P. pursuant to FITF Issue No. 85-12,*Retention of Specialized Accounting for Investmentsin Consolidation*.  As such,marketable equity securities held by Western Acquisitions, L.P. are recorded atfair value in Investments in Marketable Securities, with unrealized gains andlosses resulting from the change in fair value reflected in the Statement ofOperations.

 

In September 2006,the Company was served with a lawsuit filed in the Circuit Court of PulaskiCounty, Arkansas, captioned *Parks Land Company, LLLP,et al. v. Western Sizzlin Corporation, et al.*  On February 12, 2008, this case camebefore the Court for trial.  On February 29,2008, the Circuit Court of Pulaski County, Arkansas entered judgment in thecase captioned *Parks Land Company, et al. v. WesternSizzlin Corporation, et al*.**against theCompany in the amount of $689,666 plus plaintiff’s legal costs.  The Company disagrees with the result of thetrial and is evaluating its options. (See Note 10 to the consolidated financial statements).

 

On March 28, 2008,the Company signed a term sheet to purchase a controlling interest in Mustang CapitalAdvisors, LP and Mustang Capital Management, LLC.  Under the proposed transaction which theCompany announced in a press release on March 28, 2008, it will purchase a50.5% limited partnership interest in Mustang Capital Advisors and a 51%membership interest in Mustang Capital Management, which owns a 1% interest inMustang Capital Advisors as its general partner.  The total purchase price for these interestswill be $1,173,000, consisting of $300,000 in cash and $873,000 in shares ofthe Company’s common stock.  Thetransaction is subject to definitive documentation.  As of March 28, 2008, Mustang, throughits funds and managed accounts, holds a total of 7.4% of the Company’s commonstock which will be distributed to its limited partners prior to the closing ofthe proposed transaction.

 

Subsequent to March 31,2008,  the Company completed its exchangeoffer for shares of ITEX Corporation on May 13, 2008.  Based upon a preliminary tally by theexchange agent for the offer, a total of 873,862 shares of ITEX common stockwere validly tendered in the offer and not withdrawn. The Company has acceptedfor exchange of all ITEX shares validly tendered, at the exchange ratio of oneshare of ITEX common stock for .06623 shares of the Company’s common stock.  After the completed exchange, the Companyowns approximately 1,574,576 shares of ITEX common stock.

 

**Resultsof Operations**

 

Net loss for the three months ended March 31,2008 was ($3,850,995) compared to net income of $149,957 for the three monthsended March 31, 2007.  Losses frominvestment activities that impacted net income (loss) for the three monthsended March 31, 2008 and 2007 were ($4,703,536) and ($61,897)respectively.

 

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,** | ** ** |
| ** **                                                         | ** ** | **2008**                      | ** ** | **2007** | ** ** |
| Revenues:                                                          |       |                          |       |   |   |
| Company-operated restaurants                                       |       | 74.9                          |       | 73.8 |   |
| Franchise operations                                               |       | 25.1                          |       | 26.2 |   |
|                                                               |       | 100.0                         |       | 100.0 |   |
| Total revenues                                                     |       |                          |       |   |   |
| Costs and expenses —  restaurant and franchise operations:    |       |                          |       |   |   |
| Company-operated restaurants — food, beverage and labor costs |       | 55.4                          |       | 54.8 |   |
| Restaurant occupancy and other                                     |       | 13.4                          |       | 14.6 |   |
| Franchise operations — direct support                         |       | 7.3                           |       | 6.6 |   |
| Subleased restaurant property expenses                             |       | .7                            |       | .5 |   |
| Corporate expenses                                                 |       | 12.5                          |       | 9.4 |   |
| Depreciation and amortization expense                              |       | 6.3                           |       | 6.4 |   |

 

17

----

 

| Claims settlement and legal fees associated with lawsuit                    |   | 3.3    |   | .4     |   |
|-----------------------------------------------------------------------------|--------|--------|--------|--------|--------|
| Total costs and expenses — restaurant and franchise operations         |   | 98.9   |   | 92.7   |   |
|                                                                        |   |   |   |   |   |
| Equity in income of joint  venture                                          |   | 1.1    |   | .3     |   |
| Income from restaurant and franchise operations                             |   | 2.2    |   | 7.6    |   |
|                                                                        |   |   |   |   |   |
| Net realized gain (loss)  on sales of marketable securities                 |   | (.9    | )      | .1     |   |
| Net unrealized losses on  marketable securities held by limited partnership |   | (99.7  | )      |   |   |
| Expense of investment  activities                                           |   | (11.6  | )      | (1.5   | )      |
| Loss from investment activities                                             |   | (112.2 | )      | (1.4   | )      |
| Other income (expense):                                                     |   |   |   |   |   |
| Interest expense                                                            |   | (.4    | )      | (.5    | )      |
| Interest income                                                             |   | .5     |   | .4     |   |
| Other, net                                                                  |   | — |   | — |   |
| Total other income (expense), net                                           |   | .1     |   | (.1    | )      |
|                                                                        |   |   |   |   |   |
| Income (loss) before income tax expense and minority interest               |   | (109.9 | )      | 6.1    |   |
| Income tax expense (benefit)                                                |   |   |   |   |   |
| Current                                                                     |   | (.1    | )      | .2     |   |
| Deferred                                                                    |   | (3.4   | )      | 2.3    |   |
| Total income tax expense (benefit)                                          |   | (3.5   | )      | 2.5    |   |
| Minority interest in net  loss of limited partnership                       |   | 14.2   |   | — |   |
| Net income (loss)                                                           |   | (92.2  | )      | 3.6    |   |

 

| ** **                               | ** ** | **Three Months**         | ** ** |
|------------------------------------------|------------|-------------------------------|------------|
| ** **                               | ** ** | **Ended March 31,** | ** ** |
| ** **                               | ** ** | **2008**                      | ** ** | **2007** | ** ** |
| **Restaurant  Data**                     | ** ** | ** **                    | ** ** | ** ** | ** ** |
| Number  of Company-Operated Restaurants: |       |                          |       |   |   |
| Beginning of period                      |       | 5                             |       | 5 |   |
| Opened                                   |       | —                        |       | — |   |
| Closed                                   |       | —                        |       | — |   |
| Franchised                               |       | —                        |       | — |   |
| End of period                            |       | 5                             |       | 5 |   |
| Number  of U.S. Franchised Restaurants:  |       |                          |       |   |   |
| Beginning of period                      |       | 116                           |       | 123 |   |
| Opened                                   |       | —                        |       | — |   |
| Closed                                   |       | (1                            | )          | (2 | ) |
| End of period                            |       | 115                           |       | 121 |   |
| Number  of Joint Venture Restaurants:    |       |                          |       |   |   |
| Beginning of period                      |       | 1                             |       | 1 |   |
| Opened                                   |       | —                        |       | — |   |
| Closed                                   |       | —                        |       | — |   |
| End of period                            |       | 1                             |       | 1 |   |

** **

**Revenues**

** **

Total revenues increased 1.1% to $4.18 million for thethree months ended March 31, 2008 from $4.13 million for the comparablethree months ended March 31, 2007. Company-operated restaurant revenuesincreased 2.5% to $3.13 million for the three months ended March 31, 2008as compared to $3.05 million for the comparable three months ended March 31,2007.  Same store sales for the threemonths ended March 31, 2008 experienced an overall increase of 2.55% forCompany-operated restaurants.  Franchiserevenues decreased 2.98% to $1.05 million for the three months ended March 31,2008 as compared to $1.08 million for the comparable three months ended March 31,2007.  The decrease is attributable tofewer franchised units in the system at March 31, 2008 as compared to March 31,2007.  Same store sales for the threemonths ended March 31, 2008 experienced an overall decrease of 0.84%.

 

18

----

 

**Costsand Expenses —restaurant and franchise operations**

** **

Cost of Company-operated restaurants, consistingprimarily of food, beverage, and labor costs increased $47,000 (2.0%) to $2.3million for the three months ended March 31, 2008 from $2.3 million forthe three months ended March 31, 2007.  These costs for the three month period as a percentage ofCompany-operated restaurants revenue were 73.9% and 74.2% for the three monthsended March 31, 2008 and 2007, respectively.  The increase in the costs was largelyattributable to increased costs in commodities during the first quarter of2008.

 

Restaurant occupancy and other, which includeutilities, insurance, maintenance, rent and other such costs of theCompany-operated restaurants, decreased by $43,000 (7.1%) for the three monthsended March 31, 2008 versus the prior year’s comparable period. Thesecosts for the three month period decreased as a percentage of Company-operatedrestaurant revenues from 19.8% in 2007 to 17.9% in 2008.  The decrease for the three months ended March 31,2008 was largely attributable to a $45,000 settlement of a lease dispute inChantilly, Virginia, which was included in the three months ended March 31,2007.

 

Cost of franchise operations direct support expenseincreased by $30,000 (11.0%) for the three months ended March 31, 2008versus the prior year’s comparable period. The increase was largely attributable to increased spending in franchisedevelopment for franchise sales, development of a new concept, and fourscheduled new openings in 2008.

 

Subleased properties include net costs associated withsubleasing former Company-operated restaurants and maintenance of vacantpremises.  These expenses increased by$8,000 (3.9%) for the three months ended March 31, 2008 versus the prioryear’s comparable period.  The increasewas largely attributable to inflationary increases in costs associated withvacant properties.

 

Unallocated corporate expenses consist of certainexpenses not allocated to any business segment. These expenses include legal, accounting, stockholder relations,personnel not directly related to a segment, information systems, and otherheadquarter’s activities.  These expensesincreased by $96,000 (24.6%) for the three months ended March 31, 2008versus the prior year’s comparable period. The increase was primarily attributable to additional accounting andlegal expenses in 2008 associated with financial reporting assistance and thefees associated with listing on NASDAQ.

 

Depreciation and amortization expense for 2008 werecomparable to 2007.

 

Legal fees associated with lawsuit increased by$123,000 for the three months ended March 31, 2008 versus the prior year’scomparable period due to increased legal fees associated with the trial andappeal of the Company’s lawsuit in Little Rock, Arkansas.  (See Note 10 to the consolidated financialstatements).

 

**Equity in income of Joint Venture**

 

Equity in income of joint venture increased $32,000versus the prior year’s comparable period, due to better operating performanceof the restaurant during 2008.  (See Note11)

 

**Income (Loss) from Investment Activities**

 

Investment activities include net realized losses on sales ofmarketable securities of $41,000 and $0 for the three months ended March 31,2008 and 2007, respectively and net unrealized losses on marketable securitiesheld by the limited partnership, Western Acquisitions, L.P., of $4.2 millionand $0 for the three months ended March 31, 2008 and 2007,respectively.  Expenses associated withinvestment activities were $500,000 and $62,000 for the three months ended March 31,2008 and 2007, respectively.  Theincrease in expenses for 2008 versus the prior year’s comparable period isattributable to expenses associated with the Steak n Shake proxy contest toobtain seats on Steak n Shake’s board of directors for Mr. Biglari and Dr. Cooleyduring the fourth quarter of 2007 and first quarter of 2008, ITEX, and otherinvestment related activities.  Therewere no management fees charged or collected by the limited partnership in 2008or 2007.  Future management fees willdepend on portfolio performance and the extent of outside investors.

 

**OtherIncome (Expense)**

 

Interest expense increased$18,000 for the three months ended March 31, 2008 over the comparableperiod in 2007 due to interest expense associated with line of creditborrowings.  Interest income fluctuatesaccording to the levels of available cash balances.

 

19

----

 

 

Other income decreased by$3,000 for the three months ended March 31, 2008 over the comparableperiod in 2007.

 

Incometax expense is directly affected by the levels of pretax income and thevaluation allowance established on deferred tax assets. The Company’s effectivetax rate was (3.2%) and 40.4% for the three months ended March 31, 2008and 2007, respectively.  The provisionfor deferred income taxes for the three months ended March 31, 2008includes a provision for the valuation allowance of $1,313,000, whichnegatively impacted the Company’s effective tax rate for the quarter.

 

**Cash andCash Equivalents**

 

As of March 31,2008, the Company had $766,000 of cash and cash equivalents which is comparableto $727,000 as of December 31, 2007.

 

**Investmentof Available Capital**

 

The Company’s cash flowsfrom restaurant and franchise activities have exceeded its working capital,financing and capital investment needs of its restaurant and franchiseoperations, and management expects that the Company’s cash flows will continueto exceed its operating cash needs for the foreseeable future.  The Company regularly evaluates how best touse available capital to increase stockholder value.  The Company may pursue investments in theform of acquisitions, joint ventures and partnerships where the Companybelieves attractive returns can be obtained. Further, the Company may determine under certain market conditions thatavailable capital is best utilized to fund investments that it believes offersthe Company attractive return opportunities, whether or not related to itsongoing business activities.

 

As previously discussedin Note 4 of Notes to the Consolidated Financial Statements in Part I,Item 1 of this Form 10-Q, the Company’s Board of Directors has delegatedauthority to direct investment of the Company’s surplus cash to its Chairman,Sardar Biglari, subject to Board reporting requirements and various limitationsthat have been or may be from time to time adopted by the Board ofDirectors.  These investments may includesignificant and highly concentrated direct investments with respect to theequity securities of public companies. Any such investments will involve risks, and stockholders shouldrecognize that the Company’s balance sheet may change depending on the performanceof investments.  Furthermore, suchinvestments could be subject to volatility that may affect both the recordedvalue of the investments as well as the Company’s periodic earnings.

 

**Operating Activities and Cash Flows**

 

TheCompany used approximately $1.1 million and $67,000 in operating cash flows forthe three months ended March 31, 2008 and 2007, respectively, includingthe purchase of marketable securities of $804,000 and $384,000 in the threemonths ended March 31, 2008 and 2007, respectively.  The Company’s primary source of operating cashflows is the operating profits generated from Company’s restaurant andfranchise operations.  Adjustments toreconcile net income (loss) to net cash provided by restaurant and franchiseactivities were approximately $265,000 and $167,000 for the three months ended March 31,2008 and 2007, respectively.  Adjustmentsto reconcile net income (loss) to net cash used in investment activities wereapproximately $2.5 million and ($384,000) for the three months ended March 31,2008 and 2007, respectively.

 

**Investing Activities**

 

The Company’s investing activities on its statementsof cash flows primarily represent repayments of cash advances to the unconsolidatedjoint venture and cash paid related to improvements to its operatingproperties.  Prior to 2007, the Companyconsidered purchases and sales of marketable securities to be investingactivities; however, during the fourth quarter 2007 with the expandedinvestment activities of the Company, and more specifically the organization ofWestern Acquisitions, L.P. and the investment of minority limited partnerinterests, the Company began to consider such activities to be operatingactivities of the Company.  Thispresentation is consistent with the guidance in the AICPA’s Audit andAccounting Guide, *Investment Companies*.

 

During the three months ended March 31, 2008and 2007, the Company spent $5,000 and $1,000 on capital expenditures onCompany restaurants.  Also during 2007,repayments were received of $25,000 on prior advances to the joint ventureduring pre-opening of the restaurant.

 

20

----

 

**Financing Activities**

 

TheCompany made scheduled payments on long-term debt of $43,000 and $39,000 forthe three months ended March 31, 2008 and 2007, respectively.  Also during 2008, proceeds of $2.6 millionwere received from the issuance of a note payable, capital contributions werereceived from minority interests in the limited partnership, and payment of $2million was made on the line of credit. During 2007, $17,000 was received from the exercise of stock options.

 

Certainnotes payable require pre-payment premiums in certain circumstances.  In addition, certain notes payable containcertain restrictive covenants including debt coverage ratios, periodicreporting requirements and maintenance of operations at certainCompany-operated restaurants that collateralize the notes payable. At March 31,2008, the Company was in compliance with all covenants on the notes payable.

 

**Liquidity**

 

The Company’s primarysources of liquidity are cash generated from operations and, if needed,borrowings under its existing line of credit. The Company continually reviewsavailable financing alternatives.  Inaddition, the Company may consider, on an opportunistic basis, strategicdecisions to create value and improve operational performance.

 

 

 

**CONTRACTUAL OBLIGATIONS**

** **

The table belowsets forth a summary of contractual obligations that will impact futureliquidity as of March 31, 2008:

 
| ** **                                      | ** ** | **Payment due by period** | ** ** |
|-------------------------------------------------|------------|------------------------------------------|------------|
| **Contractual Obligations**                | ** ** | **2008**                                 | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** | **2012** | ** ** | **Thereafter** | ** ** | **Totals** | ** ** |
| Long-term debt                                  |       | $                                        | 75,471     |   | 109,803 |   | 121,385 |   | 134,189 |   | 148,342 |   | 52,552 |   | 641,742 |   |
| Promissory note — land held for investment |       | $                                        | —     |   | 264,122 |   | 2,377,098 |   | — |   | — |   | — |   | 2,641,220 |   |
| Operating leases, net (1)                       |       | $                                        | 534,707    |   | 634,425 |   | 623,880 |   | 357,611 |   | 399,171 |   | 1,171,994 |   | 3,721,788 |   |
| Interest expense (2)                            |       | $                                        | 107,833    |   | 97,041 |   | 40,459 |   | 27,655 |   | 13,501 |   | 1,101 |   | 287,590 |   |
| Tax obligations (3)                             |       | $                                        | 16,829     |   | — |   | — |   | — |   | — |   | — |   | 16,829 |   |
| Totals                                          |       | $                                        | 734,840    |   | 1,105,391 |   | 3,162,822 |   | 519,455 |   | 561,014 |   | 1,225,647 |   | 7,309,169 |   |

----

(1)             Operatinglease commitments are presented net of sublease rentals.  Gross operating lease commitments for theperiods above aggregate to approximately $3.8 million, offset by sublease rentalsfor the same periods of approximately $27,000.

 

(2)             Reflectsfuture interest payments through scheduled maturity dates based upon averageborrowing rates, outstanding debt balances and scheduled principal payments onlong-term debt.  Interest on the Company’svariable rate debt is based on the interest rate in effect at March 31,2008.

 

(3)             Reflectrecognized liabilities for uncertain tax positions under the provision FIN48.  (See Note 7 to the consolidatedfinancial statements).

 

**CRITICAL ACCOUNTING POLICIES**

** **

The discussion andanalysis of financial condition and results of operations is based on theconsolidated financial statements and accompanying notes that have beenprepared in accordance with United States generally accepted accountingprinciples.  The preparation of theseconsolidated financial statements requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities and thedisclosure of contingent assets and liabilities at the date of the consolidatedfinancial statements and the reported amounts of revenues and expenses duringthe reporting period.  Actual resultscould differ from those estimates.

 

Application of thecritical accounting policies discussed below requires significant judgments bymanagement, often as a result of the need to make estimates of matters that areinherently uncertain.  If actual resultswere to differ 

 

21

----

 

materially fromthe estimates made, the reported results could be materially affected.  The Company is not currently aware of anyreasonably likely events or circumstance that would result in materiallydifferent results. Senior management has reviewed the critical accounting policiesand estimates and the Management’s Discussion and Analysis regarding them withthe Audit Committee of the Board of Directors.

 

For additionalinformation regarding the impact of recently issued accounting standards, seeNote 12 of Notes to the Consolidated Financial Statements in Part I,Item 1 of this Form 10-Q.

 

*TradeAccounts and Notes Receivable and the Allowance for Doubtful Accounts*

 

The Companycollects royalties, and in some cases rent, from franchisees.  The Company views trade accounts and notesreceivable and the related allowance for doubtful accounts as a criticalaccounting estimate since the allowance for doubtful accounts is based onjudgments and estimates concerning the likelihood that individual franchiseeswill pay the amounts included as receivables from them.  In determining the amount of allowance fordoubtful accounts to be recorded for individual franchisees, the Companyconsiders the age of the receivable, the financial stability of the franchisee,discussions that may have occurred with the franchisee and a judgment as to theoverall collectibility of the receivable from the franchisee.  In addition, the Company establishes anallowance for all other receivables for which no specific allowances are deemednecessary.  If average sales or thefinancial health of franchisees were to deteriorate, the Company might have toincrease the allowance for doubtful accounts.

 

*Investments*

 

Marketableequity securities held by Western Sizzlin Corporation are held for anindefinite period and thus are classified as available-for-sale.Available-for-sale securities are recorded at fair value in Investments inMarketable Securities on the consolidated balance sheet, with the change infair value during the period excluded from earnings and recorded net of tax asa component of other comprehensive income. Fair value is determined through the use of quoted market values onnational exchanges.

 

WesternAcquisitions, L.P. is, for GAAP purposes, an investment company under the AICPAAudit and Accounting Guide *Investment Companies*.  The Company has retained the specializedaccounting for Western Acquisitions, L.P. pursuant to EITF Issue No. 85-12,*Retention of Specialized Accounting for Investmentsin Consolidation.*  As such,marketable equity securities held by Western Acquisitions, L.P. are recorded atfair value in Investments in Marketable Securities, with unrealized gains andlosses resulting from the change in fair value reflected in the Statement ofOperations.  Fair value is determinedthrough the use of quoted market values on national exchanges.

 

*Long-livedAssets, Franchise Royalty Contracts and Goodwill*

 

The Company viewsthe determination of the carrying value of long-lived assets, franchise royaltycontracts and goodwill as critical accounting estimates since it must evaluatethe estimated economic useful life in order to properly depreciate or amortizeour long-lived assets and franchise royalty contracts and because it mustconsider if the value of any of our long-lived assets have been impaired,requiring adjustments to the carrying value. Goodwill is not subject to amortization but is subject to at least anannual impairment test to determine if the carrying amount exceeds its fairvalue.

 

Economic usefullife 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 life of an asset is monitored to determineif it continues to be appropriate in light of changes in businesscircumstances.

 

The Company must also consider whether long-lived assets (includingproperty and equipment and intangible assets) have been impaired to the extentthat we must recognize a loss on such impairment, including goodwillimpairment. The Company evaluates long-lived assets for impairment at therestaurant and franchise levels on an annual basis or whenever changes orevents indicate that the carrying value may not be recoverable. The Companyassesses impairment of each level of assets based on the operating cash flowsof the restaurant and franchise operations and the plans for each restaurantunit or franchisee contract. Generally, all units with negative cash flows fromoperations for the most recent twelve months at each quarter end are includedin our assessment. In performing the assessment, the Company must makeassumptions regarding estimated future cash flows, including estimated proceedsfrom similar asset sales, and other factors to determine both therecoverability and the estimated fair value of the respective assets. If thelong-lived assets of a restaurant are not recoverable based upon estimatedfuture, undiscounted cash flows, the Company writes the assets down to theirfair value. If these estimates or their related 

 

22

----

 

assumptions change in the future, the Company may be required to recordadditional impairment charges.  Therewere no impairment changes for the quarters ended March 31, 2008 and 2007,respectively.  (See Notes 13 and 14 tothe notes to the consolidated financial statements).

 

The Company evaluates goodwill for impairment on an annual basis duringthe fourth quarter of each year, or more frequently if an event occurs thattriggers an interim impairment test.  TheCompany determines the fair values of our reporting units using the discountedcash flow method.  This method usesprojections of cash flows from each of the reporting units.  Several of the key assumptions in estimatingfuture cash flows include periods of operations, projections of operatingprofits, and weighted average cost of capital. These assumptions are derived from internal budgets and consideration ofavailable market data.  The factors whichcontribute the greatest variability in the Company’s estimates of fair valuesare the weighted average cost of capital and estimates of future operatingprofits.  The Company currently hasgoodwill of $770,000 related to the franchising reporting unit and $3.5 millionallocated to the restaurant reporting unit.

 

*Commitmentsand Contingencies*

 

The Company viewsaccounting for contingencies as a critical accounting estimate since losscontingencies arising from claims, assessments, litigation, fines and penaltiesand other sources require judgment as to any probable liabilitiesincurred.  Actual results could differfrom the expected results determined based on such estimates.

 

*Income Taxes*

 

The Company recordsvaluation allowances against its deferred tax assets, when necessary, inaccordance with SFAS No. 109, “Accounting for Income Taxes.” Realizationof deferred tax assets is dependent on future taxable earnings and is thereforeuncertain. The Company assesses the likelihood that its deferred tax assets ineach of the jurisdictions in which the Company operates will be recovered fromfuture taxable income. Deferred tax assets do not include future tax benefitsthat the Company deems likely not to be realized.

 

In July 2006,the FASB issued FASB Interpretation Number 48, *Accountingfor Uncertainty in Income Taxes, an Interpretation of FASB Statement No. 109,*(“FIN 48”).  FIN 48 prescribesa recognition threshold and measurement attributes for the financial statementrecognition 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 ofany related appeals or litigation processes, based on the technical merits ofthe position.  Once it is determined thata position meets the more-likely-than-not recognition threshold, the positionis measured to determine the amount of benefit to recognize in the financialstatements.  FIN 48 applies to all taxpositions related to income taxes subject to FASB Statement No. 109, *Accounting for Income Taxes.*

 

Foradditional information regarding the adoption of FIN 48, see Note 7 of Notes toConsolidated Financial Statements in Part I, Item 1 of this Form 10-Q.

 

**OTHER**

 

**Impactof Inflation**

** **

The impact of inflation on the costs of food andbeverage products, labor and real estate can affect the Company’soperations.  Management believes theCompany has historically been able to pass on increased costs through certainselected menu price increases and has offset increased costs by increasedproductivity and purchasing efficiencies, but there can be no assurance that theCompany will be able to do so in the future. Management anticipates that the average cost of restaurant real estateleases and construction cost could increase in the future which could affectthe Company’s ability to expand.  Inaddition, mandated health care or additional increases in the federal or stateminimum wages could significantly increase the Company’s costs of doingbusiness.

 

**Item 3.****          ****Quantitative andQualitative Disclosureabout Market Risk**

 

As of March 31,2008, the Company’s financial instruments are not exposed to significant marketrisk due to foreign currency exchange risk. However, the Company is exposed to market risk related to changes inmarket prices of marketable securities, interest rates related to certain debtobligations, and commodity risks.

 

23

----

 

 

**MarketPrice Risk**

 

The Company’s marketablesecurities are currently concentrated in a few investments. A change in marketprices exposes the Company to market risk related to the investments inmarketable securities.  As of March 31,2008, the Company held $12.4 million in available-for-sale marketablesecurities. A hypothetical 10% decline in the market value of those securitieswould result in a $1.2 million unrealized losses and a corresponding decline intheir fair values at March 31, 2008. This hypothetical decline would not affect the Company’s cash flowsunless the securities were disposed of.

 

**InterestRate Risk**

 

The Company has exposureto interest rate risk related to certain instruments entered into for otherthan trading purposes. Specifically, borrowings under the loan associated withthe Texas land purchase and revolving credit facility bear interest at variablerates based on the prime rate minus .5%. The nature and amount of borrowings under the credit facility may varyas a result of future business requirements, market conditions and otherfactors.

 

**CommodityPrice Risk**

 

The Company purchasescertain food products such as beef, poultry, pork, eggs and coffee, andutilities such as gas and electricity, which are affected by commodity pricingand are, therefore, subject to price volatility caused by weather, productionproblems, delivery difficulties and other factors that are outside of theCompany’s control and which are generally unpredictable. Changes in commodityprices affect the Company and competitors generally and often simultaneously.In general, the Company purchases food products and utilities based upon marketprices established with vendors. Although many of the items purchased aresubject to changes in commodity prices, the majority of our purchasingarrangements are structured to contain features that minimize price volatilityby establishing fixed pricing and/or price ceilings and floors. The Companyuses these types of purchase arrangements to control costs as an alternative tousing financial instruments to hedge commodity prices. The Company hasdetermined that our purchasing agreements do not qualify as derivativefinancial instruments or contain embedded derivative instruments. In manycases, the Company believes it will be able to address commodity cost increaseswhich are significant and appear to be long-term in nature by adjusting ourmenu pricing or changing our product delivery strategy. However, competitivecircumstances could limit such actions and, in those circumstances, increasesin commodity prices could lower its margins. Because of the often short-termnature of commodity pricing aberrations and our ability to change menu pricingor product delivery strategies in response to commodity price increases, theCompany believes that the impact of commodity price risk is not significant.

 

The Company hasestablished a policy to identify, control and manage market risks which mayarise from changes in interest rates, commodity prices and other relevant ratesand prices.

 

The table below providesinformation about debt obligations that are sensitive to changes in interestrates.  The table presents principal cashflows and related weighted average interest rates by expected maturity dates.

 

Debt obligations held forother than trading purposes at March 31, 2008 (dollars in thousands):

 

EXPECTED MATURITY DATE

 
| ** **                     | ** ** | **2008** | ** ** | **2009** | ** ** | **2010** | ** ** | **2011** | ** ** | **2012** | ** ** | **Thereafter** | ** ** | **Total** | ** ** | **Estimated  Fair Value** | ** ** |
|--------------------------------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------|------------|----------------|------------|-----------|------------|--------------------------------|------------|
| Long-term debt:                |       |     |       |     |       |     |       |     |       |     |       |           |       |      |       |                           |       |
| Fixed Rate                     |       | $        | 75         |     | $          | 110      |       | $        | 121        |     | $          | 134            |       | $         | 148        |                           | 54         |   | $ | 642 |   | $ | 721 |   |
| Average Interest Rate          |       | 10.07    | %          | 10.07    | %          | 10.07    | %          | 10.07    | %          | 10.07    | %          | 10.07          | %          | 10.07     | %          |                           |       |
| Variable Rate  Prime minus .5% |       | 0        |       | 264      |       | 2,377    |       | 0        |       | 0        |       | 0              |       | 2,641     |       | $                              | 2,641      |   |
|                                |            |          |            |          |            |          |            |          |            |          |            |                |            |           |            |                                |            |  |  |  |  |  |  |  |

 

                                                Interest on the Company’s variable ratedebt is based on the interest rate in effect at March 31, 2008.

 

24

----

 

**Item4T.  Controls and Procedures**

 

The Company’s seniormanagement, including the Chief Executive Officer and Chief Financial Officer,evaluated the effectiveness of the disclosure controls and procedures (asdefined in Rules 13a-15(e) and 15d-15(e) under the SecuritiesExchange Act of 1934, as amended) as of March 31, 2008. Based on itsevaluation as of December 31, 2007, the Company concluded that thedisclosure controls and procedures were ineffective in providing reasonableassurance that the information required to be disclosed in the Annual Report onForm 10-K was summarized and reported within the time periods specified inthe Securities and Exchange Commission’s rules and Form 10-K due tothe material weaknesses discussed below. These weaknesses still existed andwere being addressed as of March 31, 2008.

 

A material weakness is acontrol deficiency (as defined by the PCAOB), or a combination of controldeficiencies, that results in there being more than a remote likelihood that amaterial misstatement of the annual or interim financial statements will not beprevented or detected.  The following isa description of the material weakness that the Company noted as of December 31,2007 and March 31, 2008, as well as a discussion of the related remediationefforts:

 

The Company’s independent registered public accounting firm recommendedto management to change the presentation and reporting of marketable securitiesheld by a limited partnership. Using the guidance in AICPA Audit and AccountingGuide, Investment Companies, and pursuant to EITF 85-12, Retention ofSpecialized Accounting for Investments in Consolidation, the Companyconcluded that it should retain this same accounting when preparing itsconsolidated financial statements. Adjustments were made in the process of preparing the 2007 consolidatedfinancial statements to present this subsidiary’s financial statements inaccordance with the provisions of EITF 85-12. Solely as a result of this material weakness in internal controls theCompany identified in accounting for the consolidation of the investmentpartnership, the Company concluded that it did not maintain effective internalcontrol over financial reporting as of December 31, 2007 or at March 31,2008 based on criteria established in *Internal Control —Integrated Framework*issued by COSO*.*

 

Subsequent to year end, the Company is implementing several importantchanges in our internal controls, including additional procedures over theidentification of accounting issues, consultation with outside accountants, andreview and evaluation of the accounting for significant transactions.

 

There were no otherchanges in the Company’s internal controls or in other factors that couldsignificantly affect internal controls since the evaluation process wascompleted as of March 31, 2008.

 

 

**PART II.OTHER INFORMATION**

 

Item1.             Legal Proceedings

 

In addition to thoseproceedings discussed in Note 10 in the Company’s consolidated financialstatements, the Company is involved in various other claims and legal actionswhich are routine litigation matters incidental to the business.  In the opinion of the management, theultimate disposition of these other matters will not have a material adverseeffect on the Company’s financial condition, results of operations orliquidity.

 

Item1A. Risk Factors

 

An investment in thecommon stock of any company involves a degree of risk.  Investors should consider carefully the risksand uncertainties described in the Company’s Annual Report on Form 10-Kfiled with the SEC, and those other risks described elsewhere in this report,before deciding whether to purchase our common stock.  Additional risks and uncertainties notcurrently known to us or that we currently deem immaterial may also becomeimportant factors that may harm the Company’s business, financial condition,and results of operations.  Theoccurrence of risk factors could harm the Company’s business, financialcondition, and results of operations for company operations, as well asfranchised operations.  The trading priceof the Company’s common stock could decline due to any of these risks anduncertainties, and stockholders may lose part or all of their investment.

 

Item4.  Submission of Matters to a Vote ofSecurity Holders

 

On February 19,2008, Messers. Biglari and Dash, who together own a total of 1,635,677 sharesor approximately 61% of the Company’s total issued and outstanding commonstock, submitted their consents to a resolutionto 

 

25

----

 

amendand restate Article IV of the Company’s Restated Certificate ofIncorporation, as previously amended.  Asamended and restated, the number of authorized shares of common stock will  increase from 4,000,000 shares, par value$0.01, to 10,000,000 shares, par value $0.01.

 

Item6.    Exhibits :

 

See Exhibit Indexon page 28.

 

26

----

 

**SIGNATURES**

 

Pursuant to the requirements of the SecuritiesExchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned hereunto duly authorized.

 
|                    |   | **Western Sizzlin Corporation** |
|-------------------------|--------|---------------------------------|
|                    |   |                            |   |
|                    |   | By:                             | /s/ Sardar Biglari |
|                    |   |                            | Sardar Biglari |
|                    |   |                            | President and Chief Executive Officer |
|                    |   |                            |   |
|                    |   | By:                             | /s/ Robyn B. Mabe |
|                    |   |                            | Robyn B. Mabe |
|                    |   |                            | Vice President and Chief Financial Officer |
|                    |   |                            |   |
| Date: May 15, 2008 |   |                            |   |

 

27

----

 

**EXHIBITINDEX**

 
| 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. |

 

28

----