UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

~~FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTION 13 OR 15~~(~~d) OF~~Mark ~~THE SECURITIES EXCHANGE ACT OF 1934.~~one)

(Mark one)
x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 2004
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

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

For the fiscal year ended December 31, 2008

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

Commission File No. 0-23911

Fog Cutter Capital Group Inc.

(Exact name of registrant as specified in its charter)

	Maryland	52-2081138
	(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

~~1410~~301 SWArizona ~~Jefferson Street Portland~~Avenue, ORSuite ~~97201~~200

Santa Monica, CA 90401

(Address of principal executive offices) (Zip Code)

(~~503~~310) ~~721~~319-~~6500~~1850

(Registrant’'s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, par value $0.0001 per share

Indicate by check mark ~~whether~~ if the registrant: ~~(1) has~~is ~~filed~~a ~~all~~well-known ~~reports~~seasoned ~~required~~issuer, toas bedefined ~~filed~~in byRule ~~Section 13 or~~405 ~~15(d)~~ of the Securities ~~Exchange~~ Act ~~of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days~~. Yes x £ No o. R

Indicate by check mark if ~~disclosure~~ ofthe ~~delinquent~~registrant ~~filers pursuant to Item 405 of Regulation S-K~~ is not ~~contained~~ ~~herein,~~required ~~and~~to ~~will~~file ~~not~~reports bepursuant ~~contained,~~ to ~~the~~Section ~~best~~13 ~~of the registrant’s knowledge, in definitive proxy~~ or ~~information~~Section ~~statements~~15(d) ~~incorporated by reference in Part III~~ of ~~this~~the ~~Form 10-K~~Act. Yes or£ No ~~any amendment to this Form 10-K. o~~R

Indicate by check mark whether the registrant: is(1) anhas ~~accelerated~~filed ~~filer~~all reports required to be filed by Section 13 or 15(asd) ~~defined~~of inthe Securities Exchange Act ~~Rule 12b-~~of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2.) has been subject to such filing requirements for the past 90 days. Yes ~~o No x~~£ NoR.

~~The~~Indicate ~~aggregate~~by ~~market~~check ~~value~~ mark if disclosure of ~~the~~delinquent ~~voting~~filers ~~stock~~pursuant ~~held~~to byItem ~~non-affiliates~~405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, ~~computed~~in definitive proxy or information statements incorporated by reference toin ~~the~~Part ~~closing~~III ~~price~~of asthis ~~quoted~~From on10-K ~~NASDAQ~~or onany ~~June 30,~~amendments ~~2004~~to ~~was $21,373,000~~this Form 10-K. £.

AsIndicate ofby ~~February 28, 2005,~~check ~~there~~mark ~~were~~whether ~~8,380,673~~the ~~shares~~registrant ~~outstanding,~~is ~~not~~a ~~including~~large ~~options~~accelerated ~~to purchase~~filer, 1an accelerated filer,~~528,527~~ ~~shares~~a ofnon-accelerated ~~Fog~~filer, ~~Cutter~~or ~~Capital~~a ~~Group~~smaller ~~Inc~~reporting company.’s See ~~common~~definition ~~stock~~of ~~and 3~~“accelerated filer”,~~376,400~~ ~~treasury~~“large ~~shares~~accelerated filer”, ~~par~~and ~~value~~“smaller ~~$0.0001~~reporting ~~per~~company” ~~share~~in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer £		Accelerated filer £
Non-accelerated filer £ (do not check if a smaller reporting company)		Smaller reporting company R

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £ NoR.

The aggregate market value of the voting stock held by non-affiliates of the registrant, computed by reference to the closing price as quoted on OTC Bulletin Board market on June 30, 2008 was $2,444,479.

As of March 15, 2010, there were 7,954,928 shares outstanding, not including 3,802,145 treasury shares, par value $0.0001 per share.

DOCUMENTS INCORPORATED BY REFERENCE

~~See Item 15 for a list of exhibits incorporated by reference into this report~~None.

FOG CUTTER CAPITAL GROUP INC.

FORM 10-K

INDEX

PART I
Item 1.	Business	~~Business~~2	2
Item 2.		Properties	8
Item 1A	Risk Factors	6
Item 3.		Legal Proceedings	8
Item 1B	Unresolved SEC Comments	11
Item 4.		Submission of Matters to a Vote of Security Holders	11
Item 2.	Properties	11
PART II
Item 3.	Legal Proceedings	11
Item 5.		Market for the Registrant’s Common Equity and Related Stockholder Matters	12
Item 4.	Submission of Matters to a Vote of Security Holders	12
Item 6.		Selected Financial Data	14
PART II
Item 7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	16
Item 5.	Market for the Registrant's Common Equity and Related Stockholder Matters	13
Item 7a.		Quantitative and Qualitative Disclosures about Market Risk	29
Item 6.	Selected Financial Data	13
Item 8.		Financial Statements and Supplementary Data	30
Item 7.	Management's Discussion and Analysis of Financial Condition and Results of Operations	14
Item 9.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	31
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	26
Item 9A.		Controls and Procedures	31
Item 8.	Financial Statements and Supplementary Data	27
PART III
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	27
Item 10.		Directors and Executive Officers of the Registrant	31
Item 9A.	Controls and Procedures	27
Item 11.		Executive Compensation	35
Item 9B.	Other Information	28
Item 12.		Security Ownership of Certain Beneficial Owners and Management	43
PART III
Item 13.		Certain Relationships and Related Transactions	48
Item 10.	Directors and Executive Officers of the Registrant	29
PART IV
Item 11.	Executive Compensation	31
Item 14.		Principal Accountant Fees and Services	50
Item 12.	Security Ownership of Certain Beneficial Owners and Management	35
Item 15.		Exhibits, Financial Statement Schedules, and Reports on Form 8-K	51
Item 13.	Certain Relationships and Related Transactions	37
Item 14.	Principal Accounting Fees and Services	38
PART IV
Item 15.	Exhibits, Financial Statement Schedules	39

~~FORWARD-LOOKING STATEMENTS~~Index

~~CERTAIN~~Certain ~~STATEMENTS~~statements ~~CONTAINED~~contained ~~HEREIN~~herein ~~AND~~and ~~CERTAIN STATEMENTS~~certain ~~CONTAINED~~statements INcontained ~~FUTURE~~in ~~FILINGS~~future BYfilings ~~THE~~by ~~COMPANY~~the ~~WITH~~Company ~~THE~~with the SEC ~~MAY NOT BE~~may ~~BASED~~not ONbe ~~HISTORICAL~~based ~~FACTS~~on ~~AND~~historical ~~ARE~~facts and are “~~FORWARD~~Forward-~~LOOKING~~Looking ~~STATEMENTS~~Statements” ~~WITHIN~~within ~~THE MEANING~~the OFmeaning ~~SECTION~~ of Section 27A OFof ~~THE~~the ~~SECURITIES~~Securities ~~ACT~~Act OFof 1933, ASas ~~AMENDED~~amended, ~~AND~~and ~~SECTION~~ Section 21E OF ~~THE~~of ~~SECURITIES~~the ~~EXCHANGE~~Securities ~~ACT~~Exchange OFAct of 1934, ASas ~~AMENDED~~amended. ~~FORWARD~~ Forward-~~LOOKING~~Looking ~~STATEMENTS WHICH~~Statements ~~ARE~~are ~~BASED~~based ONon ~~VARIOUS~~various ~~ASSUMPTIONS~~assumptions and events (~~SOME~~some OFof ~~WHICH~~which ~~ARE~~are ~~BEYOND~~beyond ~~THE~~the ~~COMPANY~~Company’~~S CONTROL~~s control) ~~MAY BE~~and ~~IDENTIFIED~~may BYbe ~~REFERENCE~~identified TOby Areference ~~FUTURE~~to ~~PERIOD~~a ORfuture ~~PERIODS~~period or periods, ~~OR BY~~or ~~THE~~by ~~USE~~the OFuse ~~FORWARD~~of forward-~~LOOKING~~looking ~~TERMINOLOGY~~terminology, ~~SUCH~~such ASas “~~MAY~~may,” “~~WILL~~will,” “~~BELIEVE~~believe,” “~~EXPECT~~expect,” “~~ANTICIPATE~~anticipate,” “~~CONTINUE~~continue,” ORor ~~SIMILAR~~similar ~~TERMS~~terms ORor ~~VARIATIONS~~variations ONon ~~THOSE~~those ~~TERMS~~terms, ORor ~~THE NEGATIVE~~the OFnegative ~~THOSE~~of ~~TERMS~~those terms. Actual ~~ACTUAL~~results ~~RESULTS~~could ~~COULD~~differ ~~DIFFER~~materially ~~MATERIALLY~~from ~~FROM~~those ~~THOSE~~set ~~SET FORTH~~forth INin ~~FORWARD~~Forward-~~LOOKING~~Looking ~~STATEMENTS~~Statements ~~DUE~~due TOto Aa ~~VARIETY~~variety OFof ~~FACTORS~~factors, ~~INCLUDING~~including, ~~BUT NOT~~but ~~LIMITED~~not ~~TO,~~limited ~~THOSE~~to ~~RELATED~~the TORisk ~~THE~~Factors ~~ECONOMIC~~identified ~~ENVIRONMENT,~~herein ~~PARTICULARLY~~and INthe THE MARKET AREAS IN WHICH THE COMPANY OPERATES, THE FINANCIAL AND SECURITIES MARKETS AND THE AVAILABILITY OF AND COSTS ASSOCIATED WITH SOURCES OF LIQUIDITY, CONSUMER PREFERENCES, COMPETITIVE PRODUCTS AND PRICING, THE REAL ESTATE MARKET, FISCAL AND MONETARY POLICIES OF THE U.S. GOVERNMENT, CHANGES IN PREVAILING INTEREST RATES, ACQUISITIONS AND THE INTEGRATION OF ACQUIRED BUSINESSES, CREDIT RISK MANAGEMENT, ASSET/LIABILITY MANAGEMENT AND LITIGATION AND GOVERNMENT INVESTIGATIONS. EXCEPT AS MAY BE REQUIRED BY LAW, THE COMPANY DOES NOT UNDERTAKE, AND SPECIFICALLY DISCLAIMS ANY OBLIGATION, TO PUBLICLY RELEASE THE RESULTS OF ANY REVISIONS WHICH MAY BE MADE TO ANY FORWARD-LOOKING STATEMENTS TO REFLECT THE OCCURRENCE OF ANTICIPATED OR UNANTICIPATED EVENTS OR CIRCUMSTANCES AFTER THE DATE OF SUCH STATEMENTS.following:

economic factors, particularly in the market areas in which the Company operates;

the financial and securities markets and the availability of and costs associated with sources of liquidity;

competitive products and pricing;

the ability to sell assets to maintain liquidity;

fiscal and monetary policies of the U.S. Government;

changes in prevailing interest rates;

changes in currency exchange rates;

acquisitions and the integration of acquired businesses;

performance of retail/consumer markets, including consumer preferences and concerns about diet;

effective expansion of the Company’s restaurants in new and existing markets;

profitability and success of franchisee restaurants;

availability of quality real estate locations for restaurant expansion;

credit risk management; and

asset/liability management

Except as may be required by law, the Company does not undertake, and specifically disclaims any obligation, to publicly release the results of any revisions that may be made to any Forward-Looking Statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements.

The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements of Fog Cutter Capital Group Inc. and the notes thereto included elsewhere in this filing. References in this filing to “the Company,” “we,” “our,” and “us” refer to Fog Cutter Capital Group Inc. and its subsidiaries unless the context indicates otherwise.

Index

PART I

ITEM 1. BUSINESS

~~General~~Business Overview

Fog Cutter Capital Group Inc. (“~~FCCG~~Fog Cutter”, or the “Company”, “we,” “us” or “ours”) ~~operates~~ ais primarily engaged in the operations of its Fatburger Holdings, Inc. (“Fatburger”) restaurant business,. We ~~conducts~~acquired ~~commercial~~the ~~mortgage~~controlling ~~lending~~interest ~~and brokerage~~in ~~activities~~Fatburger in August 2003 and ~~makes~~own ~~real~~82% ~~estate~~voting ~~investments.~~control ~~The~~as ~~Company~~of ~~also~~December ~~seeks~~ 31, 2008. In addition to ~~acquire~~our ~~controlling~~restaurant ~~interests~~operation, inwe ~~underperforming~~also orconduct ~~undervalued~~unrelated ~~operating businesses~~manufacturing inactivities ~~which~~and ~~the~~make ~~Company’s~~real ~~management~~estate ~~skills~~related ~~and~~investments ~~financial~~through ~~structuring can~~various ~~create~~controlled ~~value~~subsidiaries.

The Company was originally incorporated as Wilshire Real Estate Investment Trust Inc. in the State of Maryland on October 24, 1997. However, we subsequently chose not to elect the tax status of a real estate investment trust ~~(“REIT”)~~ and on January 25, 2001, we changed our name to Fog Cutter Capital Group Inc. to better reflect the diversified nature of our business. Our ~~capital~~ stock is ~~traded~~quoted ~~over the counter~~ on the Pink Sheets under the ticker symbol “FCCG.PK”.

~~Available~~Our ~~Information~~website is www.fogcutter.com. We make our annual report on Form 10-K, as well as other periodic reports filed with the Securities and Exchange Commission, available free of charge through our website as soon as reasonably practicable after they are filed. A copy of our annual report may also be obtained by writing to us at 301 Arizona Avenue, Suite 200, Santa Monica, CA 90401, Attn: Investor Reporting.

~~Our~~Segment ~~website~~financial isdata ~~www.fccgi.com.~~for Wethe ~~make~~years ~~our~~ended ~~annual~~December ~~report on Form 10-K~~31, as ~~well~~2008 asand ~~other~~2007 ~~reports~~for ~~filed with~~ the ~~Securities~~Company ~~and~~is ~~Exchange~~included ~~Commission, available~~in ~~free~~Management’s ofDiscussion ~~charge~~and ~~through~~Analysis ~~our~~of ~~website~~Financial asCondition ~~soon~~and asResults ~~reasonably~~of ~~practicable after~~Operations ~~they~~in ~~are~~Part ~~filed.~~II, AItem ~~copy~~7, ofand ~~our~~in ~~annual~~the ~~report~~related ~~may~~Consolidated ~~also~~Financial beStatements ~~obtained~~and ~~by writing~~footnotes toin usPart atII, ~~1410~~Item SW8 ~~Jefferson~~of ~~Street,~~this ~~Portland,~~report ~~Oregon~~on ~~97201, Attn: Investor Reporting~~Form10-K.

~~Business~~Bankruptcy ~~Strategy~~Proceedings

~~Our~~On ~~business~~April ~~strategy consists~~6, ~~of developing~~2009, ~~strengthening~~certain ~~and~~controlled ~~expanding~~subsidiaries ~~our~~of ~~restaurant~~Fog ~~and commercial~~Cutter ~~real~~Capital ~~estate~~Group ~~mortgage~~Inc. ~~brokerage~~filed ~~operations~~voluntary ~~and~~petitions ~~continuing~~for torelief ~~identify and~~under ~~acquire~~chapter ~~real~~11 ~~estate~~of ~~investments~~the ~~with~~United ~~favorable~~States ~~risk-adjusted~~Bankruptcy ~~returns.~~Code ~~We also~~(the ~~seek~~"Chapter to11 ~~identify~~Cases") ~~and acquire controlling interests~~ in ~~other~~the ~~operating businesses~~United inStates ~~which~~Bankruptcy weCourt ~~feel~~for wethe ~~can~~Central ~~add~~District ~~value. Our operating segments consist~~ of ~~(i) restaurant~~ ~~operations~~California ~~conducted~~– ~~through~~San ~~our~~Fernando ~~subsidiary,~~Valley ~~Fatburger Holdings, Inc.~~Division (~~“Fatburger”),~~the ~~(ii~~"Bankruptcy Court") ~~commercial~~. ~~real~~The ~~estate~~entities ~~mortgage brokerage~~involved ~~activities~~and ~~conducted~~the ~~through~~case ~~our~~numbers ~~majority-owned~~assigned ~~subsidiary,~~to ~~George Elkins~~the ~~Mortgage~~subsidiaries ~~Banking Company~~ (~~“George~~collectively, ~~Elkins”)~~the ~~and (iii~~"Debtors") ~~real~~ ~~estate, merchant~~are ~~banking~~as ~~and financing activities. The following is a summary of each of the operating segments~~follows:

Fatburger Restaurants of California, Inc., Case No. 1:09-bk-13964-GM

Fatburger Restaurants of Nevada, Inc., Case No.1:09-bk-13965-GM

The Chapter 11 Cases are being jointly administered. Since the Chapter 11 bankruptcy filing date, the Debtors have been operating their bankruptcy estates as "debtors in possession" under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court.

On or about November 3, 2009, the Debtors filed a joint plan of reorganization and related disclosure statement. The Bankruptcy Court is currently considering the approval of the plan of reorganization.

Operating Segments

Our operating segments are:

(i)

Restaurant Operations – conducted through our Fatburger subsidiary,

(ii)

Manufacturing Operations – conducted through our wholly owned subsidiary, DAC International (“DAC”), and

(iii)

Real Estate and Financing Operations.

Due to the varied nature of our operations, we do not utilize a standard array of key performance indicators in evaluating our results of operations. Our evaluation instead focuses on an investment-by-investment or asset-by-asset analysis within our operating segments.

Restaurant Operations

~~Our~~ Fatburger, ~~subsidiary operates~~“The 26Last ~~hamburger~~Great ~~restaurants~~Hamburger ~~and franchises 36 additional restaurants located primarily in California and Nevada. Known for their cook to order gourmet hamburgers~~Stand”®, ~~the~~opened ~~50’s-style~~its ~~restaurants also offer a variety of side orders and other sandwiches. The~~ first ~~Fatburger~~restaurant ~~stand was opened~~ in ~~1952~~ in Los Angeles ~~when~~in ~~“fat” was used as slang for “good~~1952.” As of December 31, ~~2004~~ 2008, wethere ~~owned~~were ~~approximately~~92 ~~71% of the voting control of~~ Fatburger. ~~Fatburger plans~~restaurants tolocated ~~significantly~~in ~~expand~~13 ~~its franchising operations throughout the United~~ States and ~~has~~in ~~sold~~Canada, China and the ~~rights~~United toArab ~~open~~Emirates. The ~~220 additional~~ restaurants ~~to approximately~~specialize 20in ~~individual franchisees. During the year ended December 31~~fresh, ~~2004,~~ ~~franchise~~made ~~rights~~ to ~~open~~order 31hamburgers ~~individual~~and ~~Fatburger~~other ~~restaurants~~specialty ~~were sold~~sandwiches. French ~~Ten new~~fries, ~~restaurants~~homemade ~~were~~onion ~~opened during the period~~rings, ~~including 3 company~~hand-~~owned locations.~~scooped ~~Royalty~~ice ~~revenues~~cream ~~were~~shakes ~~approximately~~and ~~$1.2~~soft ~~million~~drinks ~~for~~round out the ~~year~~menu.

Commercial Real Estate Mortgage Brokerage Operations

Our George Elkins subsidiary provided brokerage services related to the production of over $700 million in commercial real estate mortgages during 2004. George Elkins is headquartered in Los Angeles, with satellite offices located throughout the southern California area and in Las Vegas. The mortgage brokerage operation also manages a commercial loan servicing portfolio in excess of $700 million for various investors. We own 51% of the voting control of George Elkins.

~~Real Estate, Merchant Banking and Financing Operations~~Index

We ~~invest~~plan into oropen ~~finance real~~additional ~~estate~~Fatburger restaurants throughout the United States and ~~other~~internationally, ~~real~~including ~~estate-related~~Canada, orChina, ~~finance-related~~Indonesia, ~~assets~~Kuwait, Saudi Arabia and the United Arab Emirates. Ten ~~Our merchant~~new ~~banking~~restaurants were opened during 2008, which included nine franchise locations and ~~financing~~one ~~operations~~company-owned ~~focus~~location. In onaddition, Fatburger acquired four restaurants from franchisees during 2008. We intend to continue to open company-owned restaurants in strategic markets and increase the ~~acquisition~~number of ~~controlling~~ ~~interests~~franchised locations in ~~businesses~~the U.S. and internationally. Fatburger has opened a total of 55 restaurant locations since our acquisition in ~~the~~2003. At ~~process~~December 31, 2008, franchisees owned and operated 56 of ~~restructuring~~the Fatburger locations and we have agreements for approximately 112 new franchise locations. Many ~~This~~factors ~~can~~ affect our ability to open new franchise locations and we expect that it will take ~~the~~several ~~form~~years for our current franchisees to open all of ~~assisting~~their inrestaurant alocations. As ~~management~~is ~~buy-out~~typical for our industry, ~~refinancing~~the ~~corporate~~identification ~~debt or~~of ~~acquiring~~qualified franchisees and quality locations has an impact on the ~~“non-core”~~rate ~~assets~~of growth in the number of aour ~~business~~restaurants.

Our restaurant business is moderately seasonal, as average restaurant sales are slightly higher during the summer months than during the winter months. As such, results from our restaurant operations for any quarter are not necessarily indicative of results for any other quarter or for the full fiscal year.

Fatburger’s fiscal year ends on the last Sunday in December and, as a result, a 53rd week is added to the fiscal year every 5 or 6 years. In a 52-week year, all four quarters are comprised of 13 weeks. In a 53-week year, one extra week is added to the fourth quarter. Fiscal years 2008 and 2007 were both 52 week years.

Manufacturing Operations

We conduct manufacturing activities through our wholly-owned subsidiary, DAC International. DAC is a manufacturer of computer controlled lathes and milling machinery for the production of eyeglass, contact, and intraocular lenses.

Real Estate and Financing Operations

During 2008, we sold nearly all of our interests in real estate and notes receivable, which included leasehold interests in 72 freestanding retail buildings located throughout the United States and an apartment building located in Barcelona, Spain. We also recorded an impairment charge against the remaining net carrying value of a second apartment building in Spain. During 2008, we were fully repaid on notes receivable that had a carrying value of $1.8 million and which were primarily secured by real estate. We expect that as we focus our attention on the expansion of Fatburger, our future investments in this segment will become less frequent. As of December 31, 2008, our carrying value for real estate and notes receivable was $52,000.

Principal Assets

We have set forth below information regarding our principal assets at December 31, ~~2004~~ 2008 and ~~2003~~2007:

	December 31, 2004						December 31, 2003
	December 31, 2008							December 31, 2007
	Carrying Value			%	%		~~Carrying Value~~	Carrying Value		%
	(dollars in thousands)
Real estate, net		$	26,660		36.0	%		$	22,577	20.7	%
Goodwill		8,028			29.1	%			9,526		17.7	%
Cash and cash equivalents		11,948			16.2			19,607		18.0
Property, plant and equipment, net		8,253			30.0				10,203		19.0
Restaurant property, plant and equipment, net		6,228			8.4			5,897		5.4
Intangible assets, net		4,068			14.8				4,986		9.2
Mortgage-backed securities(1)		9			—			35,510		32.6
Inventories		2,964			10.7				2,505		4.7
Loans(2)		6,651			9.0			3,744		3.4
Accounts receivable		2,712			9.8				1,491		2.8
Investment in Bourne End Property Holdings Ltd		1,901			2.6			2,141		2.0
Cash and cash equivalents		390			1.4				1,131		2.1
Intangible assets, net		5,401			7.3			5,640		5.2
Notes Receivable		52			0.2				612		1.1
Goodwill		7,063			9.6			7,300		6.7
Real estate, net		-			-				19,658		36.6
Other assets		81,~~037~~106			104.90			~~6,560~~	3,657	~~6.0~~	6.8
Total assets	$	$27,573	~~73,898~~		100.0	%		$	~~108~~53,~~976~~769	~~100.0~~	%100.0	%

(1) Our mortgage-backed securities are secured primarily by residential mortgage loans.

(2) Our loans are primarily secured by stock, commercial assets and real estate.

The following sections provide additional information on our principal assets and operations as of December 31, 2004.

Restaurant Operation

Fatburger. We acquired the controlling interest in Fatburger in August 2003. Our investment consists of convertible preferred stock (the “Series A Preferred”) and redeemable convertible preferred stock (the “Series D Preferred”). As a result of our voting control, we began reporting the operations of Fatburger on a consolidated basis beginning August 15, 2003.

The Series A Preferred is convertible into a 50% ownership interest of the common stock of Fatburger on a fully diluted basis. The Company owns approximately 93% of the issued and outstanding Series A Preferred, and currently holds voting rights equal to 71% of the voting control of Fatburger. The Series A Preferred is not redeemable and does not pay dividends.

The Series D Preferred has a liquidation preference and is redeemable by Fatburger for $10.1 million plus accrued but unpaid dividends. Dividends accrue at a rate of 20% of the redemption value, compounded annually. The Series D Preferred does not have any voting rights but may be converted into common stock under certain circumstances. The Company owns all of the issued and outstanding Series D Preferred.

The accompanying consolidated statements of financial condition include net restaurant property, plant and equipment of $6.2 million relating to Fatburger operations as of December 31, 2004. Intangible assets, consisting primarily of Fatburger trademarks and franchises, totaled $5.4 million at year end. The acquisition of Fatburger also resulted in the recording of goodwill, which at December 31, 2004 totaled $7.1 million.

The accompanying consolidated statements of financial condition also include borrowings and notes payable of $6.3 million as of December 31, 2004 as a result of the consolidation of Fatburger. Of this amount, approximately $5.6 million is secured by substantially all of the assets of Fatburger, bears interest at rates currently ranging from 5.8% to 6.9% and requires monthly payments of principal and interest, primarily through 2014. The debt was refinanced in September 2004 and requires adherence to financial covenants and conditions with which management believes Fatburger was in compliance as of December 31, 2004. Borrowings and notes payable also include mandatory redeemable preferred stock (the “Series B Preferred”) with a carrying value of $0.7 million which was issued by Fatburger to a third party on August 15, 2003. The Series B Preferred is redeemable by Fatburger for $1.5 million at any time, but must be redeemed by August 15, 2009. Under certain circumstances, the Series B Preferred shareholders may convert their shares into the common stock of Fatburger in an amount equal to the redemption price based upon the fair value of the common stock at the time of conversion. The Series B Preferred is entitled to dividends from Fatburger equal to 2.5% per annum of the redemption price. The Series B Preferred does not have voting rights.Index

~~Commercial~~The ~~Real~~following ~~Estate~~sections ~~Mortgage~~provide ~~Brokerage~~additional ~~Operation~~information on our principal assets and operations as of December 31, 2008.

~~George~~Restaurant Elkins. We own a 51% interest in George Elkins and began reporting their operations on a consolidated basis in May 2002. George Elkins provided brokerage services related to the production of over $700 million in commercial real estate loans during 2004 and currently acts as the loan servicer for a portfolio of $700 million in commercial real estate loans. Since George Elkins has a service based operation, there are no material assets or liabilities relating to the consolidation of that segment in the accompanying consolidated statements of financial condition.Operations

~~Real~~Our ~~Estate,~~investment ~~Merchant Banking~~in ~~and~~Fatburger ~~Financing~~at ~~Operation~~December 31, 2008 consists of:

~~Real~~(i) ~~Estate~~Series A Preferred Stock - convertible preferred stock which is convertible into a 50% ownership interest of the common stock of Fatburger on a fully diluted basis. As of December 31, 2008, we own approximately 93% of the issued and outstanding Series A Preferred stock, and currently hold voting rights equal to 82% of the voting control of Fatburger. The Series A Preferred stock is not redeemable and does not pay dividends.

We(ii) ~~invest,~~Series ~~both~~D ~~directly~~Preferred ~~and~~Stock ~~indirectly,~~- ~~in commercial~~redeemable ~~and~~convertible ~~residential~~preferred ~~real~~stock ~~estate~~which has a liquidation preference. ~~The~~Dividends ~~following~~accrue ~~table~~at ~~sets~~a ~~forth information~~rate ~~regarding~~of ~~our~~20% ~~direct~~of ~~investments~~the inredemption ~~real~~value, ~~estate~~compounded atannually. As of December 31, ~~2004:~~ 2008, the redemption amount totaled $23.3 million. The Series D Preferred Stock does not have any voting rights but may be converted into common stock under certain circumstances. We own all of the issued and outstanding shares of Series D Preferred Stock.

Date Acquired	Name of Property	Location	Year Built/ Renovated	Net Leaseable Sq. Ft.		Approximate Percentage Leased at December 31, 2004			Net Book Value
10/2002	50 Freestanding Retail Properties	Various U.S.	Various		225,000		81	%		$	19,074,000
4/1998	Eugene Warehouse	Eugene, OR	Unknown		84,912		50	%		1,554,000
6/2004	Barcelona Apartments	Spain	Unknown		17,100		100	%		4,585,000
4/1998	Wilsonville-Land	Wilsonville, OR	N/A		474,804		N/A			1,447,000
										$	26,660,000

(iii)

Common Stock – we own common stock equal to 15% of the fully diluted ownership of Fatburger.

~~N/A—Not~~As ~~applicable~~a result of our voting and operational control, we report the operations of Fatburger on a consolidated basis. The accompanying consolidated statements of financial condition include the following at December 31, 2008 relating to Fatburger:

~~The~~· ~~following~~$6.3 ismillion ~~a brief~~in ~~description~~property, ofplant ~~each~~and ofequipment, ~~the properties set forth in the above table:~~net;

~~Freestanding Retail~~· ~~Properties. We own directly, or through capital leases, 50 freestanding retail buildings located throughout the United States. The buildings are approximately~~ $4~~,500 square feet each and were originally developed during the 1970’s and 1980’s~~.1 ~~The~~million ~~buildings are leased to a variety~~ of ~~tenants~~intangible ~~including convenience stores~~assets, ~~video~~primarily ~~rental~~trademarks ~~outlets, shoe stores~~ and ~~other small businesses. As of December 31, 2004, 8 of the buildings were vacant. We also control 44 similar retail locations through operating leases.~~franchises;

~~During~~· ~~2004, we sold eight similar properties that had been owned in the same portfolio for~~ $36.7 5 million. ~~Subsequent~~of togoodwill; ~~December 31, 2004, we sold two additional stand-alone retail locations in separate~~ and

$7.2 million of borrowings and notes payable consisting of:

$5.8 million debt secured by substantially all of the assets of Fatburger, bearing interest at rates currently ranging from 6.5% to 9.3%, and requiring monthly payments of principal and interest, primarily through 2015. At December 31, 2008, Fatburger had not made all of the required payments on indebtedness with an outstanding principal balance of $3.9 million. As a result, the lender has declared the indebtedness in default and has accelerated the maturity date of the entire balance. If the Company is unsuccessful in renegotiating the debt with the lender and obtaining waivers of the default, the resulting consequences could have a material adverse impact on our business, prospects, financial condition, or results of operation. In addition to the payment default, at December 31, 2008 and 2007, Fatburger was not in compliance with all obligations under the agreements evidencing its indebtedness, as defined in the applicable agreements, due to its failure to meet the prescribed fixed charge coverage ratio and the prescribed debt-coverage ratio in three notes payable. The lender subsequently issued a waiver of the covenant violations for December 31, 2007. As such, on our Consolidated Statements of Financial Condition, $4.1 million of long-term debt that was classified as long-term at December 31, 2007 has been classified as current as of December 31, 2008.

ii.

Mandatory redeemable preferred stock (the “Series B Preferred”) with a carrying value of $1.4 million which was issued by Fatburger to a third party on August 15, 2003. This stock is redeemable by Fatburger for $1.5 million at any time, but must be redeemed by August 15, 2009. Under certain circumstances, the Series B Preferred shareholders may convert their shares into the common stock of Fatburger in an amount equal to the redemption price based upon the fair value of the common stock at the time of conversion. The stock accrues dividends from Fatburger equal to 2.5% per annum of the redemption price and does not have voting rights.

In September 2007, Fatburger opened its first joint-venture location in China, at the Venetian Macao-Resort-Hotel in Macao. During 2008, an additional joint venture location was opened in Hong Kong. These joint-venture locations pay a management fee to Fatburger in the amount or 10% of net sales, which is eliminated upon consolidation. In all other respects, these locations operate similar to our other company-owned locations.

Manufacturing Operations

We own 100% of the outstanding stock of DAC. The accompanying consolidated statements of financial condition include the following at December 31, 2008 relating to DAC:

$2.8 million of inventory;

$1.9 million in trade receivables;

$1.5 million of goodwill;

$0.8 million of borrowings; and

$2.6 million of accounts payable and accrued liabilities, including $1.2 million of sales deposits.

Real Estate Related Operations

Real Estate – We have invested, both directly and indirectly, in commercial and residential real estate. However, as of December 31, 2008, our carrying value of real estate was zero. In February 2008, we sold our wholly owned subsidiary, Fog Cap Retail Investors LLC (“FCRI”), which held our leased real estate portfolio. The sales price for the FCRI membership interests was $8.5 million and was paid in cash. A portion of the proceeds were used to repay $4.2 million of existing debt. We recorded a $4.2 million gain on sale as a result of the transaction. We also entered into an option agreement with the buyer that gave us the right, but not the obligation, to re-acquire all of the membership interests in FCRI. The option period was for two years beginning February 15, 2008. Under certain circumstances after December 31, 2008, the buyer could accelerate the termination of the option period upon thirty days notice. The exercise price increased over the option period from approximately $9.7 million at December 31, 2008 to $11.3 million after January 31, 2010. The option commitment fee was $850,000 and was payable in installments over the option period. We determined that the option exercise prices were significantly higher than the expected value during the option period. Therefore, the option has been assigned no value as it was not anticipated that it would provide a future economic benefit to us. The $850,000 option commitment fee reduced the amount of the gain on sale. The option was subsequently terminated on October 31, 2009.

~~transactions for an aggregate sales price of $1.2 million in cash. We currently are under contract to sell three additional free-standing retail locations for a combined sales price of $1.3 million.~~Index

~~Eugene~~In ~~Warehouse,90005 Prairie~~September ~~Road~~2008, ~~Eugene,~~we ~~Oregon. This~~sold ~~building~~one isinvestment anproperty 84in Barcelona,~~000-square-foot~~ ~~warehouse~~Spain ~~located~~held onthrough 4a Variable Interest Entity (“VIE”).5 We ~~acres with~~received ~~access~~cash toproceeds ~~Interstate~~of ~~Route~~approximately $4.5 ~~via~~million ~~Belt~~and ~~Line~~recorded ~~Road~~a ~~and~~loss toon the ~~Eugene-Springfield~~ ~~metropolitan~~sale ~~and~~of ~~Gateway~~approximately ~~areas~~$0.6 ~~The~~million. Approximately ~~property~~$3.2 ismillion ~~within~~of the ~~West~~ ~~Eugene~~cash ~~enterprise~~proceeds ~~zone~~were used to partially repay two outstanding notes payable. We ~~This~~continue to own an apartment property isin ~~being~~Spain ~~marketed~~through ~~for~~a ~~lease~~VIE, orbut ~~sale~~we have established impairment losses on this property which have reduced its carrying value to zero.

~~Barcelona~~· ~~Apartments. This~~Indebtedness ~~investment~~– ~~consists~~When ~~of two~~it ~~apartment~~is ~~buildings~~beneficial to do so, ~~consisting~~our ofgeneral 20strategy ~~residential~~is ~~units~~to ~~and~~leverage 4our ~~retail~~real ~~shops located~~estate ininvestments ~~Barcelona,~~by ~~Spain~~incurring borrowings secured by these investments. WeHowever, ~~are~~we ~~converting~~had ~~the~~no ~~units~~outstanding indebtedness relating to ~~condominiums~~real ~~and preparing~~estate ~~the~~as ~~individual~~of ~~units~~December ~~for~~31, ~~sale~~2008.

~~Wilsonville Land. This 10.9-acre~~Notes ~~parcel~~receivable – As of ~~undeveloped~~December ~~land~~31, is2008, ~~located~~our innotes ~~the~~receivable ~~city~~consisted of ~~Wilsonville~~one note secured by real estate with a carrying value of approximately $52, ~~Oregon,~~000. We ~~and~~received ispayment ~~being~~in ~~held~~full ~~for~~on ~~future~~two ~~development~~notes orduring ~~sale~~2008 (not including loans to senior executives) of $0.6 million.

Indebtedness. When it is beneficial to do so, our general strategy is to leverage our real estate investments by incurring borrowings secured by these investments. Set forth below is information regarding our indebtedness relating to our real estate as of December 31, 2004.

Property	Principal Amount		Interest Rate			Approximate Maturity		Amortization		Annual Payments
Freestanding Retail Properties	$	11,985,000		8.5	%		1/2018		30 Years	$	1,539,000
(subject to capital leases)
Barcelona Apartments	$	1,636,000		4.0	%		06/2029		N/A	$	65,000

The Wilsonville and Eugene properties are not currently subject to indebtedness.

Loans

Our loans are primarily secured by stock, commercial assets and real estate. Our portfolio consists primarily of five loans with a total outstanding principal balance of $12.0 million. However, as a result of purchase discounts and other deferred income, the carrying value of these loans is $6.7 million. One of the loans, with a carrying value of $1.6 million is secured by substantially all of the common stock and assets of a corporation that develops and manufactures eyeglass lens production machinery. One additional loan with a carrying value of $1.1 million is secured by the stock of a private corporation that has developed and is marketing a software application. The remaining loans are secured by commercial or residential real estate. As of December 31, 2004, two of the Company’s loans with a carrying value totaling $2.2 million had been restructured to provide additional time for repayment by the borrowers in exchange for various extension fees or other new terms. As a result, these loans were considered impaired for accounting purposes and were on non-accrual status. However, no impairment reserves were required on these impaired loans due to management’s expectation that the carrying amounts will be collected.

All of the loans mature in 2005. Based upon our carrying value, the effective aggregate interest rate on these loans at December 31, 2004 was approximately 8.0%. The effective interest rate is net of the effect of the two impaired loans which are on non-accrual status, but does not reflect the effect of points and fees collected.

Other Subsidiaries and Investments

We also invest in other finance related opportunities, including the debt or equity of corporations in the process of restructuring their operations. We have acquired the following subsidiaries and made the following investments:

Bourne End. In December 2000, we organized and led a group of investors to purchase all of the outstanding capital stock of Bourne End Properties Plc (“Bourne End”), a specialist investor in retail property. BEP Acquisitions was incorporated in Jersey, Channel Islands for the purpose of acquiring Bourne End. BEP Acquisitions is a wholly-owned subsidiary of BEP Property Holdings Limited (“BEP”), which is 26% owned by us, 71% owned by Merrill Lynch (Jersey) Holdings Limited (a subsidiary of Merrill Lynch & Co., Inc.) and 3% owned by the asset manager, Greenbau Estuary Limited.

At the time of the acquisition, Bourne End had approximately GBP 169.6 million of assets and GBP 123.1 million of debt. The real estate assets consisted of 1.7 million square feet in fifteen shopping centers located in the United Kingdom. Bourne End has sold fourteen of these properties since the acquisition, including one sale during 2004. The sales are consistent with the investor group’s strategy to reposition each of the centers with the ultimate goal of reselling the properties.

V Model Management. As of December 31, 2004, we have invested approximately $0.6 million in a debt and equity financing package for V Model Management, a French modeling agency (“V Model”). Headquartered in Paris, V Model represents and promotes models for the fashion industry. Currently, V Model represents approximately 60 male and 60 female models. Our investment included the acquisition of 51% of the outstanding common stock of V Model. As a result of our voting control, we began reporting the operations of V Model on a consolidated basis beginning November 20, 2003.

Mortgage-Backed Securities. Mortgage-backed securities are interests in pools of mortgages that have been securitized and are usually issued in multiple classes ranging from the most senior to the most subordinate class. Prior to 2004, investments in mortgage-backed securities were a significant part of our business. However, during 2002 through 2004, we took advantage of market opportunities and sold nearly all of our mortgage-backed securities at significant gains. As a result, at December 31, 2004, we only had one remaining security with a carrying value of less than $10,000.

Funding Sources

In order to maximize the return on our investments, we generally seek to fund acquisitions with third-party debt and equity financing so that our invested capital represents a relatively small percentage of the purchase price. Funding sources for real property assets generally involve capital leases or longer-term traditional mortgage financing with banks and other financial institutions. Other ~~Our~~funding ~~investments in~~sources ~~corporate~~include ~~restructuring opportunities are often made without third~~short-~~party leverage.~~term ~~The~~notes ~~principal~~payables ~~sources~~from ~~for~~private ~~funding~~lenders ~~mortgage-backed~~and ~~securities~~a ~~have historically~~line ~~been~~of ~~repurchase~~credit ~~agreements~~from ~~with~~a ~~major~~financial ~~investment banks~~institution. The following table sets forth information relating to our borrowings and other funding sources at December 31, ~~2004~~2008 and ~~2003.~~2007:

	At December 31,
	2004		2003
	2008			2007
	(dollars in thousands)
Borrowings and Notes payable:	(dollars in thousands)
Borrowings and Notes payable:
Notes payable and other debt – Fatburger	$	7,158		$	7,233
Repurchase agreements	$	—	$	25,318
Notes payable – Fog Cutter		6,341			7,373
Notes payable and other Fatburger debt	6,341		7,804
Notes payable and other debt – DAC		831			500
Other notes payable	1,636		—
Mortgage and note payable – Barcelona properties		-			3,505
Total borrowings	~~7,977~~	14,330	~~33,122~~		18,611
Obligations under capital leases	~~12,401~~	1,927	~~12,942~~		12,064
Total borrowings and other funding sources	$	2016,~~378~~257	$	~~46,064~~$	30,675

6The following table sets forth certain information related to our borrowings. During the reported periods, borrowings were comprised of various notes payable, mortgage debt on real estate and obligations under capital leases. Averages are determined by utilizing month-end balances.

The following table sets forth certain information related to the Company’s borrowings. During the reported periods, borrowings were comprised of repurchase agreements, notes payable and other Fatburger debt, mortgage debt on real estate and obligations under capital leases. Averages are determined by utilizing month-end balances.

	December 31,
	2008			2007
	(dollars in thousands)
Average amount outstanding during the year	$	18,696		$	30,019
Maximum month-end balance outstanding during the year		31,301			31,333
Weighted average rate:
During the year		12.9	%		12.3	%
At end of year		13.9	%		12.2	%

	December 31,
	2004			2003
	(dollars in thousands)
Average amount outstanding during the year	$	28,620		$	50,584
Maximum month-end balance outstanding during the year	$	45,312		$	54,967
Weighted average rate:
During the year	6.7		%	4.4		%
At end of year	8.6		%	4.7		%

Asset Quality

~~Real Estate.~~ Our real estate investments are carried at the lower of historical cost (net of depreciation) or estimated market value. Our estimate of market value is based upon comparable sales information for similar properties and management’s best estimate of market value given current market conditions. Our notes receivable portfolio is secured by real estate and corporate stock. We evaluate the quality of our notes based upon the underlying value of the collateral. We also give consideration to the credit performance of these notes.

Loans. Our loans are secured by real estate, commercial assets and corporate stock. Our evaluation of the quality of our loans is based upon the underlying value of the collateral. We also give consideration to the credit performance of these loans.5

Index

Employees

As of December 31, ~~2004~~ 2008, we had approximately ~~599~~875 employees, which included approximately 28 825 employees of ~~George~~Fatburger ~~Elkins~~ and ~~560~~50 employees of ~~Fatburger.~~DAC,

Intellectual Property

We believe our trademarks and service marks have significant value and are important to our marketing efforts. To protect our proprietary rights, we rely primarily on a combination of copyright, trade secret and trademark laws, confidentiality agreements with employees and third parties, and protective contractual provisions such as those contained in license agreements with consultants, vendors and customers, although we have not signed these agreements in every case. Despite our efforts to protect our proprietary rights, unauthorized parties may copy aspects of our products and obtain and use information that we regard as proprietary. Other parties may breach confidentiality agreements and other protective contracts we have entered into, and we may not become aware of, or have adequate remedies in the event of, any breach. Our policy is to pursue registration of our marks whenever possible and to oppose vigorously any infringement of these marks.

“Fatburger” isand a“The Last Great Hamburger Stand” are registered ~~trademark~~trademarks in the United States and in a number of international jurisdictions. All other trademarks or service marks appearing in this report are trademarks or service marks of the respective companies that use them. We pursue the registration of some trademarks and service marks in the United States and in other countries, but we have not secured registration of all our marks. In addition, the laws of some foreign countries do not protect our proprietary rights to the same extent as do the laws of the United States, and effective copyright, trademark and trade secret protection may not be available in other jurisdictions. We license trademark rights to third parties through our franchise agreements. In the event that a licensee does not abide by compliance and quality control guidelines with respect to the licensed trademark rights or take actions that fail to adequately protect these marks, the value of these rights and our use of them in our business may be negatively impacted.

Competition

~~Restaurant Operations.~~ The restaurant industry, particularly the fast ~~food~~casual segment, is highly competitive and there are numerous well-established competitors possessing substantially greater financial, marketing, personnel and other resources than ~~the~~we ~~company~~have. In addition, the fast ~~food~~casual restaurant industry is characterized by the frequent introduction of new products, accompanied by substantial promotional campaigns. In recent years, numerous companies in the fast ~~food~~casual industry, including Fatburger, have introduced products positioned to capitalize on growing consumer preference for food products which are, or are perceived to be, healthful, nutritious, low in calories and low in fat content. It can be expected that ~~the~~Fatburger ~~company~~ will be subject to competition from companies whose products or marketing strategies address these consumer preferences. In addition, the market for suitable restaurant locations, franchisees, and staff is highly competitive in that fast ~~food~~casual companies, major restaurant companies and non-food companies compete for ~~prime~~the ~~real~~best ~~estate~~in ~~sites~~all of these resources.

~~Commercial~~Where ~~Real~~You ~~Estate~~Can ~~Mortgage Brokerage~~Find ~~Operations. The~~Additional mortgage brokerage industry is also highly competitive. There are a number of similar brokerage firms and direct lenders within the markets that we service which are competing for loan production. We rely on our relationships with lenders and borrowers to generate brokerage opportunities, but we are subject to competition relating to interest rates and underwriting standards being offered in the marketplace.Information

~~ITEM~~We 2are a reporting company and file annual, quarterly and current reports, proxy statements and other information with the SEC. ~~PROPERTIES~~ For further information with respect to us, you may read and copy our reports, proxy statements and other information, at the SEC’s public reference rooms at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as at the SEC’s regional offices at 500 West Madison Street, Suite 1400, Chicago, IL 60661 and at 233 Broadway, New York, NY 10279. You can request copies of these documents by writing to the SEC and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330 for more information about the operation of the public reference rooms. Our SEC filings are also available at the SEC’s web site at www.sec.gov.

~~Our~~Copies ~~corporate~~of ~~headquarters~~our ~~are~~Annual ~~located~~Report inon ~~Portland~~Form 10-K, ~~Oregon,~~ ~~where~~Quarterly weReports ~~lease~~on ~~approximately~~Form 510-Q,~~000~~ ~~square~~Current ~~feet~~Reports ofon ~~office~~Form ~~space~~8-K, ~~under~~our ~~a lease~~proxy ~~expiring~~statement inand ~~December 2009.~~amendments Weto ~~also~~those ~~lease~~reports ~~executive~~filed ~~offices~~or ~~in London,~~furnished ~~England.~~pursuant ~~Fatburger~~to ~~leases~~Section ~~approximately~~13(a) ~~6,600~~or ~~square~~15(d) ~~feet~~of the Securities Exchange Act of ~~corporate office~~1934 ~~space~~as inwell ~~Santa~~as ~~Monica,~~certain ~~California~~of ~~under~~our acorporate ~~lease~~governance ~~that~~documents ~~will~~are ~~expire~~all inavailable ~~July 2007~~on our website (www. ~~George~~fogcutter.com) ~~Elkins~~or ~~leases~~by ~~approximately~~sending ~~6,800~~a ~~square~~request ~~feet~~for ofa ~~office~~paper ~~space~~copy into: ~~Los Angeles~~301 Arizona Avenue, ~~California~~Suite ~~under~~200, aSanta ~~lease~~Monica, ~~that~~CA ~~will~~90401, ~~expire~~Attn: inInvestor ~~June 2005~~Reporting.

~~Fatburger~~ITEM ~~operates 26 restaurant locations in California and Nevada~~1A. ~~Two~~RISK ~~of the restaurant sites in Nevada are operated from properties owned by Fatburger. The remainder of the restaurant locations are leased.~~FACTORS

~~ITEM~~In 3addition to the other information contained in this annual report, you should carefully read and consider the following risk factors. ~~LEGAL~~ If ~~PROCEEDINGS~~any of these risks actually occur, our business, financial condition or operating results could be materially adversely affected and the trading price of our common stock could decline.

~~Capital~~Risks ~~Consultants LLC~~related to us and our common stock - Generally

AsThe ~~the~~delisting ~~Company~~of ~~has~~our ~~previously~~common ~~disclosed,~~stock ~~the Company’s former Chief Executive Officer and current Chief Strategic Officer, Andrew Wiederhorn, and former President, Lawrence Mendelsohn, received letters~~ from ~~the~~ ~~United States Attorney’s Office for~~ the ~~District~~NASDAQ ofStock ~~Oregon~~Market ~~(“USAODO”)~~could inimpair ~~March 2001 advising~~our ~~them~~ability ~~that they were targets of a grand jury investigation (the “CCL Investigation”) into the failure of Capital Consultants, L.L.C (“CCL”). CCL was a lender~~ to ~~Wilshire~~finance ~~Credit~~our ~~Corporation~~operations ~~(“WCC”)~~through and related and affiliated companies. WCC was a mortgage loan servicing company owned by Mr. Wiederhorn and Mr. Mendelsohn that provided mortgage loan servicing for Wilshire Financial Services Group Inc., a public company for which Mr. Wiederhorn acted as CEO and Mr. Mendelsohn acted as President and which was principally engaged in banking, loan pool purchasing, and investing in mortgage-backed securities. As a result of the ~~liquidity~~sale ~~crisis in the financial markets in the fall~~ of 1998, Wilshire Financial Services Group Inc. experienced significant losses and filed for bankruptcy, which in turn had a significant impact on its affiliates, including WCC, which could not repay the amounts borrowed from CCL. At the time, Wilshire Financial Services Group Inc. owned approximately 8.6% of the Company’s common stock ~~and~~or ~~managed~~securities ~~the~~convertible ~~Company’s~~into ~~investments~~common ~~under a management agreement~~stock.

In August 2002, Mr. Mendelsohn resigned as President and Director of the Company. In November 2003, Mr. Mendelsohn entered into an agreement with the USAODO pursuant to which he pled guilty to filing a false 1998 personal tax return and agreed to cooperate in the CCL Investigation.6

Index

Effective October 14, 2004, due to a NASDAQ staff determination to delist our common stock, our stock began trading in the over-the-counter (“OTC”) market. Prior to the delisting, our common stock was quoted on the NASDAQ Stock Market. The liquidity of our common stock is reduced by trading on the OTC market as compared to quotation on the NASDAQ Stock Market. The coverage of the Company by security analysts and media could be reduced, which could result in lower prices for our common stock than might otherwise prevail and could also result in increased spreads between the bid and ask prices for our common stock. Additionally, certain investors will not purchase securities that are not quoted on the NASDAQ Stock Market, which could materially impair our ability to raise funds through the issuance of common stock or other securities convertible into common stock.

Because the trading price of our common stock is currently below $5.00 per share, trading in our common stock is subject to certain restrictions and the market for our common stock could diminish.

Because the trading price of our common stock is less than $5.00 per share, trading in our common stock is subject to Rule 15g-9 of the Securities Exchange Act of 1934, as amended. Under that Rule, brokers who recommend such securities to persons other than established customers and accredited investors must satisfy special sales practice requirements, including an individualized written suitability determination for the purchaser and the purchaser’s written consent prior to any transaction. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 also requires additional disclosure in connection with any trades involving a stock defined as a penny stock (generally, any equity security not traded on an exchange or quoted on NASDAQ that has a market price of less than $5.00 per share), including the delivery of a disclosure schedule explaining the penny stock market and the associated risks. Such requirements could severely limit the market liquidity of our common stock.

Changes in interest rates and currency exchange rates affect our net income.

Our borrowings and the availability of further borrowings are substantially affected by, among other things, changes in interest rates. Fluctuations in interest rates will affect our net income to the extent our operations and our fixed rate assets are funded by variable rate debt. We are also affected by foreign currency exchange rate changes, as a significant portion of our assets are invested in foreign currencies, mainly the euro. See Item 7A - Quantitative and Qualitative Disclosures about Market Risk for further analysis of the impact of interest and currency rate fluctuations on our financial condition and results of operations.

If we do not retain our key employees and management team our ability to execute our business strategy will be limited.

Our future performance will depend largely on the efforts and abilities of our key executive, finance and accounting, and managerial personnel, and on our ability to attract and retain them. The loss of one or more of our senior management personnel may adversely affect our business, financial condition or operating results. When we lose key employees, new employees must spend a significant amount of time learning our business model in addition to performing their regular duties and integration of these individuals often results in some disruption to our business. In addition, our ability to execute our business strategy will depend on our ability to recruit and retain key personnel. Our key employees are not obligated to continue their employment with us and could leave at any time. As part of our strategy to attract and retain personnel, we offer stock option grants to certain employees. However, given the fluctuations of the market price of and limited market our common stock, potential employees may not perceive our equity incentives such as stock options as attractive, and current employees whose options are no longer priced below market value may choose not to remain employed by us. In addition, due to the intense competition for qualified employees, we may be required to increase the level of compensation paid to existing and new employees, which could materially increase our operating expenses.

We may be subject to litigation, which may be expensive and may be time consuming for our management team.

We vigorously defend ourselves in litigation, which can cause increased professional fees from our external legal counsel, and may be time consuming for our management team. If we fail to succeed in defending ourselves in certain lawsuits, our liquidity could be negatively affected. See Item 3 – Legal Proceeds for detailed description of current litigation.

Changes to our liquidity may affect our net income and future business plans.

The sale of real estate and other investments has historically been a recurring part of operations and a source of liquidity. However, most of those investments have been liquidated as the Company focused on the Fatburger operations. Borrowings and Fatburger’s operations are now the major source of liquidity for the Company and management expects these sources, including the sale of Fatburger franchises, to generate adequate cash flow to meet the Company’s liquidity needs for the next fiscal year. The Company has experienced losses from operations since its 2004 fiscal year. During this period, the Company’s operations and activities have become more focused on restaurant and other more typical commercial business activities and have been transitioning away from finance and real estate activities. The growth strategies for the restaurant and other commercial operations, as well as administrative cost burdens, may threaten the Company’s liquidity position.

If our existing liquidity position were to prove insufficient, and we were unable to repay, renew or replace maturing indebtedness on terms reasonably satisfactory to us, we may be required to sell (potentially on short notice) a portion of our assets, and could incur losses as a result. Specific risks to our liquidity position include, but are not limited to, interest rate risk, Fatburger’s debt covenants and Fatburger’s store expansion.

Index

Insiders own a significant portion of our common stock, which could limit our shareholders’ ability to influence the outcome of key transactions.

As of December 31, 2008, our executive officers and directors and their affiliates owned approximately 56.9% of our common stock. Andrew Wiederhorn (Chairman of the Board and Chief Executive Officer), his wife Tiffany Wiederhorn and entities controlled by Mr. and Mrs. Wiederhorn, together own approximately 41.1% of our common stock at December 31, 2008. Accordingly, our executive officers and directors have the ability to affect the outcome of, or exert considerable influence over, all matters requiring shareholder approval, including the election and removal of directors and any change in control. This concentration of ownership of our common stock could have the effect of delaying or preventing a change of control of us or otherwise discouraging or preventing a potential acquirer from attempting to obtain control of us. This, in turn, could have a negative effect on the market price of our common stock. It could also prevent our shareholders from realizing a premium over the market prices for their shares of common stock.

Risks related to Fatburger

Fatburger debt covenant

In addition to the payment default, at December 31, 2008 and 2007, Fatburger was not in compliance with all obligations under the agreements evidencing its indebtedness, as defined in the applicable agreements, due to its failure to meet the prescribed fixed charge coverage ratio and the prescribed debt-coverage ratio in three notes payable. The lender subsequently issued a waiver of the covenant violations for December 31, 2007. There can be no assurance that Fatburger will be able to comply with all of its obligations under the agreements evidencing its indebtedness in the future, or that lenders will agree to waive future defaults. Failure to satisfy covenants in the Company’s loan documents may result in a default and acceleration of outstanding obligations.

Fatburger may not be able to achieve its planned expansion.

We believe our Fatburger segment will constitute an increasingly important part of our business going forward. In addition to the risks associated generally with a restaurant business, such as changing consumer tastes and price pressure from competing businesses, our success depends in large part on our ability to expand Fatburger’s operations. We intend to grow Fatburger primarily through developing additional new franchisee and Company-owned restaurants. Development involves substantial risks, including:

the availability of financing to Fatburger and to franchisees at acceptable rates and upon acceptable terms;

the availability of sufficient liquidity to fund continued expansion;

development costs exceeding budgeted or contracted amounts;

delays in the completion of construction;

the inability to identify, or the unavailability of, suitable sites on acceptable leasing or purchase terms;

developed properties not achieving desired revenue or cash flow levels once opened;

incurring substantial unrecoverable costs in the event that a development project is abandoned prior to completion;

the inability to obtain all required governmental permits;

changes in governmental rules, regulations and interpretations; and

changes in general economic and business conditions.

Although we intend to manage Fatburger’s operations and development to reduce such risks, we cannot assure you that present or future development will perform in accordance with our expectations. We cannot assure you that we will complete the development and construction of the restaurants, or that any such development will be completed in a timely manner or within budget, or that any restaurants will generate our expected returns on investment. Our inability to expand Fatburger in accordance with our plans or to manage our growth could have a material adverse effect on our results of operations and financial condition.

We may not be able to obtain financing sufficient to fund our planned expansion of Fatburger.

We are implementing a nationwide and international expansion of franchise and company-owned locations of Fatburger, which will require significant liquidity. If Fatburger or its franchisees are unsuccessful in obtaining capital sufficient to fund this expansion, the timing of restaurant openings may be delayed and Fatburger’s results may be harmed.

On June 3, 2004 the Company announced that Chief Executive Officer and Chairman of the Board Andrew Wiederhorn had entered into a settlement with the USAODO regarding its investigation into CCL (the “Settlement”) and would take a leave of absence from his corporate positions at the Company.Index

~~Under~~Fatburger’s ~~the~~success ~~Settlement~~depends ~~terms, Mr. Wiederhorn pled guilty~~ on ~~June 3,~~its ~~2004~~ability to ~~two~~locate ~~federal counts and was sentenced to 18 months incarceration and fined $2.0 million. The first count,~~ a ~~violation~~sufficient ofnumber ~~an ERISA provision, involved a federal law that required no criminal intent and for which his reliance on the advice~~ of ~~counsel~~suitable ~~was~~new ~~not~~restaurant ~~a defense~~sites. The second count related to a violation involving a deduction on a personal tax return. The deduction was structured and approved by Mr. Wiederhorn’s tax advisors and did not reduce Mr. Wiederhorn’s tax liability or reduce the government’s tax collections. The charges to which Mr. Wiederhorn has pled guilty pursuant to the Settlement are not based upon any acts or omission involving the Company or Mr. Wiederhorn in his capacity as an officer or director of the Company.

InOne ~~entering~~of ~~into~~the ~~Mr. Wiederhorn’s~~biggest ~~leave~~challenges ~~of absence~~in ~~agreement,~~meeting ~~the~~our ~~Company’s~~growth ~~Board~~objectives offor ~~Directors~~Fatburger ~~considered~~will ~~the~~be ~~nature~~to secure an adequate supply of ~~the~~ ~~statutes~~suitable tonew ~~which~~restaurant Mrsites. ~~Wiederhorn~~ We ~~pled~~have experienced delays in opening some Fatburger restaurants and may experience delays in the ~~fact~~future. There can be no assurance that hesufficient ~~relied~~suitable ~~on the~~locations ~~advice~~will ofbe ~~expert~~available ~~legal~~for ~~counsel~~our ~~and~~planned aexpansion ~~national~~in ~~accounting~~any ~~firm~~future period. Delays ~~The~~or ~~Board also~~failures ~~believed~~in itopening ~~was~~new ~~important~~restaurants tocould ~~assure~~materially ~~Mr. Wiederhorn~~adversely affect Fatburger’s ~~return~~performance toand ~~active involvement~~our ~~with~~business, ~~the~~financial ~~Company~~condition, ~~because~~operating ofresults ~~his~~and ~~expertise~~cash ~~and~~flows. In ~~knowledge~~addition, ~~and~~Fatburger ~~to preserve~~is aexpanding ~~significant~~into ~~business~~international ~~relationship~~markets, ~~and~~which ~~the~~may ~~value~~have ofadditional ~~the~~challenges ~~Company’s investments~~and requirements.

~~Under~~New ~~the terms of the leave of absence agreement~~restaurants, ~~Mr. Wiederhorn will~~once ~~continue to receive his regular salary and bonus pursuant to and as set forth in his employment agreement. In addition~~opened, inmay ~~consideration~~not ofbe ~~Mr. Wiederhorn’s good will~~profitable, ~~cooperation,~~if ~~and~~at ~~continuing assistance~~all, ~~and in recognition of Mr. Wiederhorn’s past service to the Company, to help avoid litigation and~~ for ~~the~~several ~~other reasons stated in the agreement, the Company made a leave of absence payment to Mr~~months. ~~Wiederhorn in the amount of $2.0 million on June 2, 2004.~~

ToWe ~~address~~anticipate ~~the~~that ~~management~~new ~~transition,~~Fatburger ~~the~~restaurants ~~Company appointed~~will ~~Donald~~generally ~~Berchtold~~take asseveral ~~Co-Chief~~months ~~Executive~~to ~~Officer~~reach innormalized ~~June 2004.~~operating ~~Mr. Berchtold has~~levels ~~been~~due ~~Senior~~to ~~Vice~~inefficiencies ~~President~~typically ofassociated ~~Administration~~with atnew ~~the~~restaurants, ~~Company~~including ~~since~~lack ~~October 1999 and~~of ~~became~~market aawareness, ~~director~~the inneed ~~March 2004.~~to Hehire ~~currently~~and ~~sits~~train ona ~~the~~sufficient ~~board~~number of ~~directors~~ ofteam ~~Fatburger~~members, ~~and~~operating ~~has~~costs, ~~more~~which ~~than~~are 25often ~~years~~materially ~~experience~~greater induring the ~~restaurant business.~~first ~~Mr. Berchtold~~several ismonths ~~the~~of ~~father-in-law~~operation ofthan ~~Mr. Wiederhorn.~~thereafter, ~~In order~~pre-opening tocosts ~~further~~and ~~assist~~other ~~the~~factors. Further, ~~transition~~some, ~~David~~or ~~Dale-Johnson~~all ~~and~~of ~~Don~~the ~~Coleman serve~~new asrestaurants ~~co-Chairmen~~may ofnot ~~the~~attain ~~Board.~~anticipated ~~Both~~operating ~~Mr. Dale-Johnson~~results ~~and~~or ~~Mr. Coleman have~~results ~~been~~similar ~~directors~~to those of ~~the~~Fatburger’s ~~Company~~existing ~~since October 2001~~restaurants. In ~~Mr. Dale-Johnson~~addition, ~~was~~restaurants ~~the~~opened ~~Director~~in ofnew ~~the Real~~markets ~~Estate~~may ~~program~~open at ~~USC’s~~lower ~~Marshall~~average ~~School~~weekly ofsales ~~Business~~volumes ~~and~~than ~~has~~restaurants ~~significant expertise~~opened in ~~real~~existing ~~estate,~~markets ~~economics~~ and ~~finance.~~may ~~Mr. Coleman~~have ~~has held~~higher ~~prominent~~restaurant-level ~~executive~~ operating ~~positions~~expense inratios ~~several~~than ~~major~~in ~~companies~~existing ~~and~~markets. Sales ~~is currently~~at ~~the~~restaurants ~~Chief~~opened ~~Operating~~in ~~Officer~~new ofmarkets ~~Eagle~~may ~~Telephonic~~take ~~Inc.~~longer ~~The~~to ~~Company~~reach ~~also appointed~~average ~~Mr. Dale~~annual company-~~Johnson~~owned asrestaurant ~~Chief Investment Officer~~sales, ~~adding~~if aat ~~new full-time~~all, ~~position~~thereby toaffecting the ~~Company’s~~profitability ~~management~~of ~~team~~these restaurants.

~~Mr. Wiederhorn~~Fatburger’s ~~began~~existing ~~his~~systems ~~leave of absence on August 2, 2004~~ and isprocedures ~~expected~~may to remain in that status until October 2, 2005. On August 13, 2004, the Board of Directors adopted a resolution changing the role of Andrew Wiederhorn from Co-Chief Executive to Chief Strategic Officer during the leave of absence period. The Board determined that during the leave of absence period, Mr. Wiederhorn would be ininadequate ~~a better position~~ to ~~develop~~support ~~strategies that~~our ~~would~~growth ~~be of future benefit to the Company, while his current status would significantly limit his ability to perform the full functions of Co-Chief Executive Officer~~plans. ~~All other provisions of the Leave of Absence Agreement and employment agreement with Mr. Wiederhorn remain in force. On August 13, 2004, Donald J. Berchtold became sole Chief Executive Officer.~~

~~Mr. Wiederhorn~~We face the risk that Fatburger’s existing systems and ~~Mr. Mendelsohn~~procedures, ~~pursuant~~ torestaurant ~~the~~management ~~terms~~systems, offinancial ~~their~~controls, ~~respective~~information ~~employment~~and ~~agreements~~accounting systems, ~~may~~management ~~have~~resources ~~been entitled~~and human resources will be inadequate to ~~indemnity~~support ~~from~~our ~~the~~planned ~~Company~~expansion ~~for~~of ~~litigation~~company-owned ~~expenses~~and franchised restaurants. Expansion may strain Fatburger’s infrastructure and ~~personal losses~~other inresources, ~~connection~~which ~~with~~could ~~the~~slow ~~CCL~~restaurant ~~investigations~~development ~~and~~or ~~any~~cause ~~related~~other ~~litigation~~problems. ~~Messrs. Wiederhorn~~ We ~~and~~may ~~Mendelsohn~~not ~~had~~be ~~notified~~able to respond on a timely basis to all of the ~~Company~~changing demands that, ~~although they~~our ~~believed~~planned ~~they~~expansion ~~were~~will ~~entitled~~impose toon ~~primary~~Fatburger’s ~~indemnification~~infrastructure ~~from~~and other ~~sources, they~~resources. Any ~~were~~failure ~~reserving~~by ~~their~~us ~~rights~~to continue to ~~seek~~improve ~~indemnity~~our ~~from~~infrastructure ~~the~~or ~~Company.~~to ~~The Company~~manage ~~did~~other ~~not~~factors ~~agree~~necessary for us to ~~any~~achieve ~~indemnity~~Fatburger’s ~~requests.~~expansion ~~Mr. Wiederhorn~~objectives ~~released the~~could ~~Company~~have ~~from~~a ~~any~~material adverse effect on our operating results.

The fast casual restaurant segment is highly competitive, and that competition could lower revenues, margins and market share.

The fast casual restaurant industry is highly competitive with respect to price, service, location, personnel and the type and quality of food, and there are many well-established competitors. Each of Fatburger’s restaurants competes directly and indirectly with a large number of national and regional restaurant chains, as well as with locally-owned quick service restaurants, fast casual restaurants, and sandwich shops and other similar types of businesses. The trend toward a convergence in grocery, deli and restaurant services may increase the number of Fatburger’s competitors. Such increased competition could have a material adverse affect on Fatburger’s financial condition and results of operations. Some of Fatburger’s competitors have substantially greater financial, marketing, operating and other resources than we have, which may give them a competitive advantage. Certain of Fatburger’s competitors have introduced a variety of new products and engaged in substantial price discounting in recent years and may continue to do so in the future. There can be no assurance as to the success of any of Fatburger’s new products, initiatives or overall strategies, or assurance that competitive product offerings, pricings and promotions will not have an adverse effect upon Fatburger’s financial condition and results of operations.

Changes in economic, market and other conditions could adversely affect Fatburger and its franchisees, and thereby our operating results.

The fast casual restaurant industry is affected by changes in international, national, regional, and local economic conditions, consumer preferences and spending patterns, demographic trends, consumer perceptions of food safety, weather, traffic patterns, the type, number and location of competing restaurants, and the effects of war or terrorist activities and any governmental responses thereto. Factors such as inflation, food costs, labor and benefit costs, legal claims, and the availability of management and hourly employees also affect restaurant operations and administrative expenses. The ability of Fatburger and its franchisees to finance new restaurant development, improvements and additions to existing restaurants, and the acquisition of restaurants from, and sale of restaurants to, franchisees is affected by economic conditions, including interest rates and other government policies impacting land and construction costs and the cost and availability of borrowed funds.

Increases in the minimum wage may have a material adverse effect on Fatburger’s business and financial results.

A substantial number of Fatburger employees are paid wage rates at or slightly above the minimum wage. As federal and state minimum wage rates increase, Fatburger may need to increase not only the wages of its minimum wage employees, but also the wages paid to the employees at wage rates that are above minimum wage. If competitive pressures or other factors prevent Fatburger from offsetting the increased costs by price increases, profitability may decline. In addition, various other proposals that would require employers to provide health insurance for all of their employees are considered from time to time in Congress and various states. The imposition of any requirement that Fatburger provide health insurance to all employees on terms materially different from its existing programs could have a material adverse impact on the results of operations and financial condition of Fatburger.

and all claims he may have had relating to the CCL matter as partial consideration for the leave of absence agreement in June 2004. The USAODO has settled the CCL matter as it relates to both Mr. Wiederhorn and Mr. Mendelsohn. As a result, the Company believes that the contingencies relating to the potential indemnification of these officers or former officers relating to CCL have now been resolved.Index

~~Nasdaq~~Events ~~Delisting~~reported in the media, such as incidents involving food-borne illnesses or food tampering, whether or not accurate, can cause damage to Fatburger’s brand’s reputation and swiftly affect sales and profitability.

~~Effective October 14~~Reports, ~~2004,~~whether ~~the~~true ~~Company’s~~or ~~Common~~not, ~~Stock~~of ~~began~~food-borne ~~trading~~illnesses in(such ~~the~~as ~~over~~e-~~the-counter~~coli, ~~market~~avian onflu, ~~the~~bovine ~~OTC~~spongiform ~~“pink sheets.”~~encephalopathy, ~~Prior~~hepatitis ~~to that~~A, ~~the~~trichinosis ~~Company’s~~or ~~Common~~salmonella) ~~Stock~~and ~~was~~injuries ~~quoted~~caused onby ~~the~~food ~~Nasdaq National~~tampering ~~Market.~~have Onin ~~July 20,~~the ~~2004,~~past severely injured the ~~Company~~reputations ~~was~~of ~~notified~~participants ~~by Nasdaq~~in ofthe afast ~~staff~~casual ~~determination~~restaurant tosegment ~~delist~~and could, in the ~~Company’s~~future, ~~Common~~affect ~~Stock~~Fatburger ~~effective~~as ~~July 29, 2004~~well. Fatburger’s ~~The~~brand ~~Company~~reputation ~~challenged~~is ~~the~~an ~~staff~~important ~~determination~~asset ~~and~~to ~~requested~~the anbusiness; ~~oral hearing~~as by a ~~Listing~~result, ~~Qualifications~~anything ~~Panel~~that todamages ~~review~~ the ~~staff~~brand’s ~~conclusions.~~reputation ~~A hearing~~could ~~was~~immediately ~~held~~and onseverely ~~September 9,~~hurt ~~2004,~~sales and, ~~on October 12~~accordingly, ~~2004,~~revenues ~~the~~and ~~Company~~profits. If ~~was~~customers ~~notified~~become byill ~~Nasdaq~~from ~~that~~food-borne ~~the~~illnesses, ~~Listing Qualifications~~Fatburger ~~Panel~~could ~~upheld~~also ~~the~~be ~~staff~~forced ~~determination~~to ~~and~~temporarily ~~the~~close ~~Company’s~~some ~~Common Stock~~restaurants. In ~~was~~addition, ~~delisted~~instances ~~from~~of ~~the~~food-borne ~~Nasdaq~~illnesses ~~National~~or ~~Market~~food ~~on October 14~~tampering, ~~2004.~~even ~~The Company~~those ~~requested~~occurring asolely ~~review~~at of the ~~Listing~~restaurants ~~Qualifications~~of ~~Panel’s~~competitors, ~~decision~~could, by ~~Nasdaq’s~~ ~~Listing~~resulting ~~and~~in ~~Hearing~~negative ~~Review~~publicity ~~Council.~~about Onthe ~~February 16~~restaurant industry, ~~2005~~adversely affect sales on a local, ~~the Company~~regional ~~received~~or ~~notice~~system-wide ~~that~~basis. A ~~the~~decrease ~~Nasdaq~~in ~~Listing~~customer ~~and~~traffic ~~Hearing~~as ~~Review~~a ~~Council~~result ~~had upheld~~of ~~the~~these ~~Panel’s~~health ~~decision.~~concerns ~~The~~or ~~Company~~negative ispublicity, ~~considering~~or ~~whether~~as toa ~~continue~~result ~~the appeal~~of ~~process.~~a ~~There~~temporary ~~can~~closure beof noany ~~assurance~~Fatburger ~~that~~restaurants, ancould ~~appeal~~materially ~~will~~harm beFatburger’s ~~successful~~business.

~~Derivative~~Changing ~~Action~~health or dietary preferences may cause consumers to avoid products offered by Fatburger in favor of alternative foods.

OnThe ~~July 6,~~food ~~2004,~~service ~~Jeff Allen~~industry ~~McCoon,~~is ~~derivatively~~affected onby ~~behalf~~consumer ofpreferences ~~the~~and ~~Company,~~perceptions. Fatburger’s ~~filed~~success adepends, ~~lawsuit~~ in ~~the Circuit~~part, ~~Court~~upon ~~for~~ the ~~State~~popularity of ~~Oregon~~burgers ~~(Multnomah~~and ~~County~~fast ~~Case~~casual Nodining. ~~0407-06900) which~~ Shifts ~~named~~in ~~the~~consumer ~~Company~~preferences ~~and all~~away offrom ~~its~~this ~~directors~~cuisine asor ~~defendants.~~dining ~~The~~style ~~lawsuit~~could ~~alleges~~have ~~that~~a ~~members~~material ~~of the~~adverse ~~Company’s~~affect ~~Board~~on ofour ~~Directors~~future ~~breached~~profitability. The ~~their~~restaurant ~~duties~~industry tois ~~the~~characterized ~~Company~~ by ~~entering~~ ~~into~~ the ~~leave~~continual introduction of ~~absence~~new ~~agreement~~concepts ~~with~~and ~~Andrew~~is ~~Wiederhorn.~~subject ~~The lawsuit~~to ~~generally~~rapidly ~~seeks~~changing ~~restitution~~consumer ofpreferences, ~~payments~~tastes ~~made~~and ~~under~~eating ~~the~~and ~~leave~~purchasing ofhabits. While ~~absence agreement~~consumption ~~plus~~of ~~attorney~~hamburgers ~~fees~~ and ~~costs.~~related ~~The~~food ~~individual~~items ~~defendants~~in ~~have indemnity agreements with~~ the ~~Company~~United ~~and~~States ~~have~~has ~~asserted~~grown over the ~~right~~past ~~to indemnification~~20 ~~from~~years, the ~~Company~~demand ~~under~~may ~~those~~not ~~indemnity~~continue ~~agreements.~~to ~~This~~grow ~~case~~or ~~is in~~taste ~~the~~trends ~~very~~may ~~early~~change. Fatburger’s ~~pleading~~success ~~stages~~will ~~and~~depend ~~motions~~in ~~are~~part ~~pending~~on ~~against~~our ~~the complaint.~~ability ~~The~~to ~~Company~~anticipate ~~may~~and ~~incur~~respond ~~expenses~~to ~~under~~changing ~~the~~consumer ~~indemnity~~preferences, ~~agreements~~tastes and ~~also~~ ~~may~~eating ~~derive~~and ~~benefits~~purchasing ifhabits, ~~the~~as ~~plaintiff’s~~well ~~claims~~as ~~are~~other ~~successful.~~factors Ataffecting ~~this stage~~the offood ~~the~~service ~~case~~industry, itincluding isnew ~~too~~market ~~early~~entrants toand ~~predict~~demographic ~~the~~changes. If ~~outcome~~prevailing ~~with~~health ~~any~~or ~~certainty. The~~dietary ~~complaint~~preferences isand ~~not~~perceptions ~~specific~~cause asconsumers to ~~the~~avoid ~~amount~~these ofproducts ~~damages~~offered itby isFatburger ~~seeking~~restaurants ~~against the~~in ~~individual~~favor ~~defendants,~~of ~~but~~alternative itor ~~appears~~healthier tofoods, ~~seek~~demand atfor ~~least~~Fatburger’s ~~the~~products ~~return~~may ofbe ~~$2 million~~reduced ~~paid~~and toits ~~Mr. Wiederhorn~~business ~~under~~could ~~the~~be ~~Leave of Absence Agreement~~harmed.

~~Strouds~~Fatburger ~~Acquisition Corporation~~is subject to health, employment, environmental and other government regulations, and failure to comply with existing or future government regulations could expose Fatburger to litigation, damage Fatburger’s reputation and lower profits.

OnFatburger ~~October 6,~~and ~~2003~~its franchisees are subject to various federal, ~~the~~state ~~Official~~and ~~Committee~~local oflaws ~~Unsecured Creditors~~affecting oftheir ~~Strouds~~businesses. The ~~Acquisition~~successful ~~Corporation~~development ~~(“Strouds”)~~and ~~filed~~operation of restaurants depend to a ~~lawsuit~~significant inextent on the ~~United~~ ~~States~~selection ~~Bankruptcy~~and ~~Court~~acquisition ~~(LA~~of ~~03-23620-ER)~~suitable sites, which ~~named~~are ~~the~~subject ~~Company,~~to ~~among others~~zoning, asland ause ~~defendant.~~(including ~~The~~the ~~lawsuit~~placement ~~was~~of ~~amended~~drive-thru onwindows), ~~November 10~~environmental (including litter), ~~2003~~traffic and ~~limits~~ ~~the~~other ~~complaint~~regulations. ~~against~~Restaurant ~~the~~operations ~~Company~~are ~~solely~~also insubject ~~its~~to ~~capacity~~licensing asand ~~collateral agent~~regulation ~~for~~by ~~certain~~state ~~secured~~and ~~creditors~~local ofdepartments ~~Strouds~~relating ~~Acquisition~~to ~~Corporation. The lawsuit~~health, asfood itpreparation, ~~pertains~~sanitation toand ~~the~~safety ~~Company~~standards, ~~sought~~federal ~~reimbursement~~and ofstate ~~the~~labor ~~proceeds from~~laws ~~approximately~~(including ~~$3.0~~applicable ~~million~~minimum inwage ~~funds~~requirements, ~~received in October 2003~~overtime, ~~which the~~working ~~Company~~and ~~was~~safety ~~holding~~conditions asand ~~collateral~~citizenship ~~agent~~requirements), ~~for~~federal ~~other~~and ~~secured~~state ~~creditors.~~laws ~~These funds~~prohibiting ~~were~~discrimination ~~not~~and ~~included~~other inlaws regulating the ~~assets~~design ofand ~~the~~operation ~~Company~~of facilities, ~~but~~such ~~were~~as ~~being~~the ~~held~~Americans ~~in trust.~~with OnDisabilities ~~July 1,~~Act ~~2004,~~of ~~the~~1990. If ~~lawsuit~~Fatburger ~~was~~fails ~~settled~~to ~~and~~comply ~~the~~with ~~Company distributed~~any ~~the~~of ~~trust~~these ~~funds~~laws, ~~net~~it ofmay ~~legal~~be ~~reimbursements~~subject ofto ~~$0.3~~governmental ~~million~~action or litigation, ~~in accordance~~and ~~with~~its ~~the~~reputation ~~settlement~~could ~~agreement.~~be ~~The~~accordingly ~~Company~~harmed. Injury ~~received~~to aFatburger’s ~~general release~~reputation ~~from~~would, ~~the~~in ~~parties~~turn, ~~and~~likely ~~considers~~reduce ~~the~~revenues ~~matter~~and ~~closed~~profits.

In recent years, there has been an increased legislative, regulatory and consumer focus on nutrition and advertising practices in the food industry, particularly among fast casual restaurants. As a result, Fatburger may become subject to regulatory initiatives in the area of nutrition disclosure or advertising, such as requirements to provide information about the nutritional content of its food products, which could increase expenses. The operation of Fatburger’s franchise system is also subject to franchise laws and regulations enacted by a number of states and rules promulgated by the U.S. Federal Trade Commission. Any future legislation regulating franchise relationships may negatively affect Fatburger’s operations, particularly its relationship with its franchisees. Failure to comply with new or existing franchise laws and regulations in any jurisdiction or to obtain required government approvals could result in a ban or temporary suspension on future franchise sales. Changes in applicable accounting rules imposed by governmental regulators or private governing bodies could also affect Fatburger’s reported results of operations, and thus cause our stock price to fluctuate or decline.

Fatburger’s earnings and business growth strategy depends in large part on the success of its franchisees, and Fatburger’s reputation may be harmed by actions taken by franchisees that are outside of its control.

A portion of Fatburger’s earnings comes from royalties and other amounts paid by Fatburger’s franchisees. Franchisees are independent contractors, and their employees are not employees of Fatburger. Fatburger provides training and support to, and monitors the operations of, its franchisees, but the quality of their restaurant operations may be diminished by any number of factors beyond Fatburger’s control. Consequently, franchisees may not successfully operate stores in a manner consistent with Fatburger’s high standards and requirements and franchisees may not hire and train qualified managers and other restaurant personnel. Any operational shortcoming of a franchise restaurant is likely to be attributed by consumers to an entire brand, thus damaging Fatburger’s reputation and potentially affecting revenues and profitability.

~~George Elkins~~Index

OnRisks ~~August 11,~~related 2004 the Company received a notice from the minority shareholders of George Elkins informing the Company that the minority shareholders believe that a Change in Control Transaction (as defined in the Operating Agreement) has occurred as a result of the leave of absence of Mr. Wiederhorn. The notice also indicates that unless the Change in Control Transaction is corrected within 120 days, the minority shareholders intend to ~~exercise~~our ~~their~~real ~~rights~~estate ~~to purchase the interests held by the Company in accordance with the formula outlined in the Operating Agreement.~~holdings

~~The~~Acquired ~~Company~~properties ~~disputes~~may ~~the~~expose ~~claim~~us that a Change in Control Transaction has occurred as a result of the leave of absence agreement with Mr. Wiederhorn. The Company believes that the market value of its investment is greater than the amount of the buyback formula and intends to ~~vigorously~~ ~~defend~~unknown ~~against these claims~~liability. However, in the event that the Company was unsuccessful in defending this position, an analysis of the economic effect of the buyback formula indicates that the Company would not incur a loss on the transaction. As a result, no reserves are required due to the receipt of the notice.

~~The~~We ~~120~~may ~~day~~acquire ~~notice~~properties ~~period has~~subject ~~lapsed~~to liabilities and without any recourse, or with only limited recourse against the ~~minority~~prior ~~shareholders~~owners ~~have~~or ~~not~~other ~~sought~~third toparties, ~~exercise~~with ~~their rights~~respect to ~~purchase~~unknown ~~the~~liabilities. As ~~interests~~a ~~held~~result, byif ~~the~~a ~~Company.~~liability ~~There~~were ~~can~~asserted beagainst nous ~~assurance that~~based ~~the~~upon ~~minority~~ownership ~~shareholders~~of ~~will~~those ~~not~~properties, ~~seek~~we might have to ~~exercise~~pay ~~these~~substantial ~~rights~~sums into ~~the future~~settle or contest it, which could adversely affect our results of operations and cash flow. Unknown liabilities with respect to acquired properties might include:

~~Other~~· ~~Legal Proceedings~~liabilities for clean-up of undisclosed environmental contamination or hazardous substances;

~~The~~· ~~Company~~claims isby ~~involved~~tenants, ~~in various~~vendors or other ~~legal~~persons ~~proceedings~~against ~~occurring in~~ the ~~ordinary~~former ~~course~~owners of ~~business which~~ the ~~Company believes will not have a material adverse effect on the consolidated financial condition or operations of the Company.~~properties;

~~ITEM~~· ~~4. SUBMISSION~~liabilities ~~OF MATTERS~~incurred TOin Athe ~~VOTE~~ordinary OFcourse ~~SECURITY~~of ~~HOLDERS~~business; and

On· ~~December 8,~~claims ~~2004,~~for atindemnification ~~the~~by ~~annual~~general ~~stockholders’ meeting~~partners, ~~the~~directors, ~~Company’s~~officers ~~stockholders~~and ~~elected~~others ~~seven~~indemnified ~~persons~~by to the ~~Board~~former ~~of Directors~~owners ~~and ratified the selection~~ of ~~UHY LLP as~~ the ~~Company’s auditors for the year ending December 31, 2004~~properties.

~~In connection~~ITEM ~~with~~1B. UNRESOLVED ~~the~~SEC ~~election of directors, the shares of common stock present in person or by proxy were voted as follows:~~ COMMENTS

	For	Withheld
Andrew A. Wiederhorn	8,192,077	177,471
Donald J. Berchtold	8,226,998	142,550
Don H. Coleman	8,230,103	139,445
Christopher DeWolfe	8,231,203	138,345
David Dale-Johnson	8,229,818	139,730
K. Kenneth Kotler	8,231,853	137,695
M. Ray Mathis	8,229,753	139,795

Not required.

InITEM connection with the proposal to approve the ratification of the selection of UHY LLP, independent registered public accounting firm, as the Company’s auditors for the year ending December 31, 2004, 8,287,350 shares were voted in favor of the proposal, 59,131 shares were voted against the proposal and there were 23,067 abstentions2. PROPERTIES

Our corporate headquarters are located in approximately 8,700 square feet of corporate office space in Santa Monica, California under a lease that will expire in January 2013. Fatburger also operates 36 restaurant locations in California, Nevada, Florida, New Jersey, and China. Two of the restaurant sites in Nevada are operated from properties owned by Fatburger, while the remaining locations are leased. DAC leases approximately 17,500 square feet of office and production space in Carpinteria, California under a lease that will expire in December 2017. We believe that all of our existing facilities are in good operating condition and adequate to meet our current and foreseeable needs.

ITEM 3. LEGAL PROCEEDINGS

Warlick Complaint

Fatburger Holdings, Inc., et al. v. Keith A. Warlick/ Warlick v. Fatburger, et al, Superior Court of California for the County of Los Angeles, Case No. SC 091436. On October 16, 2006, Fatburger Holdings, Inc., Fatburger Corporation and Fatburger North America, Inc. filed suit against Keith A. Warlick (“Warlick”) the former Chief Executive Officer of Fatburger Holdings, Inc. and Fatburger Corporation. Warlick’s employment with Fatburger was terminated on September 21, 2006 by resolution of the board of directors of Fatburger Holdings, Inc. The Fatburger companies initiated the lawsuit to recover damages from Warlick arising from wrongful acts and conduct during and after his employment, and are asserting claims for: breach of contract, breach of duty of loyalty, breach of fiduciary duty, conversion – embezzlement; fraud/commencement; intentional interference with contractual relations, and equitable indemnity. Warlick filed an answer to the lawsuit denying the allegations and included a Cross-complaint against Fatburger Holdings, Inc., Fatburger Corporation, Fatburger North America, Inc., Fog Cutter Capital Group, Inc., and Andrew Wiederhorn (“Cross-Defendants”), for breach of contract, employment discrimination based on race and retaliation, wrongful termination and defamation – slander without any specification of damages. On a motion filed by the Cross-Defendants, the Court dismissed Warlick’s cross-claim for employment discrimination based on race and retaliation. In further response Warlick initiated a second lawsuit against the Company, various Fatburger companies, and members of the Fatburger board of directors, which is set out below. The Cross-Defendants disputed the allegations of the cross-claim and vigorously defended against the claims. In October 2009, the parties reached an agreement in principal to settle all claims alleged in this lawsuit and the settlement was completed on March 5, 2010. The settlement did not have a material effect on the financial statements of the Company.

Keith Warlick, et al. v. Fog Cutter Capital Group, et al., Superior Court of California for the County of Los Angeles, Case No. 58365915

On February 6, 2007, Warlick, his wife, and a limited liability company controlled by Warlick, each of whom is a minority shareholder of Fatburger Holdings, Inc., filed a complaint against various Fatburger entities, the Company, Andrew Wiederhorn, and members of the Fatburger board of directors. The complaint alleges fraud, negligent misrepresentation against Wiederhorn and the Company, and breach of contract and breach of fiduciary duty against all the defendants, related to business transactions which the plaintiff’s allege were not in the best interests of Fatburger Holdings, Inc., or the plaintiff minority shareholders. The defendants disputed the allegations of the lawsuit and vigorously defended against the claims. In October 2009, the parties reached an agreement in principal to settle all claims alleged in this lawsuit and the settlement was completed on March 5, 2010. The settlement did not have a material effect on the financial statements of the Company.

~~PART II~~Index

~~ITEM~~Bankruptcy ~~5. MARKET FOR THE REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS~~Proceedings

~~From~~On April 6, ~~1998~~2009, ~~through~~certain ~~October 13,~~controlled ~~2004, our~~subsidiaries ~~common~~of ~~stock,~~Fog ~~par~~Cutter ~~value~~Capital $0Group Inc.~~0001~~ ~~per~~filed ~~share~~voluntary ~~(the~~petitions ~~“Common~~for ~~Stock”)~~relief ~~was~~under ~~quoted on~~chapter ~~the~~11 ~~Nasdaq~~of ~~National~~the ~~Market.~~United ~~Effective~~States ~~October 14,~~Bankruptcy ~~2004,~~Code (the ~~Company’s~~"Chapter ~~Common~~11 ~~Stock~~Cases") ~~began trading~~ in the ~~over-the-counter~~United ~~market~~States on Bankruptcy Court for the ~~OTC~~Central ~~“pink~~District ~~sheets.”~~of ~~The~~California ~~Common~~– ~~Stock~~San isFernando ~~quoted~~Valley ~~under~~Division (the ~~symbol~~"Bankruptcy ~~“FCCG~~Court").” The ~~approximate~~entities ~~number~~involved ofand ~~holders~~the ofcase ~~record~~numbers ~~(not~~assigned ~~beneficial~~to ~~shareholders,~~the ~~as most~~subsidiaries ~~shares~~(collectively, ~~are~~the ~~held in brokerage name~~"Debtors") ofare ~~our~~as ~~Common Stock at February 28, 2005, was 41.~~follows:

~~The following~~Fatburger ~~table~~Restaurants ~~sets~~of ~~forth~~California, ~~the high and low sales prices for the Common Stock as quoted on Nasdaq (or the OTC “pink sheets” after October 13~~Inc., ~~2004)~~Case ~~for the periods indicated~~No. 1:09-bk-13964-GM

2004	High		Low
First quarter	$	6.600	$	5.231
Second quarter	$	5.950	$	3.900
Third quarter	$	4.450	$	3.200
Fourth quarter	$	4.000	$	2.500

Fatburger Restaurants of Nevada, Inc., Case No.1:09-bk-13965-GM

2003	High		Low
First quarter	$	5.390	$	3.660
Second quarter	$	6.750	$	4.700
Third quarter	$	5.790	$	4.900
Fourth quarter	$	5.619	$	5.020

~~During~~On ~~the~~or ~~year~~about ~~ended~~November ~~December 31~~3, ~~2004~~2009, ~~we declared four quarterly cash distributions of $0.13 per share, totaling $0.52 per share ($4.4 million). During~~ the ~~year~~Debtors ~~ended~~filed ~~December 31,~~a ~~2003,~~joint ~~we declared~~plan ~~four quarterly cash dividends~~ of ~~$0.13~~reorganization ~~per~~and ~~share,~~related ~~totaling~~disclosure $0statement.~~52 per share ($4.5 million). On January 26, 2005, the Board of Directors declared a $0.13 per share dividend for the first quarter of 2005.~~ The ~~dividend~~bankruptcy ~~was~~court ~~paid on~~is ~~February 10,~~currently ~~2005~~considering to shareholders of record on February 4, 2005. We may declare and pay new quarterly dividends on our common stock in 2005, subject to our financial condition, results of operations, capital requirements and other factors deemed relevant by the ~~Board~~disclosure ~~of Directors~~statement.

OnOther ~~October 18,~~Legal 2002, we adopted a stockholder rights plan (the “Plan”) and declared a distribution of one right (a “Right”) to purchase one-tenth of a share of the Company’s common stock for each outstanding share of common stock, payable to the stockholders of record on October 28, 2002. The Board of Directors authorized and directed the issuance of one Right with respect to each share of common stock issued thereafter until the Distribution Date. The Plan was adopted as a means of protecting the potential tax benefits of our net operating loss carry forward (“NOL”). Under Federal tax rules, the NOL will be limited if we experience a significant change in ownership. The Plan dilutes any new 5% holder, or any existing 5% holder that increases its stake by 1% or more, thereby preserving the Company’s NOL. If, subject to certain exceptions, any person or group commences a tender or exchange offer to purchase 5 percent or more of the Company’s Common Stock, each right not owned by such person or group will entitle its holder to purchase, at the right’s current exercise price, shares of common stock having a value of twice the right’s current exercise price. If, subject to certain exceptions, any person or group acquires 5% or more, or any existing 5% holder increases its stake by 1% or more, of our common stock (an “Acquiring Person”), each right not owned by such person or group will automatically be exercised and entitle its holder to receive one share of common stock per right (or a lesser ratio as determined by the Board of Directors, if we do not have sufficient authorized and unreserved shares) in lieu of paying the purchase price. This right to purchase common stock at a discount will not be triggered by a person or group’s Matters

We are involved in various other legal proceedings occurring in the ordinary course of business which we believe will not have a material adverse effect on our consolidated financial condition or results of operations.

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

No matters were submitted to a vote of our shareholders during the quarter ended December 31, 2008.

acquisition of 5% or more of the common stock pursuant to a tender or exchange offer (or other securities offering by us) which is for all outstanding shares at a price and on terms that the Board of Directors determines (prior to acquisition) to be adequate and in the best interests of the Company and our stockholders. The Board of Directors also has the discretion in certain circumstances to waive the triggering of such right in the event that an acquisition will not adversely effect the Company’s NOL carryforward.Index

InPART addition, if, subject to certain exceptions, we are acquired by another corporation in a merger or consolidation or more than 50 percent of our assets or earning power is acquired, each right not owned by the acquirer or affiliates will entitle its holder to purchase, at the right’s current exercise price, common stock of the acquirer having a value of twice the right’s current exercise price. This right will not be triggered, however, if the acquisition is by a person or group which acquired our common stock at a price and on terms that the Board of Directors determines (prior to acquisition) to be adequate and in the best interests of the Company and its stockholders.II

~~The~~ITEM ~~rights will expire in the year 2012~~5. MARKET WeFOR ~~may~~THE ~~redeem all~~REGISTRANT'S ofCOMMON ~~the~~EQUITY ~~rights,~~AND atRELATED ~~the~~STOCKHOLDER option of the Board of Directors, at a redemption price of $.001 per right or by the issuance of shares of common stock then equivalent to $.001 per right, at any time prior to any person becoming an Acquiring Person.MATTERS

OnTrading ~~February 17,~~Market ~~2004,~~and ~~the~~Historical Board of Directors of the Company unanimously resolved, by written resolution effective February 17, 2004, that the Company may purchase shares of its common stock from its stockholders from time to time, in open market purchases or negotiated transactions provided that the Company shall only purchase such shares in accordance with applicable law, including United States federal securities laws, including the safe harbor provisions of Rule 10b-18 of the Securities Act of 1934, as amended.Prices

~~Effective~~From ~~March 1~~April 6, 1998 through October 13, 2004, ~~the~~our ~~Company~~common ~~made~~stock, anpar ~~automatic~~value ~~dividend~~$0.0001 ~~reinvestment~~per ~~plan~~share ~~available~~(the ~~to shareholders~~“Common ~~through~~Stock”) ~~The~~was ~~Bank~~quoted ofon ~~New~~the ~~York.~~NASDAQ ~~The~~National ~~Plan~~Market. From ~~enables~~October ~~shareholders~~14, 2004 to ~~reinvest~~ ~~their~~June ~~quarterly~~23, ~~cash~~2007, ~~dividends~~our ~~and~~common ~~make~~stock ~~supplemental~~was ~~cash contributions~~quoted upin tothe ~~$10,000~~over-the-counter ~~per~~market ~~month,~~on ~~with~~the aOTC ~~maximum~~“pink ~~amount~~sheets.” Effective ofJune ~~$60~~24,~~000~~ ~~per year~~2007, ~~toward~~our common stock commenced being quoted on the ~~purchase~~OTC ofBulletin Board (the ~~Company’s~~“OTCBB”) market as FCCG.OB. Since the 2nd quarter of 2009, our common stock has been quoted on the OTC “pink sheets” as FCCG.PK. The ~~Participation~~approximate number of holders of record (not beneficial shareholders, as most shares are held in ~~the plan~~brokerage isname) ~~voluntary~~of our common stock was less than 100 at October 31, 2009.

The following table sets forth the high and low sales prices for our common stock as quoted on the OTC Bulletin Board or Pink Sheets, as applicable, for the periods indicated.

2008	High		Low
First quarter	$	1.010	$	0.510
Second quarter	$	0.840	$	0.350
Third quarter	$	0.830	$	0.350
Fourth quarter	$	0.400	$	0.100

2007	High		Low
First quarter	$	2.440	$	1.120
Second quarter	$	3.240	$	1.550
Third quarter	$	2.930	$	1.500
Fourth quarter	$	1.600	$	0.800

Dividends

During the years ended December 31, 2008 and 2007, we did not declare or pay any distributions to shareholders. While we do not have a fixed dividend policy, any dividends paid on our common stock would be subject to our financial condition, results of operations, capital requirements and other factors deemed relevant by the Board of Directors. One factor the Board of Directors may consider is the impact of dividends on our liquidity.

Equity Compensation Plan Information

We have a non-qualified stock option plan which provides for options to purchase shares of the Company’s common stock. The information presented in the table below is as of December 31, 2008.

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)		(b)		(c)
Equity compensation plans approved by security holders		2,980,833	$	1.51		262,194
Equity compensation plans not approved by security holders		-				-
Total		2,980,833	$	1.51		262,194

ITEM 6. SELECTED FINANCIAL DATA.

Not required.

~~ITEM 6. SELECTED FINANCIAL DATA~~Index

~~The following~~ITEM ~~table sets forth selected historical, financial and operating data on a consolidated basis at December 31, 2004, 2003, 2002, 2001 and 2000 and for the years then ended~~7. MANAGEMENT'S ~~The~~DISCUSSION ~~information~~AND ~~contained~~ANALYSIS inOF ~~this~~FINANCIAL ~~table~~CONDITION ~~should~~AND ~~be read~~RESULTS inOF conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical consolidated financial statements, including the notes thereto, included elsewhere in this report.OPERATIONS

	2004			2003			2002			2001			2000
	(dollars in thousands)
Statement of Operations Data:
Net Interest Income:
Loans(1)	$	2,088		$	1,466		$	557		$	2,394		$	3,900
Securities	617			2,422			5,277			7,328			10,718
Other investments	110			173			264			226			460
Total interest income	2,815			4,061			6,098			9,948			15,078
Interest expense	112			669			1,906			4,548			7,704
Net interest income before loan losses	2,703			3,392			4,192			5,400			7,374
Recovery of (provision for) loan losses	—			—			—			—			555
Net interest income after loan losses	2,703			3,392			4,192			5,400			7,929
Real Estate Operations:
Operating revenue	4,108			4,026			927			2,197			4,870
Operating expense	(1,760		)	(1,930		)	(669		)	(418		)	(601		)
Interest expense	(1,120		)	(1,335		)	(333		)	(1,244		)	(2,742		)
Gain on sale of real estate	1,703			279			49			1,142			5,404
Depreciation	(646		)	(616		)	(158		)	(456		)	(993		)
Total real estate operations	2,285			424			(184		)	1,221			5,938
Restaurant Operations:
Operating income	21,889			7,502			—			—			—
Cost of goods sold	(13,042		)	(4,556		)	—			—			—
Franchise and royalty fees	1,431			463			—			—			—
General and administrative costs	(10,809		)	(3,514		)	—			—			—
Interest expense	(661		)	(319		)	—			—			—
Depreciation and amortization	(1,498		)	(494		)	—			—			—
Total restaurant operations	(2,690		)	(918		)	—			—			—
Other Operating Income (Loss):
Loan origination income	5,795			5,408			2,315			—			—
Market valuation losses and impairments	—			(762		)	(400		)	(11,422		)	(22,257		)
Provision for litigation claims	—			—			—			(2,000		)	(225		)
Equity in earnings (losses) of equity investees	4,419			4,934			1,100			(1,335		)	—
Gain on sale of loans and securities	2,099			12,520			28,045			1,001			5,356
Other income (loss), net	4,457			1,466			(1,037		)	(758		)	29
Total other operating income (loss)	16,770			23,566			30,023			(14,514		)	(17,097		)
Operating Expenses:
Compensation and employee benefits	10,119			11,781			8,615			5,147			7,869
Leave of absence expense	4,750			—			—			—			—
Professional fees	2,535			1,925			2,158			1,365			1,973
Other	5,596			3,704			3,031			2,520			2,470
Total operating expenses	23,000			17,410			13,804			9,032			12,312
Net income (loss) before provision for income taxes and cumulative effect of a change in accounting principle	(3,932		)	9,054			20,227			(16,925		)	(15,542		)
Provision for income taxes	—			3,655			3,522			—			—
Net income (loss) before cumulative effect of a change in accounting principle	(3,932		)	5,399			16,705			(16,925		)	(15,542		)
Cumulative effect of a change in accounting principle	—			—			—			(1,021		)	—
Net income (loss)	$	(3,932	)	$	5,399		$	16,705		$	(17,946	)	$	(15,542	)

Executive Summary

~~(1) Includes interest~~Business ~~on loans to senior executives.~~Overview

Fog Cutter Capital Group Inc. is primarily engaged in the operations of its Fatburger Holdings, Inc. (“Fatburger”) restaurant business. We acquired the controlling interest in Fatburger in August 2003 and own 82% voting control as of December 31, 2008. Fatburger, “The Last Great Hamburger Stand”®, opened its first restaurant in Los Angeles in 1952. As of December 31, 2008, there were 92 Fatburger restaurants located in 13 States and in Canada, China and the United Arab Emirates. The restaurants specialize in fresh, made to order hamburgers and other specialty sandwiches. French fries, homemade onion rings, hand-scooped ice cream shakes and soft drinks round out the menu.

We plan to open additional Fatburger restaurants throughout the United States and internationally, including Canada, China, Indonesia, Kuwait, Saudi Arabia and the United Arab Emirates. We intend to continue to open company-owned restaurants in strategic markets and increase the number of franchised locations in the U.S. and internationally. Fatburger has opened a total of 55 restaurant locations since our acquisition in 2003. At December 31, 2008, franchisees owned and operated 56 of the Fatburger locations and we have agreements for approximately 112 new franchise locations. Many factors affect our ability to open new franchise locations and we expect that it will take several years for our current franchisees to open all of their restaurant locations. As is typical for our industry, the identification of qualified franchisees and quality locations has an impact on the rate of growth in the number of our restaurants.

In addition to our restaurant operation, we also conduct manufacturing activities, software development and sales activities, and make real estate and other real estate-related investments through various controlled subsidiaries.

Operating Segments

Our operating segments are:

(i)

Restaurant Operations – conducted through our Fatburger subsidiary,

(ii)

Manufacturing Operations – conducted through our wholly owned subsidiary, DAC International (“DAC”), and

(iii)

Real Estate and Financing Operations.

Significant Events

The following significant events affected our operations for the year ended December 31, 2008:

Restaurant openings and closures – During the year ended December 31 2008, Fatburger opened nine additional franchise locations and one corporate restaurant. In order to improve overall operations, three franchise locations and eight company-owned locations have been closed.

Discontinued operations – In February 2008, we sold a wholly-owned subsidiary, Fog Cap Retail Investors LLC (“FCRI”), which held our leased real estate portfolio. The sales price for the FCRI membership interests was $8.5 million and was paid in cash. A portion of the proceeds were used to repay $4.2 million of existing debt. We recorded a gain on sale of $4.2 million as a result of the transaction. We also entered into an option agreement with the buyer that gave us the right, but not the obligation, to re-acquire all of the membership interests in FCRI. The option period was for two years beginning February 15, 2008. Under certain circumstances after December 31, 2008, the buyer could accelerate the termination of the option period upon thirty days notice. The exercise price increased over the option period from approximately $9.7 million at December 31, 2008 to $11.3 million after January 31, 2010. The option commitment fee was $850,000 and was payable by us in installments over the option period. Management determined that the option exercise prices were significantly higher than the expected value during the option period. Therefore, the option was been assigned no value as it was not anticipated that it would provide a future economic benefit to us. The $850,000 option commitment fee reduced the gain on sale. The option was subsequently terminated on October 31, 2009.

	Year Ended December 31,
	2004			2003			2002			2001			2000
Basic net income (loss) per share before cumulative effect of a change in accounting principle	$	(0.46	)	$	0.62		$	1.69		$	(1.61	)	$	(1.48	)
Cumulative effect per share of change in accounting principle	—			—			—			(.10		)	—
Basic net income (loss) per share	$	(0.46	)	$	0.62		$	1.69		$	(1.71	)	$	(1.48	)
Weighted average shares outstanding	8,462,950			8,651,500			9,905,900			10,507,413			10,507,413
Diluted net income (loss) per share before cumulative effect of a change in accounting principle	$	(0.46	)	$	0.62		$	1.66		$	(1.61	)	$	(1.48	)
Cumulative effect per share of change in accounting principle	—			—			—			(.10		)	—
Diluted net income (loss) per share	$	(0.46	)	$	0.62		$	1.66		$	(1.71	)	$	(1.48	)
Diluted weighted average shares outstanding	8,462,950			8,767,400			10,049,100			10,525,413			10,507,413
Cash Flow Data:
Net cash (used in) provided by operating activities	$	(8,937	)	$	(7,957	)	$	(8,081	)	$	22,316		$	(91	)
Net cash provided by (used in) investing activities	$	36,652		$	35,229		$	25,767		$	37,413		$	71,072
Net cash (used in) provided by financing activities	$	(35,384	)	$	(22,469	)	$	(9,994	)	$	(56,358	)	$	(73,270	)
Other Data:
Dividends declared per share	$	0.52		$	0.52		$	0.52		$	0.39		$	—

Index

	At December 31,
	2004		2003		2002		2001		2000
Total assets	$	73,898	$	108,976	$	110,586	$	82,057	$	150,304
Cash and cash equivalents	$	11,948	$	19,607	$	14,505	$	6,753	$	3,394
Securities available for sale, at estimated fair value	$	9	$	35,510	$	59,317	$	51,783	$	74,731
Loans	$	6,651	$	3,744	$	2,245	$	4,819	$	30,404
Investments in real estate	$	26,660	$	22,577	$	21,498	$	4,471	$	24,767
Investments in WFSG and affiliates	$	—	$	—	$	—	$	5,893	$	5,593
Investments in Bourne End	$	1,901	$	2,141	$	5,579	$	5,195	$	6,719
Borrowings and notes payable	$	7,977	$	33,122	$	35,478	$	37,966	$	88,930
Obligations under capital leases	$	12,401	$	12,942	$	16,847	$	—	$	—
Total stockholders’ equity	$	34,307	$	45,381	$	44,207	$	38,799	$	55,651

Discontinued operations – In June 2008, we exercised our rights under a security agreement on loans to a consolidated subsidiary, Centrisoft Corporation (“Centrisoft”). Pursuant to the security agreement, the collateral assets of Centrisoft were transferred to us in satisfaction of the loans. Centrisoft has since ceased operations. As of June 30, 2008, we no longer included Centrisoft as a consolidated subsidiary. Our carrying value of the Centrisoft assets was zero at December 31, 2008.

~~Our~~· ~~net~~Sale ~~earnings during 2004, 2003 and 2002 have come primarily from the sale~~ of ~~mortgage-backed~~real ~~securities~~estate and ~~from~~repayment ~~the sale~~ of ~~real estate~~notes bypayable ~~our~~– ~~Bourne~~In ~~End~~September ~~subsidiary.~~2008, ~~These~~we ~~assets~~sold ~~have~~one ~~now~~investment ~~become~~property ain ~~less significant~~Barcelona, ~~part~~Spain ofheld through our ~~balance~~Variable ~~sheet~~Interest ~~and~~Entity. ~~material~~We ~~earnings~~received ~~from~~cash ~~the~~proceeds ~~sale~~ of ~~these~~ ~~assets~~approximately ~~are not expected to continue~~$4.5 Wemillion ~~have~~and ~~reinvested~~recorded a ~~portion~~loss ofon the ~~proceeds~~ ~~from the~~ sale of ~~these~~approximately ~~assets~~$0.6 ~~into~~million. ~~the~~Approximately ~~acquisition of Fatburger and we expect to continue to emphasize our restaurant operations and other business segments~~$3.2 ~~Future~~million ~~earnings~~of ~~will depend upon~~ the ~~success~~cash ofproceeds ~~our~~were ~~existing operations,~~used ~~such~~to aspartially ~~Fatburger~~repay ~~and~~two ~~George~~outstanding ~~Elkins,~~notes ~~as well the redeployment of our cash~~payable.

15· Borrowing on notes payable – In May 2008, we borrowed $2.0 million through a note payable secured by certain assets of the Company. The note bears interest at a fixed rate of 2% monthly, one half of which is due monthly in arrears, the other half being due at the note’s scheduled maturity date. The note is due on or before December 31, 2008. In September 2008, we amended this note payable to borrow an additional $1.0 million.

~~ITEM~~· Income from equity investee – In December 2000, we organized and led a group of investors to purchase all of the outstanding capital stock of Bourne End Properties Plc ("Bourne End"), a specialist investor in retail property. We invested in 26% of Bourne End, which at the time of the acquisition had approximately GBP 169.6 million of assets and GBP 123.1 million of debt. The real estate assets consisted of 1.7 million square feet in fifteen shopping centers located in the United Kingdom. ~~MANAGEMENT’S~~ ~~DISCUSSION~~Bourne ~~AND~~End ~~ANALYSIS~~sold ~~OF FINANCIAL~~all ~~CONDITION~~of ~~AND~~these ~~RESULTS~~properties OFbetween ~~OPERATIONS~~the date of the acquisition and 2006 and distributed the net proceeds to the investors. Since the sale of the last property in 2006, Bourne End has been proceeding toward final liquidation. In the first quarter of 2008, Bourne End revised its estimates of accrued liabilities associated with its final liquidation, and we were notified that we had been allocated an additional $0.2 million in income, which was subsequently distributed in cash in the second quarter of 2008.

The following discussion should be read in conjunction with the Consolidated Financial Statements of the Company and notes thereto.

GENERAL

Our business strategy consists of developing, strengthening and expanding our restaurant and commercial real estate mortgage brokerage operations and continuing to identify and acquire real estate investments with favorable risk-adjusted returns. We also seek to identify and acquire controlling interests in other operating businesses in which we feel we can add value. We make acquisitions where our expertise in intensive asset management, credit analysis and financial structuring can create value and provide an appropriate risk-adjusted rate of return. We maintain a flexible approach with respect to the nature of our business, seeking to take advantage of opportunities as they arise or are developed.

Critical Accounting Policies

~~Accounting~~Our ~~For Equity~~consolidated ~~Investees~~financial statements, found under Item 8 Financial Statements and Supplementary Data in this filing, have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. We base our estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements.

The equity method of accounting is used for investments in associated companies which are not unilaterally controlled by the Company and in which the Company’s interest is generally between 20% and 50% of the outstanding voting rights. The Company’s share of earnings or losses of associated companies in which at least 20% of the voting securities is owned, is included in the consolidated statement of operations.

Valuation

At December 31, ~~2004~~2008, one of our largest ~~asset~~assets consisted of ~~our~~goodwill ~~portfolio~~and intangible assets. We assess potential impairments to goodwill and intangible assets at least annually, or when there is evidence that events or changes in circumstances indicate that the carrying amount of ~~real~~an ~~estate~~asset may not be recovered. Our Wejudgments ~~value~~regarding the existence of impairment indicators and future cash flows related to intangible assets are based on operational performance of our ~~real estate~~acquired ~~holdings~~businesses, ~~either~~market byconditions ~~independent~~and ~~appraisal~~other factors. Future events could cause us to conclude that impairment indicators exist and that goodwill or ~~through~~other ~~internally~~intangible ~~generated analysis~~assets ~~using~~associated ~~comparable~~with ~~market~~our ~~data~~acquired businesses are impaired. Any resulting impairment loss could have an adverse impact on our results of operations.

Sale Recognition

During 2004, we were involved in significant sales of mortgage-backed securities, real estate and other assets. Our accounting policy calls for the recognition of sales of financial instruments, including mortgage-backed securities and loans, only when we have irrevocably surrendered control over these assets. We do not retain any recourse or performance obligations with respect to our sales of assets. Our sales of financial instruments were cash sales, and the cash proceeds were not contingent upon any future event.

We recognize gain on sales of real estate under the full accrual method when (1) a sale is consummated, (2) the buyer’s initial and continuing investments are adequate to demonstrate a commitment to pay for the property, (3) any receivable from the buyer is not subject to future subordination and (4) the usual risks and rewards of ownership of the property have been transferred to the buyer. If any of these conditions are not met, our accounting policy requires that gain on sale be deferred until all of the conditions have been satisfied.

Fatburger Restaurant and Franchise Revenue

Revenue from the operation of Fatburger company-owned restaurants ~~are~~is recognized when sales occur.

Franchise fee revenue from the sale of individual Fatburger franchises is recognized only when we have substantially performed or satisfied all material services or conditions relating to the ~~sales have been substantially performed or satisfied~~sale. The completion of training and the opening of a location by the franchisee ~~constitute~~constitutes substantial performance on ~~the~~our part. Currently, of Fatburger charges franchise fees of $50,000 per domestic location and typically $65,000 per international location. One-half of the fees for domestic locations are collected in cash at the time the franchise rights are granted and the balance is collected at the time the lease for the location is executed. The entire fee for international locations is typically collected at the time the franchise rights are granted. Nonrefundable deposits collected in relation to the sale of franchises are recorded as deferred franchise fees until the earlier of the completion of training and the opening of the restaurant or the expiration of their term, at which time the franchise fee revenue is recognized.

1615

~~recorded as deferred franchise fees until the completion of training and the opening of the restaurant, at which time the franchise fee revenue is recognized.~~Index

~~In addition to franchise fee revenue,~~ Fatburger also collects a royalty ranging from 5% to 6% of gross sales from restaurants operated by franchisees. Fatburger recognizes royalty fees as the related product, beverage, and merchandise sales are made by the franchisees. Costs relating to continuing franchise support are expensed as incurred.

Manufacturing revenue recognition

We recognize revenue from our manufacturing operations when substantially all of the usual risks and rewards of ownership of the inventory have been transferred to the buyer. Generally, this occurs when the inventory is shipped to the customer.

Long-lived assets, held for sale

We classify our long-lived assets to be sold as held for sale in the period when the following criteria are met:

(i)

management commits to a plan to sell the asset;

(ii)

the asset is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets;

(iii)

an active program to locate a buyer and other actions required to complete the plan to sell the asset have been initiated;

(iv)

the sale of the asset is probable, and transfer of the asset is expected to qualify for recognition as a completed sale, within one year;

(v)

the asset is being actively marketed for sale at a price that is reasonable in relation to its current fair value; and

(vi)

actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn.

Recognition of Sale of Assets

Our accounting policy calls for the recognition of sales of financial instruments and other assets only when we have irrevocably surrendered control over these assets. We do not retain any recourse or performance obligations with respect to our sales of assets. We recognize gain on sales of real estate under the full accrual method when:

(i)

a sale is consummated,

(ii)

the buyer’s initial and continuing investments are adequate to demonstrate a commitment to pay for the property,

(iii)

any receivable from the buyer is not subject to future subordination, and

(iv)

the usual risks and rewards of ownership of the property have been transferred to the buyer.

If any of these conditions are not met, our accounting policy requires that gain on sale be deferred until all of the conditions have been satisfied.

Goodwill and Other Intangible Assets

Goodwill represents the excess of the purchase price and other acquisition related costs over the estimated fair value of the net tangible and intangible assets acquired. We do not amortize goodwill. Intangible assets are stated at the estimated value at the date of acquisition and include trademarks, operating manuals, franchise agreements and leasehold interests. Trademarks, which have indefinite lives, are not subject to amortization. All other intangible assets are amortized over their estimated useful lives, which range from five to fifteen years.

We assess potential impairments to intangible assets at least annually, or when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset may not be recovered. Our judgments regarding the existence of impairment indicators and future cash flows related to intangible assets are based on operational performance of our acquired businesses, market conditions and other factors. Future events could cause us to conclude that impairment indicators exist and that goodwill or other intangible assets associated with our acquired businesses are impaired. Any resulting impairment loss could have an adverse impact on our results of operations.Inventory

~~Operating~~Our ~~Segments~~inventory relates primarily to DAC and is stated at the lower of cost or market, using the first-in, first-out method. Inventory is reviewed regularly for obsolescence and charges to cost of goods sold are made as needed to adjust the carrying value.

~~Our~~Impairment ~~operating segments consist~~ of ~~(i) restaurant operations conducted through our Fatburger subsidiary, (ii) commercial real estate mortgage brokerage activities conducted through our majority~~long-~~owned~~lived ~~subsidiary, George Elkins and (iii) real estate, merchant banking and financing activities. The following is a summary of each of the operating segments:~~assets

~~Restaurant~~In ~~Operations~~accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“FAS 144”), we review our long-lived assets for impairment whenever an event occurs that indicates an impairment may exist. We test for impairment using the estimated future cash flows of the asset.

~~Fatburger~~Minority operates or franchises 62 hamburger restaurants located primarily in California and Nevada. In August 2003, we provided an investment and financing package for Fatburger which involved our acquisition of the entire class of the Series A-1 Preferred and the Series D Preferred stock of Fatburger. Currently, we own approximately 71% of the voting control of Fatburger. Fatburger has plans to open additional restaurants including franchises throughout the United States. Franchisees currently own and operate 36 of the Fatburger locations and Fatburger has agreements for approximately 220 new franchise locations.interests

~~Commercial~~We ~~Real~~apply ~~Estate~~Accounting ~~Mortgage~~Research ~~Brokerage~~Bulletin ~~Operations~~No. 51, “Consolidated Financial Statements” (“ARB 51”), which requires the elimination of all intercompany profit or loss and balances between consolidated companies. ARB 51 also requires the recognition of minority interest in consolidated subsidiaries. Consistent with ARB 51, where losses applicable to a minority interest exceed the minority interest in the capital of the subsidiary, such excess and any further losses are charged against the Company. Should the subsidiary become profitable, the Company will be credited to the extent of such losses previously absorbed.

~~George~~Share-based Elkins provided brokerage services related to the production of over $700 million in commercial real estate mortgages during 2004. George Elkins is headquartered in Los Angeles, with satellite offices located throughout the southern California area and in Las Vegas. The mortgage brokerage operation also manages a commercial loan servicing portfolio in excess of $700 million for various investors. The Company earned mortgage servicing fees of $0.7 million during 2004, which is included in other income in the accompanying consolidated statements of operations.payments

~~Real~~On ~~Estate~~January 1, ~~Merchant~~ ~~Banking~~2006, we adopted SFAS 123R, “Share-Based Payment”, which requires all share-based awards to employees, including grants of employee stock options, to be recognized in results of operations based on their fair value. Prior to January 1, 2006, the Company applied Accounting Principles Board Opinion No. 25 “Accounting for Stock Issued to Employees” (“APB 25”) and ~~Financing~~related ~~Operations~~interpretations in accounting for share-based payments. Accordingly, no compensation expense was recognized in results of operations prior to January 1, 2006 relating to share-based payments.

We invest in or finance real estate, mortgage-backed securities and other real estate-related or finance-related assets. Our merchant banking and financing operations focus on the acquisition of controlling interests in businesses in the process of restructuring. This can take the form of assisting in a management buy-out, refinancing corporate debt or acquiring the “non-core” assets of a business.16

Index

Results of Operations

During the most recent two fiscal years, our operations have resulted in net losses as follows:

Net Loss

	Year Ended December 31
	2008			2007
	(dollars in thousands, except per share data)
Loss from continuing operations	$	(15,182	)	$	(10,132	)
Loss per share from continuing operations	$	(1.91	)	$	(1.27	)

The loss from continuing operations for the year ended December 31, 2008 was $15.2 million, or $1.91 per share. The loss is primarily due to significant operating expenses associated with our management infrastructure and $2.9 million in recognized market value impairments. We have put in place a management structure that we believe will enable us to significantly expand our operations, notably our Fatburger subsidiary. However, until the growth in operations is realized, the cost of our management structure will be borne by our existing operations. Our results for 2008 compare to a loss from continuing operations of $10.1 million, or $1.27 per share for 2007. These results were also primarily attributable to our operating expenses as we transitioned our assets and liabilities and began focusing on our restaurant operations and other key subsidiaries.

The following sections describe the results of operations of our operating segments for each of the two years ended December 31, 2008 and 2007.

Restaurant Segment Operations

The following table shows our operating margin for company owned restaurants for each of the two years ended December 31:

	Year Ended December 31
	2008			2007
	(% to Company-owned restaurant sales)
Restaurant Sales:
Company-owned restaurant sales		100.0	%		100.0	%
Cost of sales – food, paper, merchandise		(26.1	%)		(24.6	%)
Cost of sales – wages and benefits		(33.3	%)		(33.5	%)
Restaurant depreciation and amortization		(6.1	%)		(6.2	%)
Operating margin (restaurant sales only)		34.5	%		35.7	%

The following table shows our total operating results from the restaurant segment for each of the two years ended December 31:

	Year Ended December 31
	2008			2007
	(% to total revenue)
Total Restaurant Operations:
Company-owned restaurant sales		85.0	%		93.0	%
Royalty revenue		6.2	%		6.5	%
Franchise fee revenue		8.8	%		0.5	%
Total revenue		100.0	%		100.0	%

Cost of sales		(50.5	%)		(59.8	%)
General & administrative costs		(47.4	%)		(48.4	%)
Interest expense		(1.9	%)		(2.4	%)
Other non-operating expenses		(16.3	%)		(7.3	%)
Minority interest in losses		0.8	%		2.8	%
Segment loss		(15.3	%)		(15.1	%)

For the year ended December 31, 2008, company owned restaurant sales increased 4.0% to $30.7 million from $29.5 million in 2007. This increase was the mainly the result of new company owned stores opened in 2008 and during the latter part of 2007. Same store sales for company-owned restaurants decreased 4.4% for the year ended December 31, 2008 compared to the same period in 2007. The operating margin for company-owned locations decreased to 34.7% in 2008 from 35.7% in 2007, due to increased food costs.

Royalty revenue increased 7.6% from $2.1 million in 2007 to $2.2 million in 2008, primarily as the result of the addition of nine new franchise locations. Franchise fee revenue increased from $0.2 million in 2007 to $3.2 million in 2008, primarily as the result of income recognition relating to the expiration of franchise rights. Same store sales for franchise locations decreased 4.2% for the year ended December 31, 2008 compared to the same period in 2007.

~~Segment data for the twelve months ended December 31, 2004, and 2003, 2002 are as follows (dollars in thousands):~~Index

	Real Estate,
	Merchant Banking and			Commercial Real Estate
	Finance			Mortgage Brokerage			Restaurant			Total
	Twelve months ended			Twelve months ended			Twelve months ended			Twelve months ended
	December 31,			December 31,			December 31,			December 31,
	2004	2003	2002	2004	2003	2002	2004	2003	2002	2004	2003	2002
Net Interest Income:

System-wide same store sales decreased 4.3% for the year ended December 31, 2008 compared to the same period in 2007. Our loss from restaurant operations was 15.3% of total revenue for 2008 compared to 15.1% for 2007.

Loans	$	1,899		$	1,250		$	469		$	—	$	—		$	—		$	—		$	—		$	—	$	1,899		$	1,250		$	469
Securities	617			2,422			5,277			—		—			—			—			—			—		617			2,422			5,277
Loans to senior executives	189			216			88			—		—			—			—			—			—		189			216			88
Other investments	108			170			262			2		3			2									—		110			173			264
Total interest income	2,813			4,058			6,096			2		3			2			—			—			—		2,815			4,061			6,098
Interest expense	112			669			1,906			—		—			—			—			—			—		112			669			1,906
Net interest income	2,701			3,389			4,190			2		3			2			—			—			—		2,703			3,392			4,192
Real estate operations:
Operating revenue	4,108			4,026			927			—		—			—			—			—			—		4,108			4,026			927
Operating expense	(1,760		)	(1,930		)	(669		)	—		—			—			—			—			—		(1,760		)	(1,930		)	(669		)
Gain on sale of real estate	1,703			279			49			—		—			—			—			—			—		1,703			279			49
Interest expense	(1,120		)	(1,335		)	(333		)	—		—			—			—			—			—		(1,120		)	(1,335		)	(333		)
Depreciation	(646		)	(616		)	(158		)	—		—			—			—			—			—		(646		)	(616		)	(158		)
Total real estate operations	2,285			424			(184		)	—		—			—			—			—			—		2,285			424			(184		)
Restaurant operations:
Operating income	—			—			—			—		—			—			21,889			7,502			—		21,889			7,502			—
Cost of goods sold	—			—			—			—		—			—			(13,042		)	(4,556		)	—		(13,042		)	(4,556		)	—
Franchise and royalty fees	—			—			—			—		—			—			1,431			463			—		1,431			463			—
General and administrative costs	—			—			—			—		—			—			(10,809		)	(3,514		)	—		(10,809		)	(3,514		)	—
Interest Expense	—			—			—			—		—			—			(661		)	(319		)	—		(661		)	(319		)	—
Depreciation and amortization	—			—			—			—		—			—			(1,498		)	(494		)	—		(1,498		)	(494		)	—
Total restaurant operations	—			—			—			—		—			—			(2,690		)	(918		)	—		(2,690		)	(918		)	—
Other operating income:
Market valuations and impairments	—			(762		)	(400		)	—		—			—			—			—			—		—			(762		)	(400		)
Gain on sale of prepaid servicing credit	1,530			—			—			—		—			—			—			—			—		1,530			—			—
Equity in earnings of equity investee	4,419			4,934			1,100			—		—			—			—			—			—		4,419			4,934			1,100
Gain on sale of loans and securities	2,099			12,520			28,045			—		—			—			—			—			—		2,099			12,520			28,045
Loan brokerage fees	—			—			—			5,795		5,408			2,315			—			—			—		5,795			5,408			2,315
Other income (loss), net	2,501			1,039			(1,424		)	426		427			387			—			—			—		2,927			1,466			(1,037		)
Total other operating income	10,549			17,731			27,321			6,221		5,835			2,702			—			—			—		16,770			23,566			30,023
Operating expenses:
Compensation and employee benefits	4,924			6,932			6,273			5,195		4,849			2,342			—			—			—		10,119			11,781			8,615
Leave of absence expense	4,750			—			—			—		—			—			—			—			—		4,750			—			—
Professional fees	2,498			1,756			2,018			37		169			140			—			—			—		2,535			1,925			2,158
Fees paid to related parties	342			425			75			—		—			—			—			—			—		342			425			75
Other	4,341			2,381			2,469			913		898			487			—			—			—		5,254			3,279			2,956
Total operating expenses	16,855			11,494			10,835			6,145		5,916			2,969			—			—			—		23,000			17,410			13,804
Net income (loss) before provision for income taxes	(1,320		)	10,050			20,492			78		(78		)	(265		)	(2,690		)	(918		)	—		(3,932		)	9,054			20,227
Provision for income taxes	—			3,454			3,522			—		—			—			—			201			—		—			3,655			3,522
Net income (loss)	$	(1,320	)	$	6,596		$	16,970		$	78	$	(78	)	$	(265	)	$	(2,690	)	$	(1,119	)	$	—	$	(3,932	)	$	5,399		$	16,705
Segment assets	$	52,357		$	87,179		$	107,561		$	1,341	$	2,230		$	3,025		$	20,200		$	19,567		$	—	$	73,898		$	108,976		$	110,586

We plan to open additional Fatburger restaurants throughout the United States and internationally, including Canada, China, Kuwait, Saudi Arabia and the United Arab Emirates. We intend to continue to open company-owned restaurants in strategic markets and increase the number of franchised locations in the U.S. and internationally. Fatburger has opened a total of 55 restaurant locations since our acquisition in 2003. As is typical for our industry, the identification of qualified franchisees and quality locations has an impact on the rate of growth in the number of our restaurants.

Manufacturing Segment Operations

	Year Ended December 31
	2008			2007
	(% to total revenue)
Manufacturing sales		100.0	%		100.0	%
Manufacturing cost of sales		(58.1	%)		(59.4	%)
Engineering and development		(8.5	%)		(8.5	%)
Operating margin		33.4	%		32.1	%

Compensation expense		(14.1	%)		(13.3	%)
Depreciation expense		(0.8	%)		(0.8	%)
Other operating expense		(6.8	%)		(9.3	%)
Segment income		11.7	%		8.7	%

Total revenue for this segment was $13.5 million for the year ended December 31, 2008, compared to $11.6 million for the year ended December 31, 2007. Net income for this segment was $1.6 million for 2008, compared to $1.0 million for 2007.

In order to focus our efforts on our restaurant segment, we intend to sell our equity position in DAC. However, the upheaval in the international capital markets has caused a delay in this process. Since this segment has been profitable, if we were to sell this segment, it would decrease our future consolidated net revenue and increase our future consolidated net loss. There can be no assurance that we will be able to sell this segment for a profit.

Real Estate and Finance Segment Operations

Real Estate Operations:	Year Ended December 31
	2008			2007
	(dollars in thousands)
Operating revenue	$	-		$	-
Operating expenses		(3	)		(9	)
Depreciation and amortization		-			(5	)
Operating margin		(3	)		(14	)

General and administrative expenses		-			(54	)
Interest expense		(386	)		(484	)
Market value impairment		(1,724	)		(3,564	)
(Loss) gain on sale of real estate		(562	)		13
Income (loss) from real estate operations		(2,675	)		(4,103	)

During the year ended December 31, 2008, our loss from real estate operations decreased to negative $2.7 million from negative $4.1 million in 2007. The 2008 loss is due to $1.7 million of market value impairments in 2008 (compared to $3.6 million in 2007), combined with a $0.6 million loss on sale of real estate (compared to a small gain in 2007). In September 2008, we sold one investment property in Barcelona, Spain held through our Variable Interest Entity for a loss of $0.6 million. Interest expense for the year ended December 31, 2008 decreased compared to the same period of 2007 as we repaid or restructured various notes payable secured by certain real estate investments. In 2008, we recognized market value impairments totaling $1.7 million relating to our Barcelona apartment buildings owned through a VIE (compared to $3.6 million in 2007).

Interest Income – Our interest income for the year ended December 31, 2008 was $0.1 million, compared with $0.2 million for 2007. The decrease is primarily attributable to a net reduction in average asset balance, reflecting the repayment of notes in our notes receivable portfolio.

~~RESULTS OF OPERATIONS—2004 Compared to 2003~~Index

~~NET~~Interest ~~INCOME. Our~~Expense ~~net~~– ~~loss~~Our ~~for~~non-real ~~the~~estate ~~year~~related ~~ended~~interest ~~December 31, 2004~~expense ~~amounted to $3.9 million, or $0.46 per share, compared to net income of $5.4 million, or $0.62 per share~~ for ~~the~~this ~~year~~segment ~~ended~~totaled ~~December 31,~~approximately ~~2003. The net loss for the 2004 period is primarily attributable to operating expenses of~~ $~~23.0 million and losses from restaurant operations of $2.7 million, partially offset by net interest income of $2.7 million, gain on sale of loans and securities of $2.~~1 ~~million, loan brokerage fees of $5~~.85 million, ~~equity~~ in ~~earnings~~ ofboth ~~equity~~2008 ~~investees of $4.4 million,~~ and ~~gain on the sale of a prepaid servicing credit of $1~~2007.~~5 million.~~

~~Operating~~Foreign ~~expenses~~Exchange ~~were~~– ~~higher~~Changes ~~than~~in ~~normal~~foreign ~~during~~currency exchange rates resulted in a net loss of approximately $0.1 million in this segment for the year ended December 31, ~~2004~~2008, ~~primarily~~compared ~~due~~ to agains of $21.0 million ~~leave~~for ~~of absence~~2007. At ~~payment~~December to31, ~~Andrew~~2008, ~~Wiederhorn~~we ~~and~~had ~~the~~eliminated ~~accrual~~all of $1our assets and liabilities which were denominated in Euros.8 This ~~million~~compares to approximately 16% of ~~future expenses~~our ~~associated~~total ~~with~~assets ~~the~~and ~~leave~~3% of ~~absence~~our total liabilities that were denominated in Euros at December 31, 2007.

~~The~~Equity ~~2003~~in ~~net~~Earnings ~~income~~of ~~was~~Equity ~~primarily~~Investees – Since the ~~result~~sale of ~~gains on~~its last property in 2006, our equity investee, Bourne End, has been proceeding toward final liquidation. In the ~~sale~~first quarter of ~~loans~~2008, ~~and~~Bourne ~~securities~~End revised its estimates of ~~$12.5~~accrued ~~million~~liabilities associated with its final liquidation, and ~~equity~~we inwere ~~earnings~~notified ~~of equity~~that ~~investees~~we ofhad been allocated an additional $40.92 million in income, which ~~were~~was ~~partially~~subsequently ~~offset~~distributed byin ~~our~~cash ~~operating expenses~~in the second quarter of 2008. There was no income recognized from Equity Investees during 2007.

~~The~~Corporate ~~following sections describe the results of operations of our operating segments for the years ended December 31, 2004 and 2003:~~Expenses

Restaurant Segment

	Year Ended December 31
	2008		2007
	(dollars in thousands)
Compensation and employee benefits	$	6,501	$	5,945
Travel and entertainment		943		1,691
Professional fees		1,176		1,323
Directors fees		354		520
Insurance		338		374
Occupancy costs		127		139
Other expenses		503		683
Total corporate expenses	$	9,942	$	10,675

InFor ~~addition to operating company owned restaurants, our strategy with respect to Fatburger is to increase~~ the ~~number~~2008 offiscal ~~franchises~~year, ~~thus~~ ~~increasing~~we ~~the~~incurred ~~franchise~~corporate ~~fees~~operating ~~and~~expenses ~~future royalty income to the operation. Fatburger is implementing a nationwide expansion~~ of ~~the franchise and currently has agreements with approximately 20 franchisees to open approximately 220 new locations~~$9.9 ~~When Fatburger enters into a franchise agreement~~million, ~~the~~compared ~~franchisee pays~~to a $~~20,000~~10.7 ~~per~~million ~~restaurant~~in ~~non-refundable franchise fee~~2007. This Andecrease ~~additional $20,000~~in ~~fee~~2008 ~~per restaurant~~ is ~~collected~~primarily ~~when~~due ~~the~~to ~~franchisee~~decreases ~~signs~~in atravel ~~lease agreement.~~and ~~These fees are recognized into income upon the opening of the franchise restaurant. As of December 31~~entertainment, ~~2004,~~professional ~~Fatburger had collected approximately $4.4 million in franchise~~ fees ~~for~~and ~~future~~expenses ~~restaurant~~related ~~locations.~~to ~~It is~~stock ~~expected~~option ~~that an additional $4~~grants.4 These ~~million~~decreases ~~relating~~were topartially ~~these~~offset ~~locations~~by ~~will~~increases ~~be collected~~in ascompensation ~~specific~~and ~~leases~~employee ~~are signed~~benefits.

~~During~~Management ~~the~~allocation ~~year ended December 31, 2004, we recognized a net loss from our restaurant segment of $2.7 million. This was primarily the result of a gross margin (sales less cost of goods sold) of $8.8 million~~ and ~~franchise~~other ~~and~~intercompany ~~royalty revenue of $1.4 million, offset by general and administrative costs of $10.8 million, interest expense of $0.7 million, and depreciation and amortization of $1.5 million.~~charges

~~During~~We ~~the~~allocate ~~nearly~~a ~~five months~~portion ~~from~~of ~~acquisition~~our ~~through~~corporate ~~December 31,~~expenses ~~2003,~~to ~~we recognized a net loss from~~ our restaurant segment ofto ~~$1.1~~more ~~million.~~accurately ~~This~~reflect ~~was~~the ~~primarily~~operating ~~the~~results ~~result~~ of ~~gross~~that ~~margin~~segment. This ~~(sales~~allocation ~~less~~was ~~cost~~$2.1 ofmillion ~~goods~~for ~~sold)~~each of ~~$2.9~~the ~~million~~years ~~and~~ended ~~franchise and~~December ~~royalty~~31, ~~revenue~~2008 ofand $02007.5 This ~~million,~~allocation ~~offset~~is byeliminated ~~general~~upon ~~and~~consolidation ~~administrative~~on ~~costs~~ the Consolidated Statements of $3Operations.5 Other ~~million~~intercompany charges, including intercompany interest expense, ofare ~~$0.3~~eliminated ~~million~~upon consolidation, ~~depreciation~~ and ~~amortization~~ oftotaled $0.5 million ~~and a provision~~ for ~~income~~2008 ~~taxes~~and of $0.27 million in 2007.

~~Commercial~~Income ~~Real Estate Mortgage Brokerage Segment~~taxes

~~The~~During ~~Company~~the ~~owns~~year aended ~~51%~~December ~~ownership~~31, ~~interest in George Elkins~~2008, a ~~mortgage~~provision ~~brokerage~~for ~~operation,~~income ~~which~~taxes inwas ~~2004~~not ~~provided~~required ~~brokerage services~~due ~~resulting~~to in the ~~production~~net ofoperating ~~over~~loss ~~$700~~generated ~~million~~during inthe ~~commercial~~fiscal ~~real estate mortgages~~year. During ~~George~~the ~~Elkins~~year isended ~~headquartered~~December in31, ~~Los Angeles~~2007, ~~with~~we ~~satellite offices~~determined ~~located~~that ~~throughout~~it ~~the~~was ~~southern~~more ~~California~~likely ~~area~~than ~~and~~not inthat ~~Las~~certain ~~Vegas.~~NOL ~~The mortgage~~carryovers ~~banking~~would ~~operation~~be ~~also~~available ~~manages~~to offset prior taxable income. As a ~~commercial~~result, ~~loan~~we ~~servicing~~recognized ~~portfolio in~~an ~~excess~~income tax benefit of $~~700~~4.4 million ~~for~~in ~~various~~2007 ~~investors~~and reduced the deferred tax liability by the same amount.

We recognized $0.1 million in net income from the commercial real estate mortgage brokerage segment for the year ended December 31, 2004, compared to a loss of $0.1 million during the 2003 period. During the 2004 period, we recognized loan brokerage fees of $5.8 million, loan servicing and other revenue of $0.4 million, which was offset by compensation expense of $5.2 million and other operating expense of $0.9 million.Index

~~During~~Discontinued the 2003 period, we recognized loan brokerage fees of $5.4 million, loan servicing and other revenue of $0.4 million, which was offset by compensation expense of $4.8 million and other operating expense of $1.1 million.Operations

~~Real~~At ~~Estate~~December 31, ~~Merchant~~ ~~Banking~~2007, our wholly-owned subsidiary, FCRI, held our real estate lease portfolio. In the fourth quarter of 2007, FCRI met our requirements to be classified as held for sale, and we sold FCRI in February 2008. As such, all assets and liabilities related to FCRI have been classified as held for sale at December 31, 2007. Prior to our decision to sell FCRI, it was part of our Real Estate and Financing ~~Segment~~Operations. The following table shows our total operating results from FCRI for each of the two years ended December 31, 2008 and 2007:

NET INTEREST INCOME. Our net interest income for the year ended December 31, 2004 was $2.7 million, compared with $3.4 million for the year ended December 31, 2003. These results reflect a reduction in interest income on securities of $1.8 million as the result of the sale or repayment of mortgage-backed securities. This decrease was partially offset by an increase in interest income on loans (reflecting our increased investment in specialty real estate and other lending) of $0.6 million and a decrease in interest expense of $0.6 million as a result of our repayment of debt related to the mortgage-backed securities. The following tables set forth information regarding the total amount of income from interest-earning assets and expense from interest-bearing liabilities and the resulting average yields and rates:

	Year Ended December 31
	2008			2007
	(dollars in thousands)
Operating revenue	$	610		$	3,782
Operating expenses		(240	)		(1,356	)
Depreciation and amortization		(39	)		(445	)
Operating margin		331			1,981

General and administrative expenses		(7	)		(366	)
Interest expense		(157	)		(939	)
Market value impairment		-			-
Gain on sale of real estate		4,247			-
Other non-operating income		7			31
Provision for income taxes		1			17
Income from discontinued real estate operations	$	4,422		$	724

	For the Year Ended December 31, 2004
	Average Balance		Interest Income (Expense)				Yield/Rate
	(dollars in thousands)
Interest-Earning Assets:
Loan portfolios(1)	$	11,011		$	2,088			19.0	%
Mortgage-backed securities available for sale	12,831			617				4.8
Other investments	10,894			110				1.0
Total interest-earning assets	$	34,736		$	2,815			8.1	%
Interest-Bearing Liabilities:
Borrowings(2)	$	9,489		$	(112	)		1.2	%
Total interest-bearing liabilities	$	9,489		$	(112	)		1.2	%
Net interest income before provision for loan losses/spread(3)				$	2,703			6.9	%
Net interest margin(4)								7.8	%

In December 2006, we and our 49% partners reached an agreement to sell our ownership interest in George Elkins, a California commercial mortgage banking operation. The sale closed in February 2007. As such, results from operations of George Elkins for 2007 have been classified as discontinued operations. Prior to the decision to sell George Elkins, it was a reportable segment of our operations. The following table shows our total operating results from George Elkins for each of the two years ended December 31, 2008 and 2007:

(1) Includes loans to a senior executive, which were originated prior to restrictions on loans to executive officers being imposed by the Sarbanes—Oxley Act of 2002.

	Year Ended December 31
	2008		2007
	(dollars in thousands)
Total revenue	$	-	$	1,808

Compensation expense		-		(1,499	)
Other operating expense		-		(216	)
Non-operating income		-		16
Gain on sale of assets		-		2,492
Minority interest in earnings		-		(37	)
Segment income	$	-	$	2,564

~~(2) Borrowings~~In ~~and~~June ~~interest expense~~2008, ~~relating~~we exercised our rights under a loan security agreement on loans to ~~real~~a ~~estate~~consolidated ~~investments~~subsidiary, ~~and~~Centrisoft ~~restaurant~~Corporation. Pursuant to the security agreement, the collateral assets of Centrisoft were transferred to us in satisfaction of the loans. Centrisoft has since ceased operations. As ~~are~~of ~~not~~ June 30, 2008, we no longer included inCentrisoft ~~this~~as ~~analysis~~a consolidated subsidiary. As of December 31, 2008, the carrying value of the assets acquired from Centrisoft was zero.

(3) Net interest spread represents the unweighted difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.

	Year ended December 31,
	2008			2007


Software sales	$	128		$	249
Engineering and development		(158	)		(444	)
Depreciation and amortization		(182	)		(445	)
Other general & administrative costs		(215	)		(593	)
Interest expense		(491	)		(1,141	)
Other non-operating expense		(571	)		(1,000	)
Segment loss	$	(1,489	)	$	(3,374	)

Capital expenditures	$	-		$	-
Segment assets		-			2,171

(4) Net interest margin represents net interest income divided by average interest-earning assets.

	For the Year Ended December 31, 2003
	Average Balance		Interest Income (Expense)				Yield/Rate
	(dollars in thousands)
Interest-Earning Assets:
Loan portfolios(1)	$	6,470		$	1,466			22.7	%
Mortgage-backed securities available for sale	49,906			2,422				4.9
Other investments	15,526			173				1.1
Total interest-earning assets	$	71,902		$	4,061			5.7	%
Interest-Bearing Liabilities:
Borrowings(2)	$	30,291		$	(669	)		2.2	%
Total interest-bearing liabilities	$	30,291		$	(669	)		2.2	%
Net interest income before provision for loan losses/spread(3)				$	3,392			3.5	%
Net interest margin(4)								4.7	%

Index

~~(1) Includes~~Changes ~~loans~~in toFinancial ~~senior executives granted prior to the Sarbanes—Oxley Act of 2002.~~Condition

~~(2) Borrowings and interest expense relating to real estate investments are not included in this analysis.~~Overview

~~(3) Net~~Our ~~interest~~assets, ~~spread represents~~liabilities ~~the~~and ~~unweighted~~stockholders’ ~~difference~~equity ~~between~~for the ~~average~~two ~~yield~~most ~~on interest-earning~~recent ~~assets~~fiscal ~~and~~years ~~the~~can ~~average~~be ~~cost~~summarized ofas ~~interest-bearing liabilities.~~follows:

(4) Net interest margin represents net interest income divided by average interest-earning assets.

	Year Ended December 31
	2008			2007
	(dollars in thousands)
Total assets	$	27,573		$	53,769
Total liabilities		36,315			51,072
Total minority interests		365			701
Total stockholders’ equity		(9,107	)		1,996

~~REAL~~The ~~ESTATE~~decrease ~~OPERATIONS. Our~~in ~~real~~total ~~estate operations~~assets ~~represent~~during ~~activity~~2008 ~~from~~is ~~our~~primarily ~~direct~~due ~~investment~~to ina ~~commercial property,~~decrease asin ~~well~~investment asin ~~the~~real ~~operations~~estate ofheld ~~our~~for ~~leasehold interests in freestanding retail buildings~~sale. ~~During~~In ~~the~~February ~~year ended December 31~~2008, ~~2004,~~ we ~~realized~~sold ~~net income~~a ~~from~~wholly-owned ~~real~~subsidiary, ~~estate~~Fog ~~operations~~Cap ofRetail ~~$2.3~~Investors ~~million~~LLC (“FCRI”), ~~compared~~which ~~with~~held ~~net~~our ~~income from~~leased real estate ~~operations of $0~~portfolio.4 Total ~~million~~liabilities ~~for~~decreased ~~the~~from ~~year~~2007, ~~ended December 31~~again, ~~2003.~~ ~~The increase during the 2004 period was~~ primarily ~~the~~due ~~result of gains on sales of real estate of $1.7 million, compared~~ to ~~gains of $0.3 million during~~ the ~~prior~~sale ~~year.~~of FCRI. The ~~gains~~cash onreceived ~~sales~~from ~~during 2004 relate to~~ the sale of ~~eight~~assets ~~of our~~or ~~freestanding retail buildings and~~ from ~~the~~operations ~~recognition~~was ofused ~~the deferred gain relating~~ to ~~the~~support ~~receipt~~our ofoperating ~~the~~activities, ~~final~~pay ~~payment~~down ondebt aand ~~real~~facilitate ~~estate~~the ~~sale~~expansion ~~which~~of ~~was financed in a prior year~~Fatburger.

~~OTHER~~We ~~OPERATING~~do ~~INCOME. Our~~not ~~other~~have ~~operating income~~a ~~was~~fixed ~~approximately~~dividend ~~$10~~policy.5 One ~~million~~factor ~~for~~the Board of Directors may consider is the ~~year~~impact ~~ended~~of ~~December 31, 2004~~dividends on our liquidity. No ~~This~~dividends ~~compares~~were todeclared ~~other~~or ~~operating~~paid ~~income~~in of2008 ~~$17~~or 2007.7 Stockholders’ ~~million~~equity ~~for~~decreased during the year ended December 31, ~~2003~~2008 by approximately $11.1 ~~The~~million, ~~primary~~mainly ~~components~~as a result of our ~~other~~net ~~operating income~~loss ~~include~~of ~~the~~$12.2 ~~following~~million. These changes are described in more detail as follows:

Gain on the Sale of Loans and Securities. During the years ended December 31, 2004 and 2003, we sold loans and securities to unrelated third parties for approximately $30.3 million and $16.0 million, respectively, resulting in gains of approximately $2.1 million and $12.5 million, respectively.Cash

~~Equity~~Our incash ~~Earnings~~decreased ~~of Equity Investees~~$0. ~~During~~8 ~~2004~~million ~~and~~from ~~2003,~~December ~~Bourne End sold properties and retired indebtedness~~31, a2007 ~~process~~to ~~which began during the fourth quarter of 2001. For the years ended~~ December 31, ~~2004, and 2003, we recorded $4~~2008.4 Significant ~~million~~sources and ~~$5.0~~uses ~~million, respectively, in earnings relating to our share~~ of ~~the~~cash ~~net~~during ~~income~~2008 ~~of Bourne End.~~included:

~~Prepaid~~· ~~Loan Servicing Credit. During the year ended December 31, 2004, we sold our Wilshire Credit Corporation (“WCC”) prepaid loan servicing credit (the “Loan Servicing Credit”) for~~ $18.53 million inof cash. ~~The~~used ~~Loan~~in ~~Servicing~~operations ~~Credit~~– ~~was originally~~comprised ~~acquired~~primarily byof usour innet ~~1998,~~loss ~~when~~from wecontinuing ~~were~~operations ~~an affiliate~~ of ~~WCC~~$15.2 ~~The Loan Servicing Credit may be used~~million, ~~subject~~partially tooffset ~~certain limitations, to pay for loan portfolio servicing activities performed~~ by ~~WCC.~~non-cash ~~As a result of the sale, we recognized a gain in the amount of $1.5 million.~~items;

$4.7 million of cash provided by investing activities – including $4.5 million proceeds from the sale of real estate and $1.1 million received from our notes receivable portfolio. These receipts were partially offset by investments in property, plant and equipment of $1.7 million;

$3.3 million of cash used in financing activities – including a net $3.5 million repayment of borrowings in excess of new advances; and

$6.3 million of net cash inflow from discontinued operations.

Net Investments in Real Estate, and related liabilities

Our investments in real estate can be summarized as follows:

	Year Ended December 31
	2008		2007
	(dollars in thousands)
US based investments – held for sale (1):
Purchase price / improvements	$	-	$	13,338
Accumulated depreciation and amortization		-		(2,143	)
Net book value		-		11,195
Foreign-based investments – held for sale (2):
Purchase price / improvements		-		8,463

Total investments in real estate, net	$	-	$	19,658

______________________

(1)	Includes 32 commercial properties under capital lease throughout the United States at December 31, 2007.

(2)	Includes 2 apartment buildings in Barcelona, Spain at December 31, 2007.

Borrowings related to our investments in real estate were as follows:

	Year Ended December 31
	2008		2007
	(dollars in thousands)
Obligations on real estate under capital lease	$	-	$	9,994
Borrowings on Barcelona properties		-		3,505
Total borrowing related to real estate	$	-	$	13,499

Other Income. During the year ended December 31, 2004, our other income included $1.3 million in gross modeling fees earned by V-Model, $0.3 million in net gains on foreign currency and $1.0 million in net advisory fees earned in connection with a third party real estate transaction. During the 2003 period, other revenue included $0.8 million in net gains on foreign currency and $0.3 million in net advisory fees earned in connection with third party real estate transactions.Index

~~OPERATING~~The ~~EXPENSES. During 2004,~~decrease ~~operating~~in ~~expenses~~US ofproperties ~~the~~owned ~~real~~at ~~estate~~December 31, ~~merchant~~2008 ~~banking~~compared ~~and~~to ~~finance segment~~December ~~were~~31, ~~comprised~~2007 ofis ~~compensation~~due ~~and~~to ~~employee~~the ~~benefits~~sale of ~~$4.9~~FCRI ~~million, Leave~~in ofFebruary ~~Absence costs of $4.8 million~~2008, ~~professional~~which ~~fees~~included ofproperty ~~$2.5~~with ~~million, V-Model~~a ~~operating~~net ~~costs~~book ofvalue ~~$1.7 million and other costs~~ of $311.01 million. Obligations ~~During 2003,~~under ~~operating~~capital ~~expenses~~leases ~~comprised~~related ofto ~~compensation~~these ~~and~~properties ~~employee~~decreased ~~benefits of~~ $610.90 million, ~~professional~~as ~~fees~~a ofresult ~~$1.8 million and other costs~~ of $2the sale.~~8 million.~~

~~RESULTS OF~~Our ~~OPERATIONS—2003~~investment ~~Compared~~in apartment buildings in Barcelona, Spain decreased $8.5 million during 2008. In September 2008, we sold one investment property in Barcelona, Spain with a carrying value of $6.1 million held through our VIE and recorded a loss on the sale of approximately $0.6 million. We used proceeds from this sale to ~~2002~~repay $1.5 million in real estate related debt and we converted $1.0 million in debt to non-real estate collateral. At December 31, 2008, we determined that the net market value of the remaining Barcelona property was less than the debt secured by that property. Since our liability in the VIE was limited to our cash investment, we abandoned our interest in the VIE and recognized an impairment loss of $1.7 million. This abandonment reduced our investment in real estate by $2.4 million and eliminated related non-recourse debt of $1.0 million.

~~NET~~Net ~~INCOME. Our net income for the year ended December 31~~Property, ~~2003~~ ~~amounted~~Plant to $5.4 million, or $0.62 per share, compared to net income of $16.7 million, or $1.69 per share, for the year ended December 31, 2002. The 2003 net income was primarily the result of gains on the sale of loans and ~~securities~~ of $12.5 million, and equity in earnings of equity investees of $4.9 million, which were partially offset by our operating expenses. The 2002 net income was primarily the result of gains on the sale of loans and securities of $28.0 million, partially offset by our operating expenses.Equipment

~~The~~Net ~~following~~property, ~~sections describe~~plant and equipment decreased $1.9 million at December 31, 2008 compared to December 31, 2007, primarily due to depreciation in the ~~results~~amount of ~~operations~~$2.2 million and the disposal of ~~our~~approximately ~~operating~~$1 ~~segments~~million ~~for~~in assets primarily associated with the ~~years ended~~closing of Fatburger locations. The decreases were partially offset by the addition of $1.5 million in new acquisitions. Obligations on property, plant, and equipment under capital lease decreased $0.1 million to $1.9 million at December 31, ~~2003~~2008 ~~and~~due ~~2002:~~to scheduled monthly payments.

~~Restaurant~~Goodwill ~~Segment~~and Net Intangible Assets

During the nearly five months from acquisition through December 31, 2003, we recognized a net loss from our restaurant segment of $1.1 million. This was primarily the result of gross margins (sales less cost of goods sold) of $2.9 million and franchise and royalty revenue of $0.5 million, offset by general and administrative costs of $3.5 million, interest expense of $0.3 million, depreciation and amortization of $0.5 million and a provision for income taxes of $0.2 million.

	Year Ended December 31
	2008		2007
	(dollars in thousands)
Goodwill – Fatburger acquisition	$	6,563	$	7,063
Goodwill – Centrisoft acquisition		-		998
Goodwill – DAC International acquisition		1,465		1,465
Total Goodwill	$	8,028	$	9,526


Net Intangible Assets – Fatburger	$	4,068	$	4,756
Net Intangible Assets – Centrisoft		-		230
Total Net Intangible Assets	$	4,068	$	4,986

~~Commercial~~Net ~~Real Estate~~intangible ~~Mortgage~~assets ~~Brokerage~~decreased ~~Segment~~$0.9 million during the year ended December 31, 2008 primarily due to a fair value impairment charge of $0.5 million plus the elimination of Centrisoft related assets. Net intangible assets at December 31, 2008 consists of trademark rights of approximately $3.5 million, franchise agreements of approximately $0.3 million and other miscellaneous intangible assets of approximately $0.3 million. Goodwill decreased $1.5 million during 2008 as the result of a fair value impairment of $0.6 million and the elimination of the Centrisoft assets.

~~Our~~Notes net loss from the commercial real estate brokerage segment was approximately $0.1 million for the year ended December 31, 2003. During the seven month period of our ownership of George Elkins during 2002, our net loss from the commercial real estate brokerage segment was $0.3 million. During the 2003 period, we recognized loan brokerage fees of $5.4 million, and loan servicing and other revenue of $0.4 million, which were offset by compensation expense of $4.8 million and other operating expense of $1.1 million. During the seven month period of our ownership during 2002, we recognized loan brokerage fees of $2.3 million, loan servicing and other revenue of $0.4 million, which were offset by compensation expense of $2.3 million and other operating expense of $0.6 million.Receivable

~~Real~~As ~~Estate~~of December 31, ~~Merchant~~ ~~Banking~~2008, our notes receivable portfolio consists of one individual note with a carrying value of $52,000. The note is secured by real estate consisting of commercial property located in Texas. The note has an interest rate (excluding fees and ~~Financing~~points) ~~Segment~~of 7.0% and a maturity date of April 2010. During 2008, two notes receivable with a combined carrying value of $0.5 million were paid in full.

~~NET~~Loans INTEREST INCOME. Our net interest income for the year ended December 31, 2003 was $3.4 million, compared with $4.2 million for the year ended December 31, 2002. These results reflect a reduction in interest income on securities of $2.9 million as the result of the sale or repayment of mortgage-backed securities. This decrease was offset by an increase in interest income on loans (reflecting our increased investment in specialty real estate and other lending) of $0.9 million and a decrease in interest expense of $1.2 million as a result of our repayment of debt related to ~~the~~Senior ~~mortgage-backed securities. The following tables set forth information regarding the total amount of income from~~ Executives

As of December 31, 2008, we did not have outstanding loans to senior executives. As of December 31, 2007, we had two loans to our Chairman and Chief Executive Officer, Andrew Wiederhorn, for a total of $1.1 million. Both loans were made on February 21, 2002 (prior to the passage of the Sarbanes-Oxley Act of 2002). The loans matured on February 21, 2007, and bore interest at the prime rate, as published in the Wall Street Journal, which interest was added to the principal. We did not extend the maturity date of the loans or amend any other terms. The loans were repaid in full, including interest, on February 21, 2008.

~~interest-earning assets and expense from interest-bearing liabilities and the resulting average yields and rates:~~Index

	For the Year Ended December 31, 2003
	Average Balance		Interest Income (Expense)				Yield/Rate
	(dollars in thousands)
Interest-Earning Assets:
Loan portfolios(1)	$	6,470		$	1,466			22.7	%
Mortgage-backed securities available for sale	49,906			2,422				4.9
Other investments	15,526			170				1.1
Total interest-earning assets	$	71,902		$	4,058			5.7	%
Interest-Bearing Liabilities:
Borrowings(2)	$	30,291		$	(669	)		2.2	%
Total interest-bearing liabilities	$	30,291		$	(669	)		2.2	%
Net interest income before provision for loan losses/spread(3)				$	3,389			3.5	%
Net interest margin(4)								4.7	%

Other Assets

(1) Includes loans to a senior executive, which were originated prior to restrictions on loans to executive officers being imposed by the Sarbanes—Oxley Act of 2002.

	Year Ended December 31
	2008		2007
	(dollars in thousands)
Trade receivables	$	2,712	$	1,491

Inventories	$	2,964	$	2,505

Other current assets:
Prepaid expenses	$	294	$	534
Other		-		2
Total other current assets	$	294	$	536

Other assets:

Security deposits	$	470	$	646
Capitalized finance fees		203		269
Other		139		972
Total other assets	$	812	$	1,887

Assets held for sale:
Current assets held for sale	$	-	$	66
Other assets held for sale		-		21

~~(2) Borrowings~~ Trade receivables and ~~interest~~inventories ~~expense~~at ~~relating~~December 31, 2008 relate primarily to the operations of DAC. Assets held for sale consists of all non-cash and non-real estate ~~investments~~assets ~~are~~of ~~not~~FCRI at December 31, 2007. Other assets at December 31, 2007 included ~~in this~~capitalized ~~analysis~~software costs related to Centrisoft.

~~(3) Net interest~~Deferred ~~spread represents the unweighted difference between the average yield on interest-earning assets and the average cost of interest-bearing liabilities.~~Income

Our deferred income relating to the collection of unearned Fatburger franchise fees was $2.6 million at December 31, 2008, compared with $5.2 million at December 31, 2007. The decrease is due to the recognition of deferred fees as a result of the opening of franchise locations or the expiration of the deposit terms. As of December 31, 2008, nearly all of the deferred income was comprised of non-refundable franchise fees received by Fatburger for each future franchise location. These initial fees generally represent half of the total fee per location. The balance of the franchise fees (4approximately an additional $2.6 million) ~~Net interest~~ ~~margin~~will ~~represents~~be ~~net~~collected ~~interest~~in the future when leases on these specific franchise locations are signed and the entire fee will be recognized in income ~~divided~~when bythe ~~average interest-earning~~criteria ~~assets~~for recognition of this revenue are met, generally when the restaurant opens.

	For the Year Ended December 31, 2002
	Average Balance		Interest Income (Expense)				Yield/Rate
	(dollars in thousands)
Interest-Earning Assets:
Loan portfolios(1)	$	4,467		$	557			12.5	%
Mortgage-backed securities available for sale	47,937			5,277				11.0
Other investments	16,017			262				1.7
Total interest-earning assets	$	68,421		$	6,096			8.9	%
Interest-Bearing Liabilities:
Borrowings(2)	$	36,310		$	(1,906	)		5.2	%
Total interest-bearing liabilities	$	36,310		$	(1,906	)		5.2	%
Net interest income before provision for loan losses/spread(3)				$	4,190			3.7	%
Net interest margin(4)								6.1	%

Notes Payable

(As of December 31, 2008, our notes payable totaled $14.3 million, including $7.2 million of debt held at Fatburger and $0.8 million at DAC. This compares $15.1 million (excluding borrowings on real estate) ~~Includes~~, ~~loans~~including to$7.2 ~~senior executives~~million ~~granted~~of ~~prior~~debt toheld ~~the~~at ~~Sarbanes—Oxley~~Fatburger ~~Act~~and $0.5 million at DAC at December 31, 2007. The decrease was primarily due to net repayment of ~~2002~~borrowings.

~~(2) Borrowings~~Accounts Payable and ~~interest expense~~Accrued ~~relating to real estate investments are not included in this analysis.~~Liabilities

~~(3) Net~~Accounts ~~interest~~payable ~~spread represents~~and ~~the~~accrued ~~unweighted~~liabilities ~~difference~~totaled ~~between~~$17.5 ~~the~~million ~~average~~at ~~yield~~December on31, ~~interest-earning assets~~2008, ~~and~~compared ~~the~~with ~~average~~$13.2 ~~cost~~million at December 31, 2007, and consisted of ~~interest-bearing~~the ~~liabilities.~~following:

(4) Net interest margin represents net interest income divided by average interest-earning assets.

	December 31, 2008		December 31, 2007
	(dollars in thousands)
Accounts payable	$	8,439	$	9,075
Sales deposits		1,228		1,478
Accrued wages, bonus and commissions		693		614
Other		7,126		2,093
Total accounts payable and accrued liabilities	$	17,486	$	13,260

Current liabilities associated with assets held for sale	$	-	$	1,232

Deferred Income Taxes

Deferred income taxes remained at zero at December 31, 2008. During the year ended December 31, 2007, we determined that it was more likely than not that certain NOL carryovers would be available to offset prior taxable income. As a result, we recognized an income tax benefit of $4.4 million and reduced the deferred tax liability by the same amount. As of December 31, 2008, we had, for U.S. Federal tax purposes, a net operating loss ("NOL") carryforward of approximately $80.6 million, including $11.4 million relating to Fatburger. Our NOL carryforwards begin to expire in 2018, while Fatburger’s NOL carryforwards began to expire in 2004.

REAL ESTATE OPERATIONS. During the year ended December 31, 2003, we realized a net income from real estate operations of $0.4 million, compared with a net loss from real estate operations of $0.2 million for the year ended December 31, 2002. The increase during the 2003 period was primarily the result of gains on sales of real estate of $0.3 million.Index

~~OTHER~~Liquidity ~~OPERATING~~and ~~INCOME. Our~~Capital other operating income was approximately $17.7 million for the year ended December 31, 2003. This compares to net other operating income of $27.3 million for the year ended December 31, 2002. The primary components of our net other operating income include the following:Resources

~~Gain~~Liquidity onis ~~the~~a ~~Sale~~measurement of ~~Loans~~our ~~and~~ability ~~Securities. During the~~to ~~years~~meet ~~ended~~potential ~~December 31~~cash requirements, ~~2003~~including ~~and~~ongoing ~~2002~~commitments to repay borrowings, wefund ~~sold~~business ~~loans~~operations, acquisitions, and ~~securities to~~expansion ~~unrelated~~(including ~~third~~growth ~~parties~~of ~~for~~company-owned ~~approximately~~and ~~$16.0~~franchised ~~million~~restaurant locations), engage in note receivable acquisition and ~~$79~~lending activities and for other general business purposes.5 In ~~million~~addition to our cash on hand, ~~respectively,~~ ~~resulting~~our inprimary ~~gains~~sources of ~~approximately~~funds ~~$12.5~~for ~~million~~liquidity ~~and~~during ~~$28.0 million~~2008 consisted of cash provided by proceeds from the sale of real estate, ~~respectively~~new borrowings, and the repayments to us from borrowers.

~~Market~~The ~~Valuation~~sale ~~Losses~~of real estate and ~~Impairments. During the~~other ~~year~~investments ~~ended~~has ~~December 31,~~historically ~~2003,~~been a recurring part of operations and ~~2002~~a source of liquidity. However, most of those investments have now been liquidated as we ~~incurred~~focused ~~market~~on ~~valuation losses~~the Fatburger operations. Borrowings and ~~impairments~~Fatburger’s ofoperations ~~$0.8~~are ~~million~~now expected to be our major source of liquidity and ~~$0.4~~we ~~million~~expect these sources, ~~respectively~~including the sale of Fatburger franchises, ~~on investments~~to ingenerate ~~loans~~adequate ~~and~~cash ~~real~~flow ~~estate~~to meet our liquidity needs for the next fiscal year.

~~Equity~~At inDecember ~~Earnings~~31, ~~of Equity Investees. During 2003 and 2002~~2008, ~~Bourne~~we ~~End~~had ~~sold properties~~total ~~and~~consolidated ~~retired~~secured indebtedness, ~~a process which began during the fourth quarter~~ of ~~2001~~$16.3 ~~For the years ended December 31~~million, ~~2003,~~as ~~and~~well ~~2002,~~as ~~we recorded~~ $520.0 million ~~and~~of $1other liabilities.1 Our ~~million,~~consolidated ~~respectively,~~secured inindebtedness ~~earnings~~consisted ~~relating to our share~~ of ~~the net income of Bourne End.~~:

~~OPERATING~~· ~~EXPENSES. During 2003,~~notes ~~operating~~payable ~~expenses of the real estate merchant banking,~~ and ~~finance segment~~other ~~were~~debt ~~comprised~~ of ~~compensation~~Fatburger ~~and~~totaling ~~employee benefits of~~ $67.~~9 million, professional fees of $1.8 million and other costs of $~~2.8 million. ~~During~~secured ~~2002, operating~~by ~~expenses of~~ the ~~merchant~~assets ~~banking, real estate and finance segment were comprised~~ of ~~compensation and employee benefits of $6.3 million, professional fees of $2.0 million and other costs of $2.6 million.~~Fatburger;

~~CHANGES~~· IN$1.9 ~~FINANCIAL~~million ~~CONDITION~~in capital leases primarily maturing in 2010, which are primarily secured by a corporate aircraft;

~~GENERAL. Total~~· ~~assets decreased from approximately~~ $~~109~~6.03 million at December 31, 2003 to approximately $73.9 million at December 31, 2004. Total liabilities decreased from approximately $63.6 million at December 31, 2003 to approximately $39.6 million at December 31, 2004. The decline in ~~total~~notes ~~assets~~payable ~~and~~secured ~~liabilities was primarily the result of sales of our mortgage-backed securities and repayment of the related borrowings. Stockholders’ equity decreased in 2004~~ by ~~approximately~~ ~~$11.1~~various ~~million~~assets ~~resulting primarily from our net loss~~ of ~~$3.9 million, dividends declared of $4.4 million,~~ the ~~purchase~~Company; ~~of treasury stock of $1.7 million~~ and ~~the purchase of a call option of $0.6 million.~~

~~SECURITIES~~· ~~AVAILABLE FOR SALE. The balance of mortgage-backed securities available for sale decreased from~~ $~~35.5 million at December 31, 2003 to less than $~~0.19 million ~~at December 31, 2004. The decrease was primarily the result~~ of ~~the sale of mortgage~~short-~~backed~~term ~~securities~~borrowings ~~with~~secured ~~a carrying value of $29.1 million and cash repayments of securities of $6.9 million, partially offset~~ by ~~increases~~the ~~in market~~assets ~~value~~ of ~~$1.4~~DAC ~~million~~International.

~~LOAN PORTFOLIO.~~ We ~~invest~~consider inthe ~~special~~sale ~~situation loans,~~of ~~generally~~assets ~~secured~~to bybe ~~real~~a ~~estate. These loans are typically short-term~~normal, ~~with~~ ~~maturities~~recurring ~~ranging~~part ~~from~~of 6our ~~to 24 months~~operations. ~~Due to the unique circumstances relating to the loans~~ However, ~~the~~excluding ~~interest rate charged~~ the ~~borrower~~sale isof ~~significantly higher~~assets ~~than~~from ~~conventional~~time ~~real~~to ~~estate lending. As of December 31~~time, ~~2004,~~we ~~our special~~are ~~situation~~currently ~~loan~~operating ~~portfolio consisted of five individual loans~~ with ~~a combined~~negative ~~carrying~~cash ~~value~~flow, ofsince ~~$6.7~~many ~~million. Three~~ of ~~the~~our ~~five~~assets ~~loans~~do ~~are~~not ~~secured~~currently ~~by real~~generate ~~estate~~sufficient ~~consisting~~cash ofto ~~commercial~~cover oroperating ~~single-family properties located in California, Texas, and Nevada~~expenses. We ~~One~~believe ~~loan~~that isour ~~secured~~existing bysources ~~all~~ of ~~the~~funds ~~stock~~will ~~and assets~~be ofadequate ato ~~commercial~~meet ~~manufacturing~~our ~~business,~~liquidity ~~and~~needs; ~~one~~however, ~~loan~~there iscan ~~secured~~be byno ~~stock in~~assurance athat ~~software~~this ~~company.~~will ~~The~~be ~~loans have a weighted average interest rate (including~~ the case.

Interest rate risk

Our borrowings and the availability of further borrowings are substantially affected by, among other things, changes in interest rates, changes in market spreads or decreases in credit quality of our assets. Material increases in interest expense from variable-rate funding sources, or material decreases in monthly cash receipts from operations, generally would negatively impact our liquidity. On the other hand, material decreases in interest expense from variable-rate funding sources would positively affect our liquidity. Fluctuations in interest rates will impact our net income to the extent our operations and our fixed rate assets are funded by variable rate debt. We may also be impacted to the extent that our variable rate assets re-price on a different schedule or in relation to a different index than any floating rate debt.

Fatburger debt default

At December 31, 2008, Fatburger had not made all of the required payments on indebtedness with an outstanding principal balance of $3.9 million. As a result, the lender had declared the indebtedness in default and has accelerated the maturity date of the entire balance. In addition to the payment default, at December 31, 2008 and 2007, Fatburger was not in compliance with all obligations under the agreements evidencing its indebtedness, as defined in the applicable agreements, due to its failure to meet the prescribed fixed charge coverage ratio and the prescribed debt-coverage ratio in three notes payable. The lender subsequently issued a waiver of the covenant violations for December 31, 2007. As such, on our Consolidated Statements of Financial Condition, $4.1 million of long-term debt that was classified as long-term at December 31, 2007 has been re-classified as current as of December 31, 2008.

Fatburger expansion

Fatburger is involved in a nationwide expansion of franchise and company-owned locations, which will require significant liquidity. If real estate locations of sufficient quality cannot be located and either leased or purchased, the timing of restaurant openings may be delayed. Additionally, if Fatburger or its franchisees cannot obtain capital sufficient to fund this expansion, the timing of restaurant openings may be delayed.

Dividends

During the years ended December 31, 2008 and 2007, we did not declare or pay any distributions to shareholders. While we do not have a fixed dividend policy, we may declare and pay new dividends on our common stock, subject to our financial condition, results of operations, capital requirements and other factors deemed relevant by the Board of Directors. One factor the Board of Directors may consider is the impact of dividends on our liquidity.

~~effects of $2.2 million in impaired loans on non-accrued status and excluding fees and points) of 8.0% and a weighted average maturity of 4 months.~~Index

~~During~~Stock ~~the~~Exchange year ended December 31, 2004, our loan portfolio increased by approximately $2.9 million. This was primarily the result of the acquisition of new loans with a carrying value totaling $10.6 million, partially offset by the sale or repayment of loans totaling $8.2 million. As of December 31, 2004, two of the Company’s loans totaling $2.2 million had been restructured to provide additional time for repayment by the borrowers in exchange for various extension fees or other new terms. As a result, these loans were considered impaired for accounting purposes, however, no impairment reserves were required on these loans due to management’s expectation that the carrying amounts will be collected.Listing

~~INVESTMENTS~~Effective INOctober ~~REAL~~14, ~~ESTATE. Investments~~2004, our stock began trading in ~~real estate~~the ~~increased~~over-the-counter by(“OTC”) $4market.1 Prior ~~million~~to ~~during~~that, ~~the~~we ~~year~~were ~~ended~~quoted ~~December 31,~~on ~~2004~~the NASDAQ National Market. Trading ~~The increase~~of ~~was~~our ~~primarily~~common ~~due~~stock toon the ~~purchase~~OTC ofmarket may reduce the ~~fee~~liquidity ~~interest~~of inour ~~three freestanding~~common ~~retail~~stock ~~buildings~~compared ~~for~~to ~~$0.9~~quotation ~~million~~on the NASDAQ National Market. Also, the ~~purchase~~coverage of ~~two~~the ~~apartment buildings~~Company inby ~~Barcelona~~security analysts and media could be reduced, ~~Spain~~which could result in lower prices for ~~$4.3~~our ~~million~~common stock than might otherwise prevail and ~~capital~~could ~~improvements~~also ofresult $2in increased spreads between the bid and ask prices for our common stock.~~0 million~~ Additionally, ~~partially~~certain ~~offset~~investors bywill not purchase securities that are not quoted on the ~~sale~~NASDAQ ofStock ~~eight~~Market, ~~properties~~which ~~with~~could amaterially ~~net~~impair ~~book~~our ~~value of~~ability ~~$2.5~~to ~~million~~raise ~~and~~funds ~~depreciation~~through the issuance of ~~$0.6~~common ~~million~~stock or other securities convertible into common stock.

~~LOANS TO SENIOR EXECUTIVES. On February 21, 2002 (prior to the passage of the Sarbanes-Oxley Act of 2002), we loaned Mr. Wiederhorn $175,000 to finance the purchase of~~ Common ~~Stock.~~stock ~~This~~trading loan is full recourse to Mr. Wiederhorn and is secured by all of Mr. Wiederhorn’s rights under his employment agreement. At Mr. Wiederhorn’s direction (in accordance with the terms of his employment agreement), on February 21, 2002, we loaned a limited partnership (the “LP”) controlled by Mr. Wiederhorn’s spouse $687,000 to finance the purchase of Common Stock. The loan is secured by the membership interests of two limited liability companies owned by the LP. The limited liability companies each own a parcel of real property in Oregon and have no liabilities. At the time of the loan, the real properties had an appraised value of $725,000. The loan is also guaranteed by Mr. Wiederhorn. The Common Stock purchased with the proceeds of these loans does not serve as security for the loans. The loans are due on February 21, 2007, and bear interest at the prime rate, as published in the Wall Street Journal, which interest is added to the principal annually.price

OnIf ~~July 9~~the trading price of our common stock is less than $5.00 per share, ~~2002~~trading ~~(prior~~in our common stock could be subject to ~~the~~Rule ~~passage~~15g-9 of the ~~Sarbanes-Oxley~~ Securities Exchange Act of ~~2002)~~1934, weas ~~loaned Mr~~amended. ~~Wiederhorn~~ Under ~~$2.0~~that ~~million.~~Rule, ~~This loan~~brokers iswho ~~full~~recommend ~~recourse~~such securities to ~~Mr. Wiederhorn~~persons other than established customers and ~~his~~accredited ~~spouse~~investors must satisfy special sales practice requirements, including an individualized written suitability determination for the purchaser and isthe ~~secured~~purchaser’s ~~by trust~~written ~~deeds~~consent onprior ~~two~~to ~~residences~~any ~~located~~transaction. The Securities Enforcement Remedies and Penny Stock Reform Act of 1990 also requires additional disclosure in ~~Oregon.~~connection ~~The~~with ~~loan~~any istrades ~~due~~involving ona ~~August 1~~stock defined as a penny stock (generally, ~~2007~~ ~~and~~any ~~bears~~equity ~~interest~~security atnot 8.traded on an exchange or quoted on NASDAQ that has a market price of less than $5%.00 per ~~annum~~share), ~~payable~~including ~~monthly~~the delivery of a disclosure schedule explaining the penny stock market and the associated risks. Such requirements severely limit the market liquidity of our common stock.

~~Further~~Accounting ~~information~~Standards onNot ~~these~~Yet ~~loans to executives is included in our proxy statements for 2004 and prior years’ Annual Meeting of Stockholders.~~Adopted

~~INVESTMENT~~In INJune ~~BOURNE~~2009, ~~END. Our~~the ~~investment~~FASB inissued ~~Bourne~~ASC ~~End~~105, ~~decreased~~The byFASB $0Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles – a replacement of FASB Statement No.~~2 million~~ to162 $1(ASC 105).9 ASC ~~million~~105 ~~during~~will become the ~~year~~source ~~ended~~of ~~December 31,~~authoritative ~~2004~~U.S. ~~The decrease~~GAAP ~~was~~recognized ~~primarily~~by the ~~result~~FASB to be applied by non-governmental entities. Rules and interpretive releases of ~~our~~the ~~receipt~~SEC, under the authority of ~~cash~~federal ~~distributions~~securities ~~from~~laws, ~~Bourne End~~are also sources of $4authoritative U.6S. ~~million;~~GAAP ~~partially~~for ~~offset~~SEC byregistrants. On the ~~recognition~~effective date of $4this statement, the codification will supersede all then-existing non-SEC accounting and reporting standards.4 All ~~million of~~other ~~our~~non-grandfathered, ~~share~~non-SEC ofaccounting literature not included in the ~~earnings~~codification will become non-authoritative. This statement is effective for financial statements issued for interim and annual reporting periods ending after September 15, 2009. The Company’s adoption of ~~Bourne~~ASC ~~End~~105 will impact the consolidated financial statements and the related disclosures as all references to authoritative accounting literature will reflect the newly adopted codification.

~~RESTAURANT~~In ~~PROPERTY~~February 2010, ~~PLANT~~the ~~AND~~FASB ~~EQUIPMENT,~~issued ~~NET~~ASU No. ~~Our investment~~ in2010-09, ~~restaurant~~Amendments ~~property,~~to ~~plant~~Certain Recognition and ~~equipment,~~Disclosure ~~net~~Requirements of(ASU ~~depreciation, increased~~2010-09). ASU $0No.3 ~~million~~2010-09 ~~during~~establishes that an entity that is an SEC filer is required to evaluate subsequent events through the ~~year~~date ~~ended~~that ~~December 31,~~the ~~2004~~financial statements are issued. An entity that is an SEC filer is not required to ~~a balance~~disclose ofthe $6date through which subsequent events have been evaluated.2 The ~~million~~amendments in ASU No. ~~The~~2010-09 ~~increase~~are ~~was~~effective ~~primarily~~upon issuance of the ~~result~~final update, except for the use of ~~approximately $1~~the issued date for conduit debt obligors.7 That ~~million~~amendment ofis ~~additions~~effective tofor ~~equipment,~~interim ~~furniture~~or ~~and~~annual ~~fixtures~~periods ~~relating~~ending toafter ~~new restaurant~~June ~~openings~~15, ~~less~~2010. Effective ~~depreciation~~with ~~expense~~the adoption of ~~approximately~~ASU $1No.4 ~~million~~2010-09 on December 31, ~~during~~ 2009, the ~~period~~Company will no longer disclose the date through which subsequent events have been evaluated, as the Company will have evaluated subsequent events through the date the financial statements were issued.

~~INTANGIBLE~~In ~~ASSETS~~January 2010, ~~NET. Primarily~~the asFASB aissued ~~result~~Accounting ~~of the~~Standards ~~acquisition~~Update (ASU No. 2010-06, Fair Value Measurements and ~~consolidation~~Disclosures of(ASU ~~Fatburger~~No. 2010-06). ASU No. 2010-06 provides guidance on improving disclosures on fair value measurements, such as ofthe ~~December 31~~transfers between Level 1, ~~2004~~Level ~~we had~~2 ~~intangible~~and ~~assets,~~Level ~~net~~3 ofinputs ~~amortization,~~and ofthe $5disaggregated activity in the rollforward for Level 3 fair value measurements.4 ASU ~~million~~No. ~~This~~2010-06 ~~consisted~~is ~~of trademark~~effective ~~rights~~for ofinterim ~~approximately~~and ~~$4.0~~annual ~~million~~reporting periods beginning after December 15, ~~franchise~~2009, ~~agreements~~except offor ~~approximately $1.1~~the ~~million~~disclosures ~~and~~about ~~other~~the ~~miscellaneous~~disclosures ~~intangible~~about ~~assets~~the ofdisaggregated ~~$0.5~~activity ~~million.~~in ~~Intangible assets~~the ~~decreased~~rollforward $0for Level 3 fair value measurements.2 Those ~~million~~disclosures ~~during~~are ~~the~~effective ~~year~~for ~~ended~~fiscal years beginning after December 31 15, ~~2004 primarily~~2010 asand for the ~~result~~interim periods within those fiscal periods. The Company is currently evaluating the impact of ~~amortization~~ASU ~~expense~~No. 2010-06 on its consolidated financial statements.

In June 2009, the FASB issued SFAS No. 167, Amendments to FASB Interpretation No. 46(R)(SFAS No. 167). SFAS No. 167 was issued to address the effects on certain provisions of FASB Interpretation No. 46 (revised December 2003), Consolidation of Variable Interest Entities(FIN 46(R)), as a result of the elimination of the qualifying special-purpose entity concept and constituent concerns about the application of certain key provisions of FIN No. 46 (R), including those in which the accounting and disclosures under the interpretation do not always provide timely and useful information about an enterprise’s involvement in a variable interest entity. SFAS No. 167 is effective for an entity’s first annual reporting period that begins after November 15, 2009. The adoption of SFAS No. 167 in not expected to have a significant effect on the consolidated financial statements.

GOODWILL. Primarily as a result of the acquisition and consolidation of Fatburger, we had recorded goodwill of $7.1 million as of December 31, 2004. Goodwill decreased during 2004 by $0.2 million as the result of the impairment of goodwill relating to the acquisition of V-Model.Index

~~OTHER ASSETS~~In April 2009, the FASB issued FSP SFAS 141 (R)-1, Recognition (FSP SFAS 141 (R)-1) to provide further guidance on assets acquired and liabilities assumed in a business combination that arise from contingencies that would be within the scope of SFAS 141(R), Business Combinations (SFAS 141(R)), if not acquired or assumed in a business combination, except for assets or liabilities arising from contingencies that are subject to specific guidance in SFAS 141 (R). ~~Our~~ FSP ~~other~~SFAS 141 (R)-1 is effective for assets ~~consisted~~or liabilities arising from contingencies in business combinations for which the acquisition date is on or after the beginning of the ~~following:~~first annual reporting period beginning on or after December 15, 2008. The adoption of FSP SFAS 1414 (R)-1, effective January 1, 2009, is not expected to impact the Company’s consolidated financial statements.

	December 31
	2004			2003
	(dollars in thousands)
Capitalized deferred compensation		$	878		$	1,249
Advisory fee receivable		1,368			—
Prepaid expenses		263			305
Trade receivables		450			344
Investment in operating leases		298			463
Mortgage servicing rights		253			273
Restaurant assets		816			213
Other		729			749
Total		$	5,055		$	3,596

In December 2007, the FASB issued FASB Statement of Financial Accounting Standards No. 160 (“SFAS 160”) clarifying the manner in which entities present non-controlling interests in consolidated financial statements. SFAS 160 is effective for fiscal years beginning after December 15, 2008, and early adoption is prohibited. Management has not yet determined the effect, if any, of this new standard on our consolidated financial position and results of operations.

~~The~~In ~~capitalized~~December ~~deferred~~2007, ~~compensation~~the ~~included~~FASB ~~in other~~issued ~~assets~~FASB ~~relates~~Statement toof ~~the~~Financial ~~acquisition~~Accounting ofStandards ~~George Elkins~~No. In141R ~~conjunction~~(“SFAS ~~with the~~141R”) ~~acquisition,~~clarifying ~~certain~~the ~~employees~~manner ofin ~~George~~which ~~Elkins~~entities ~~entered~~business ~~into~~combinations ~~long-term employment~~in ~~agreements.~~consolidated ~~These~~financial ~~employees received payments totaling $1~~statements.9 SFAS ~~million which~~141R weis ~~capitalized~~effective asfor ~~deferred~~fiscal ~~compensation.~~years ~~The~~beginning ~~employees~~after ~~are~~December ~~obligated~~15, ~~to perform~~2008, ~~under the employment agreements~~ and ~~must repay any unearned deferred compensation payments upon~~ early ~~termination.~~adoption ~~The deferred compensation~~ is ~~earned~~ ~~ratably~~prohibited. Management ~~over~~has ~~the~~not ~~terms~~yet ofdetermined the ~~employment agreements~~effect, ~~and~~if weany, ~~are amortizing~~of ~~the~~this ~~$1.9~~new ~~million~~standard ~~investment~~on ~~over~~our ~~the~~consolidated ~~contract~~financial ~~terms.~~position Atand ~~December 31, 2004,~~results ~~the~~of ~~remaining contract terms range from 4 to 29 months~~operations.

~~The~~In ~~advisory~~October ~~fee~~2008, ~~receivable~~the ofFASB ~~$1.4~~issued ~~million~~FSP atSFAS ~~December 31~~No. 157-3, ~~2004,~~ ~~relates~~Determining tothe ~~$2.0~~Fair ~~million~~Value inof ~~advisory~~a ~~fees~~Financial ~~which~~Asset weWhen ~~earned~~the ~~during~~Market ~~December 2004 relating~~for toThat aAsset ~~third~~Is ~~party~~Not ~~real~~Active ~~estate~~(SFAS ~~transaction~~157-3), inwhich ~~Europe.~~clarifies ~~The~~the ~~balance~~application of ~~the fee~~SFAS ~~was~~157 ~~collected~~in ~~during~~an inactive market and illustrates how an entity would determine fair value when the ~~first~~market ~~quarter~~for ofa ~~2005~~financial asset is not active. ~~Our~~SFAS ~~other~~157-3 ~~liabilities include~~is ~~approximately~~effective ~~$1.0~~immediately ~~million~~and inapplies ~~commissions~~to ~~payable~~prior atperiods for which financial statements have not been issued, including interim or annual periods ended on or before December 31 30, ~~2004~~ ~~relating~~2008. toThe ~~this~~implementation ~~transaction~~of SFAS 157-3 did not have an impact on the Company’s consolidated financial statements.

~~REPURCHASE~~In ~~AGREEMENTS~~March 2008, ~~BORROWINGS~~the ~~AND~~FASB ~~NOTES~~issued ~~PAYABLE~~SFAS No. ~~Our repurchase~~ ~~agreements~~161, ~~borrowings~~Disclosures about Derivative Instruments and ~~notes~~Hedging ~~payable~~Activities—an ~~decreased~~amendment ~~$25~~of FASB Statement No.1 ~~million during~~133 ~~the~~(SFAS ~~year~~161). ~~ended~~SFAS ~~December 31,~~161 ~~2004~~requires entities that utilize derivative instruments to anprovide ~~ending~~qualitative ~~balance~~disclosures about their objectives and strategies for using such instruments, as well as any details of $8credit-risk-related contingent features contained within derivatives.~~0 million.~~ ~~This~~SFAS ~~was~~161 ~~primarily~~also requires entities to disclose additional information about the ~~result~~amounts and location of derivatives located within the ~~repayment~~financial statements, how the provisions of ~~repurchase agreements~~SFAS ~~upon~~133 have been applied, and the ~~sale~~impact that hedges have on an entity’s financial position, financial performance, and cash flows. SFAS 161 is effective for fiscal years and interim periods beginning after November 15, 2008. The Company is currently in the process of ~~mortgage-backed~~assessing ~~securities~~the impact that SFAS 161 will have on the disclosures in the consolidated financial statements.

~~OBLIGATIONS~~In ~~UNDER~~February ~~CAPITAL~~2008, ~~LEASES~~the FASB issued FSP SFAS No. ~~Obligations under~~ ~~capital~~157-2, ~~leases~~Effective ~~decreased~~Date ~~approximately~~of $0FASB Statement No.5 ~~million~~157 ~~during~~(SFAS 157-2), which delayed the ~~year~~effective ~~ended December 31~~date of SFAS 157 for most nonfinancial asset and nonfinancial liabilities until fiscal years beginning after November 15, ~~2004.~~2008 ~~This~~(fiscal ~~decrease~~year ~~was~~2009 ~~primarily~~for the ~~result~~Company). ofThe Company does not expect the ~~scheduled amortization~~adoption of ~~the~~SFAS ~~obligations~~157 for nonfinancial assets and liabilities will have a material impact on its consolidated financial statements.

~~DEFERRED~~Off ~~INCOME. Franchise~~Balance ~~fee~~Sheet revenue from the sales of individual Fatburger franchises is recognized only when all material services or conditions relating to the sales have been substantially performed or satisfied. The completion of training and the opening of a location by the franchisee constitute substantial performance. Fatburger charges $40,000 per location in franchise fees. One-half of the fees are collected in cash at the time the franchise rights are granted and the balance is collected at the time the lease for the location is executed. Nonrefundable deposits collected in relation to the sale of franchises are recorded as deferred franchise fees until the completion of training and the opening of the restaurant, at which time the franchise fee revenue is recognized. As of December 31, 2004, our deferred income relating to the collection of unearned Fatburger franchise fees was $4.5 million, an increase of $0.8 million from December 31, 2003. The increase was primarily the result of the collection of nonrefundable deposits on new franchises. As of December 31, 2004, nearly all of the deferred income was comprised of Arrangements

26In order to facilitate the development of franchise locations Fatburger has, on rare occasions, guaranteed the annual minimum lease payments of restaurant sites owned and operated by franchisees. However, at December 31, 2008 there were no such guarantees in place

~~the~~We ~~initial~~have ~~$20,000~~various ~~non-refundable deposit~~operating ~~received~~leases ~~per~~for ~~location~~office and ~~the~~retail ~~balance~~space ofwhich ~~the~~expire ~~franchise~~through ~~fee~~2015. The ~~will~~leases ~~be collected~~provide infor ~~cash~~varying asminimum annual rental payments including rent increases and free rent periods. We have future minimum rental payments under non-cancelable operating leases onwith ~~these~~initial ~~locations~~or ~~are~~remaining ~~signed~~terms of one year or more of approximately $21.9 million as of December 31, 2008.

~~DEFERRED~~We ~~INCOME~~did ~~TAXES. Our~~not ~~deferred~~have ~~income~~any ~~taxes decreased~~other ~~$1.2~~off ~~million~~balance tosheet ~~$5.8~~arrangements ~~million at December 31, 2004. This was primarily the result of a decrease~~ in ~~the~~place ~~accrued~~as ~~taxes associated with unrealized gains on mortgage-backed securities. As~~ of December 31, ~~2004, we had, for U~~2008.S. Federal tax purposes, a net operating loss (“NOL”) carryforward of approximately $77.6 million, including $13.5 million relating to Fatburger. The NOL carryforward may reduce the future cash payment of the deferred income tax liability. Our NOL begins to expire in 2018. Fatburger’s NOL began to expire in 2004 and is generally subject to an annual limitation under the Internal Revenue Code of 1986, Section 382, Limitation on Net Operating Loss Carryovers and Certain Built-In Losses Following Change in Control. In addition, to the extent the Fatburger NOL is utilized, the recognition of the related tax benefits would first reduce goodwill related to the Fatburger acquisition, then other non-current intangible assets related to that acquisition, and then income tax expense in accordance with Statement on Financial Accounting Standards No. 109, Accounting for Income Taxes.

~~United~~Related ~~States~~Party tax regulations impose limitations on the use of NOL carry forwards following certain changes in ownership. If such a change were to occur with respect to the Company, the limitation could significantly reduce the amount of benefits that would be available to offset future taxable income each year, starting with the year of ownership change. To reduce the likelihood of such ownership changes, we established a Shareholder Rights Plan dated as of October 18, 2002, which discourages, under certain circumstances, ownership changes which would trigger the NOL limitations.Transactions

~~STOCKHOLDERS’~~For ~~EQUITY. Stockholders’~~a ~~equity decreased~~description byof ~~approximately~~certain ~~$11.1~~related ~~million~~party ~~resulting~~transactions, ~~primarily~~see ~~from~~“Item ~~our net loss of $3~~13.9 ~~million,~~Certain ~~purchase~~Relationships ofand ~~treasury~~Related ~~stock of $1.7 million~~Transactions, ~~the~~Director ~~purchase~~Independence” of ~~a call~~this ~~option~~Annual Report on ~~the~~Form ~~Company’s stock of $0~~10-K.~~6 million and dividends declared of $4.4 million.~~

In April 2004 we purchased 330,500 shares of our common stock from Clarence Coleman, an unrelated stockholder who, at the time, owned approximately 10% of the common stock. The purchase price was $5.40 per share and the shares were placed in treasury.

In April 2004 we purchased a three year call option (the “Call Option”) from Andrew A. Wiederhorn, the Company’s former Chairman and Chief Executive Officer and current Chief Strategic Officer. The Call Option gives us the right, but not the obligation, to purchase 423,245 of the Company’s outstanding common stock (the “Option Shares”) from Mr. Wiederhorn for a purchase price of $3.99 per share. The option may be exercised at any time during the three year option period. We paid $750,000 ($1.77 per option share) for the Call Option. The Call Option was exercised on March 14, 2005 for $1.6 million and we placed 423,245 shares in treasury.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity is a measurement of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund business operations and acquisitions, engage in loan acquisition and lending activities and for other general business purposes. The primary sources of funds for liquidity during the year ended December 31, 2004 consisted of net cash provided by investing activities, including cash repayments related to our mortgage-backed securities portfolio, cash distributions from BEP and the sale of mortgage-backed securities. As of December 31, 2004, we had cash or cash equivalents of $11.9 million which we believe will be sufficient to meet our current liquidity needs.

Fluctuations in interest rates will impact our net income to the extent our operations and our fixed rate assets are funded by variable rate debt. We may also be impacted to the extent that our variable rate

assets reprice on a different schedule or in relation to a different index than any floating rate debt. See “Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.”

At December 31, 2004, we had total consolidated secured indebtedness of $20.4 million, as well as $19.2 million of other liabilities. The consolidated secured indebtedness consisted of (i) $12.4 million outstanding of capital leases maturing between 2010 and 2040 which are secured by real estate, (ii) mortgage notes payable of $1.6 million secured by real estate and (iii) notes payable and other debt of Fatburger of $6.3 million secured by the assets of Fatburger.

If our existing liquidity position were to prove insufficient, and we were unable to repay, renew or replace maturing indebtedness on terms reasonably satisfactory to us, we may be required to sell (potentially on short notice) a portion of our assets, and could incur losses as a result. Also, Fatburger is involved in a nationwide expansion of franchise and Fatburger owned locations, which will require significant liquidity. If Fatburger or its franchisees are unsuccessful in obtaining credit lines sufficient to fund this expansion, the timing of restaurant openings may be delayed.

We consider the sale of assets to be a normal, recurring part of our operations and we are currently generating adequate cash flow as a result of these transactions. However, excluding the sale of assets from time to time, we are currently operating with negative cash flow, since many of our assets do not generate current cash sufficient to cover current operating expenses. We believe that our existing sources of funds will be adequate for purposes of meeting our liquidity needs; however, there can be no assurance that this will be the case. Material increases in interest expense from variable-rate funding sources, or material decreases in monthly cash receipts, generally would negatively impact our liquidity. On the other hand, material decreases in interest expense from variable-rate funding sources would positively affect our liquidity.

Effective October 14, 2004, the Company’s Common Stock began trading in the over-the-counter (“OTC”) market on the OTC “pink sheets.” Prior to that, the Company’s Common Stock was quoted on the Nasdaq National Market. On July 20, 2004, the Company was notified by Nasdaq of a staff determination to delist the Company’s Common Stock effective July 29, 2004. The Company challenged the staff determination and requested an oral hearing by a Listing Qualifications Panel to review the staff’s conclusions. A hearing was held on September 9, 2004, and, on October 12, 2004, the Company was notified by Nasdaq that the Listing Qualifications Panel upheld the staff determination and the Company’s Common Stock was delisted from the Nasdaq National Market on October 14, 2004. The Company requested a review of the Listing Qualifications Panel’s decision by Nasdaq’s Listing and Hearing Review Council. On February 16, 2005, the Company received notice that the Nasdaq Listing and Hearing Review Council had upheld the Panel’s decision. The Company is considering whether to continue the appeal process. There can be no assurance that an appeal will be successful.

Trading of our Common Stock in the OTC pink sheets may reduce the liquidity of our Common Stock compared to quotation on the Nasdaq National Market. Also, the coverage of the Company by security analysts and media could be reduced, which could result in lower prices for our Common Stock than might otherwise prevail and could also result in increased spreads between the bid and ask prices for the our Common Stock. Additionally, certain investors will not purchase securities that are not quoted on the Nasdaq Stock Market, which could materially impair our ability to raise funds through the issuance of Common Stock or other securities convertible into Common Stock.

In addition, if the trading price of the our Common Stock is less than $5.00 per share, trading in our Common Stock could also be subject to the requirements of Rule 15g-9 promulgated under the Securities Exchange Act of 1934, as amended. Under that Rule, brokers and dealers who recommend such low priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements, including a requirement that they make an individualized written suitability determination for the purchaser and receive the purchaser’s written consent prior to any transaction. The

Securities Enforcement Remedies and Penny Stock Reform Act of 1990 also requires additional disclosure in connection with any trades involving a stock defined as a penny stock (generally, according to regulations adopted by the SEC, any equity security not traded on an exchange or quoted on Nasdaq that has a market price of less than $5.00 per share, subject to certain exceptions), including the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and the risks associated therewith. Such requirements could severely limit the market liquidity of our Common Stock. There can be no assurance that our Common Stock will not become treated as penny stock.

CONTRACTUAL OBLIGATIONS

The following table provides information on the amounts of payments due under contractual obligations as of December 31, 2004 (dollars in thousands):

	Payments due by Period
	Total		Less than 1 year			1-3 years		3-5 years			More than 5 years
Contractual obligations:
Borrowings and notes payable	$	7,977		$	2,057	$	921		$	1,760		$	3,239
Interest payments on borrowings and notes payable	3,032			399		555			1,441			637
Obligations under capital leases(1)	33,083			1,647		3,153			3,006			25,277
Obligations under operating leases	14,593			3,185		5,003			2,715			3,690
Obligations under employment contracts	1,838			663		1,175			—			—
Leave of absence obligation	1,771			1,771		—			—			—
Purchase obligations(2)	318			318		—			—			—
Total	$	62,612		$	10,040	$	10,807		$	8,922		$	32,843

(1) The amount of imputed interest to reduce the minimum capital lease payments to present value is $20.7 million using an effective interest rate of 8.5%. Includes $22.8 million in payments expected to be made under bargain lease renewals.

(2) As of December 31, 2004, Fatburger was under contract to purchase advertising for $0.3 million.

OFF BALANCE SHEET ARRANGEMENTS

In order to facilitate the development of franchise locations, as of December 31, 2004, Fatburger had guaranteed the annual minimum lease payments of three restaurant sites owned and operated by franchisees. The amount of the guarantees approximate $1.9 million plus certain contingent rental payments as defined in the respective leases. These leases expire at various times though 2008.

We did not have any other off balance sheet arrangements in place as of December 31, 2004.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

~~Our~~Not ~~market risk is primarily the exposure to loss resulting from changes in foreign currency exchange rates, interest rates and commodity prices~~required. Our exposure to foreign currency fluctuations arises from our UK investment in BEP and our investment in Barcelona real estate. Approximately 15% of the Company’s equity is currently invested in net assets located outside of the United States as of December 31, 2004. These investments are primarily denominated in British pounds or the Euro.

2926

Our interest rate risk is sensitive to many factors beyond our control, including governmental monetary and tax policies, domestic and international economic and political considerations, and other factors. Changes in the general level of interest rates can affect our net income by affecting the spread between our interest-earning assets and our interest-bearing liabilities and by increasing the cost associated with operating and expanding our restaurant operation. Changes in the level of interest rates can also affect, among other things, the value of our interest-earning assets and our ability to acquire loans.Index

The following table sets forth information as to the type of funding used to finance our assets as of December 31, 2004. As indicated by the table, a large percentage of our assets are generally funded by equity or by fixed-rate liabilities. This represents a significant decrease in interest rate risk which resulted from the sale of the remainder of the mortgage-backed securities portfolio and the associated repayment of the associated repurchase agreements during 2004.

Assets and Liabilities As of December 31, 2004 (dollars in thousands)

	Basis Amount			Coupon Type		Liability		Type
Interest-Bearing Assets
Fixed-rate assets, no financing		$	7,056		Fixed	$	—	None
Variable-rate assets, no financing		2,587			Prime	—		None
Cash and cash equivalents		11,948			N/A	—		None
Subtotal		21,591				—
Other Assets
Investments in real estate		26,660			N/A	14,037		Fixed
Investment in BEP		1,901			N/A	—		None
Restaurant property, plant and equipment		6,228			N/A	6,341		LIBOR
Intangible assets, net		5,401			N/A	—		None
Goodwill		7,063			N/A	—		None
Other		5,054			N/A	—		None
Subtotal		52,307				20,378
Liability Only
Deferred income		—				4,466		None
Deferred income taxes		—				5,782		None
Other		—				8,965		None
Total		$	73,898			$	39,591

Our restaurant operations are also exposed to the impact of commodity and utility price fluctuations related to unpredictable factors such as weather and various other market conditions outside our control. Our ability to recover increased costs through higher prices is limited by the competitive environment in which we operate.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See Item 15 of Part IV of this Annual Report on Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

~~Ernst &~~There ~~Young~~has ~~LLP~~been ~~was~~no ~~previously~~change ~~the principal~~of ~~accountant~~accountants ~~for~~or ~~the~~any ~~Company.~~disagreements ~~The~~with ~~firm~~accountants ~~advised the Company~~ on ~~July 16, 2004~~any ~~that~~matter ~~the firm would resign as the Company’s auditors upon completion~~ of ~~its~~ ~~review~~accounting ofprinciples ~~the~~or ~~interim financial information for the second quarter 2004 and filing of the Company’s quarterly report on Form 10-Q for the quarter ending June 30~~practices, ~~2004.~~or ~~The~~financial ~~Company~~statement ~~announced~~disclosure ~~the~~required ~~resignation~~to ~~of Ernest &~~be ~~Young~~reported ~~LLP~~under onthis ~~July 23, 2004~~item. ~~The Form 10-Q was filed on August 16, 2004.~~

~~During~~ITEM the Company’s most recent two fiscal years, Ernst & Young LLP’s report on the financial statements did not contain an adverse opinion or disclaimer of opinion nor was qualified or modified as to uncertainty, audit scope, or accounting principles. During the Company’s most recent two fiscal years there were no disagreements with Ernst & Young LLP on any matter of accounting principles or practices, financial statement disclosures, or auditing scope or procedures, which disagreements if not resolved to the satisfaction of Ernst & Young LLP, would have caused Ernst & Young LLP to make references to the subject matter of the disagreements in connection with its report. During the Company’s most recent two fiscal years there were no reportable events as such term is defined in Regulation S-K 3049A(aT)~~(1)(v)~~. CONTROLS AND PROCEDURES

~~The~~Evaluation ~~Company appointed UHY LLP as its principal accountants on September 7, 2004. The decision to hire UHY LLP was approved by the Audit Committee~~ of ~~the~~disclosure ~~Board~~controls ~~of Directors. Ernst & Young LLP will continue to provide tax consulting~~ and ~~compliance services for the Company.~~procedures

~~ITEM~~Our ~~9A. CONTROLS~~Chief ~~AND~~Executive ~~PROCEDURES~~Officer and our Chief Financial Officer, after evaluating the effectiveness of the Company’s “disclosure controls and procedures” (as defined in the Securities and Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report, have concluded that our disclosure controls and procedures were effective and designed to ensure that material information relating to us and our consolidated subsidiaries is accumulated and communicated to our management to allow timely decisions regarding required disclosure.

~~(A) Evaluation of~~The Company does not expect that its disclosure controls and procedures will prevent all error and all fraud. ~~Our~~ A ~~Chief Executive~~control ~~Officer~~procedure, no matter how well conceived and ~~our~~operated, ~~Chief~~can ~~Financial~~provide ~~Officer~~only reasonable, ~~after~~not ~~evaluating~~absolute, assurance that the ~~effectiveness~~ objectives of the ~~Company’s~~control ~~“disclosure~~procedures ~~controls~~are ~~and~~met. Because ~~procedures”~~of ~~(as~~the ~~defined~~ inherent limitations in ~~the~~all ~~Securities~~control ~~and~~procedures, ~~Exchange~~no ~~Act~~evaluation of ~~1934~~controls ~~Rules 13a-15(e)~~ can provide absolute assurance that all control issues and ~~15d-15(e) as~~ instances of fraud, if any, within the ~~end~~Company ofhave been detected. These inherent limitations include the ~~period~~realities ~~covered~~that byjudgments ~~this~~in ~~report~~decision-making can be faulty, ~~have concluded~~and that ~~our~~breakdowns ~~disclosure~~can occur because of simple error or mistake. Additionally, controls ~~and~~can ~~procedures~~be ~~were~~circumvented ~~adequate~~by ~~and designed~~the toindividual ~~ensure~~acts ~~that~~of ~~material~~some ~~information~~persons, ~~relating~~by tocollusion usof two or more people, or by management override of the control. The Company considered these limitations during the development of its disclosure controls and ~~our consolidated~~procedures, ~~subsidiaries~~and ~~would~~will becontinually ~~made~~reevaluate ~~known~~them to usensure bythey ~~others~~provide ~~within~~reasonable ~~these entities~~assurance that such controls and procedures are effective.

~~(B) Changes in~~Management ~~internal~~Report ~~control~~on ~~over~~Internal ~~financial~~Control ~~reporting. There were~~Over noFinancial significant changes in our internal control over financial reporting that occurred during our fourth fiscal quarter of 2004 that has materially affected or is reasonably likely to materially affect our internal control over financial reporting.Reporting

~~(C) Resolution~~Management of ~~Reportable~~the ~~Conditions—Fatburger. Prior to~~Company ~~our~~is ~~acquisition~~responsible offor ~~Fatburger,~~establishing ~~the~~and ~~independent~~maintaining ~~auditors~~adequate ~~determined~~internal ~~that Fatburger~~control ~~had~~over ~~significant~~financial ~~deficiencies~~reporting as defined in Rule 13a-15(f) and 15d-15(f) promulgated under the Exchange Act. Those rules define internal control ~~which~~over ~~may~~financial ~~have affected~~reporting ~~its~~as ~~ability~~a process designed to ~~record,~~provide ~~process,~~reasonable ~~summarize~~assurance ~~and~~regarding ~~report~~the reliability of financial ~~data.~~reporting ~~While these~~and ~~issues~~the ~~did~~preparation ~~not~~of ~~constitute~~financial astatements ~~material~~for ~~weakness,~~external wepurposes ~~have~~in ~~made~~accordance ~~improvements to~~with ~~the~~generally ~~internal~~accepted ~~controls~~accounting principles and ~~these~~includes ~~issues~~those ~~were~~policies ~~resolved~~and asprocedures ~~of December 31, 2004.~~that:

(i)

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

(ii)

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and the receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and

(iii)

Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisitions, use or disposition of the Company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal controls over financial reporting may not prevent or detect misstatements. Our internal controls over financial reporting are subject to various inherent limitations, including cost limitations, judgments used in decision making, assumptions about the likelihood of future events, the soundness of our systems, the possibility of human error and the risk of fraud. Moreover, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2008. In making this assessment, the Company’s management used the criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

Based on our assessment and those criteria, management believes that, as of December 31, 2008, the Company’s internal control over financial reporting was effective.

Index

This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

Changes in internal control over financial reporting

There were no significant changes in our internal control over financial reporting in connection with an evaluation that occurred during the fourth quarter ended December 31, 2008 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

~~During~~Nothing ~~the fourth quarter of 2004, there were no disclosures required~~ to ~~be reported on Form 8-K that were not reported~~report.

Index

PART III

ITEM 10. DIRECTORS, ~~AND~~ EXECUTIVE OFFICERS OFAND ~~THE~~CORPORATE ~~REGISTRANT~~GOVERNANCE

The following sets forth information about our executive officers and directors as of February 28, 2005. The business address of each executive officer and director is the address of the Company, 1410 SW Jefferson Street, Portland, OR 97201, and each executive officer and director is a United States citizen. Directors

The names of our directors, their ages as of October 31, 2009 and other information about them are set forth below:

Unless otherwise noted, none of the officers or directors are related to one another and none of the entities mentioned are affiliates of the Company.

Name of Director	Position	Age
Andrew A. Wiederhorn	Chairman of the Board and Chief Executive Officer	43
Donald J. Berchtold	Director and Senior Vice President	64
Don H. Coleman	Director	71
K. Kenneth Kotler	Director	57
Kenneth J. Anderson	Director	54

~~Donald~~Andrew JA. ~~Berchtold~~Wiederhorn ~~(age 59)~~ has been a director, the ~~Senior~~Treasurer ~~Vice President~~and ofthe ~~Administration~~Secretary of ~~the~~Fog ~~Company~~Cutter ~~since~~Capital ~~October 1999,~~Group aInc. ~~director of~~since ~~the~~its ~~Company~~formation ~~since~~in ~~March 2004~~1997, and Chairman of the ~~sole~~Board and Chief Executive Officer ~~of the~~since ~~Company~~November ~~since~~2005. Mr. Wiederhorn served as our Chief Strategic Officer from August 2004 to November 2005. ~~From~~He also served as Chairman and Chief Executive Officer from our formation until June 2004 toand ~~August 2004,~~as ~~Mr. Berchtold was~~Co-Chairman and the Co-Chief Executive Officer offrom ~~the~~June ~~Company.~~2004 ~~From~~to ~~October 1991~~August to2004. ~~October~~ Until August 1999, Mr. ~~Berchtold~~ Wiederhorn was ~~Senior~~also ~~Vice~~chairman ~~President~~of the board of directors, chief executive officer, secretary and treasurer of Wilshire Financial Services Group Inc., (“WFSG”), a public company. ~~which~~In ~~was~~1987, ~~principally~~Mr. ~~engaged~~Wiederhorn infounded ~~mortgage loan~~Wilshire ~~purchasing~~Credit Corporation, and ~~investing~~served inas ~~mortgage-backed~~its, ~~securities.~~and ~~From~~certain ~~1975~~of toits ~~October 1991~~subsidiaries’, ~~Mr. Berchtold~~ ~~was~~chief aexecutive ~~consultant~~officer ~~and~~until ~~owner/operator~~August ~~of his own companies~~1999. Mr. ~~Berchtold~~ Wiederhorn holds a ~~BSC~~B.S. degree in ~~Finance~~Business ~~and~~Administration ~~Marketing~~ from ~~Santa~~the ~~Clara~~ University of Southern California. Mr. ~~Berchtold~~ Wiederhorn is ~~Mr. Wiederhorn’s~~the ~~father~~son-in-law of Mr. Berchtold. From August 2004 to October 2005, Mr. Wiederhorn took a leave of absence from Fog Cutter.

~~Don~~Donald HJ. Berchtold ~~Coleman (age 66)~~ has been a director of ~~the Company~~Fog ~~since~~Cutter ~~October 2001~~Capital ~~and~~Group ~~Co-Chairman~~Inc. since ~~June~~ March 2004. ~~Mr. Coleman has~~and ~~also~~served ~~been~~as ~~the~~our Chief ~~Operating~~Executive Officer offrom ~~Eagle~~August ~~Telephonic~~2004 ~~Inc.~~to ~~(“Eagle”),~~November ~~a designer and manufacturer of telephonic switches, since January 2000~~2005. From ~~1992~~ June 2004 to ~~1998~~August 2004, Mr. ~~Coleman~~ Berchtold was aour ~~Vice~~Co-Chief ~~President~~Executive ofOfficer. ~~International Communication~~Upon ~~Technologies Inc~~Mr., aWiederhorn’s ~~founder~~resuming ofhis ~~and~~role ~~partner~~as inChief ~~several~~Executive ~~private telephone~~Officer ~~service provider companies~~ in ~~foreign~~November ~~countries~~2005, ~~and a significant investor in Eagle. From 1988 to 1993,~~ Mr. ~~Coleman~~ ~~was~~Berchtold ~~the~~resumed ~~Chief~~his ~~Executive Officer~~duties ofas ~~Liquid~~Senior ~~Spring~~Vice ~~Technologies~~President, ~~Inc.,~~ which ~~was~~position ahe ~~developer~~previously ofheld ~~advanced~~from ~~suspension~~October ~~systems~~1999 ~~for~~to ~~cars and~~June ~~trucks~~2004. From ~~1983~~October 1991 to ~~1985~~October 1999, Mr. ~~Coleman~~ Berchtold was ~~the~~senior ~~Chief~~vice ~~Executive Officer~~president of ~~Clarion Corporation of America~~WFSG, ~~which~~overseeing ~~was~~human aresources ~~manufacturer~~ and ~~supplier of automotive sound systems and electronics to original equipment manufacturers and the aftermarket~~administration. From ~~1996~~ 1975 to ~~1999~~October 1991, Mr. ~~Coleman~~ Berchtold was a ~~director~~consultant ofand ~~WFSG.~~owner/operator ~~From~~of ~~1993~~several tocompanies. ~~1999,~~ Mr. ~~Coleman was~~ Berchtold holds a ~~director~~B.Sc. ofdegree ~~First~~in ~~Bank~~Finance ofand ~~Beverly~~Marketing ~~Hills,~~from ~~FSB~~Santa ~~(“FBBH”)~~Clara University. Mr. ~~Coleman holds~~ ~~B.A.~~Berchtold ~~and~~is MMr.~~B.A.~~ ~~degrees~~Wiederhorn’s ~~from Stanford University~~father-in-law.

~~David~~Don ~~Dale-Johnson~~H. ~~(age~~Coleman ~~57)~~ has been a director of ~~the Company~~Fog Cutter Capital Group Inc. since October 2001, aand Co-Chairman of the Board ~~since~~from June 2004 ~~and~~ ~~the~~to ~~Chief~~April ~~Investment~~2005. He ~~Officer~~served as sole Chairman of the ~~Company~~Board ~~since~~from ~~August 2004. Mr. Dale-Johnson~~April ~~has~~2005 ~~held various~~to ~~teaching~~November ~~and~~2005. ~~administrative~~Mr. ~~positions~~Coleman ~~during~~was 25chief ~~years~~operating atofficer ~~University~~ of ~~Southern~~Eagle ~~California~~Telephonics ~~including~~Inc., ~~associate~~a ~~professor~~designer and ~~director~~manufacturer of ~~the Marshall~~telephonic ~~School~~switches, from ofJanuary ~~Business’s~~2000 ~~Real Estate~~to ~~Program,~~December ~~associate~~2007. ~~professor~~From ~~at the~~1992 ~~School~~to of1998, ~~Policy~~Mr. ~~Planning~~Coleman ~~and~~was ~~Development~~a ~~and~~Vice ~~director~~President of ~~Executive Education~~International ~~for~~Communication ~~the~~Technologies ~~Lusk Center for Real Estate~~Inc., ~~Mr. Dale-Johnson~~and ~~is also~~ a ~~director~~founder of ~~LECG, Inc.,~~and apartner ~~litigation-consulting~~in ~~firm~~several ~~for~~private ~~which~~telephone ~~he has~~service ~~served~~provider ascompanies ~~an expert~~ in ~~real~~foreign ~~estate~~countries. ~~economics~~From ~~and~~1988 ~~finance since August 2001. Prior~~ to ~~August 2001~~1993, Mr. ~~Dale-Johnson~~ Coleman was achief ~~Senior~~executive ~~Consultant~~officer ~~for Economic~~of ~~Analysis~~Liquid ~~LLC~~Spring Technologies, ~~a litigation-consulting firm~~Inc., ~~From~~a ~~1996~~developer toof ~~1999,~~advanced ~~Mr. Dale-Johnson was~~suspension asystems ~~director~~for ofcars ~~WFSG~~and trucks. From ~~1993~~1983 to ~~1999~~1985, Mr. ~~Dale-Johnson~~ Coleman was achief ~~director of~~executive ~~FBBH.~~officer ~~Mr. Dale-Johnson~~of isClarion ~~also~~Corporation ~~Chairman~~of America, a ~~director~~manufacturer and ~~member~~supplier of ~~the executive~~automotive ~~committee~~sound ofsystems ~~CCEO, Inc.,~~and aelectronics ~~charitable~~to ~~organization~~original ~~involved~~equipment ~~in housing~~manufacturers ~~rehabilitation~~and the aftermarket. Mr. Coleman holds B.A. and ~~training~~M.B.A. ofdegrees ~~at-risk~~from ~~youth~~Stanford University.

~~Christopher T~~K. ~~DeWolfe (age~~Kenneth ~~39)~~Kotler has been a director of ~~the~~Fog ~~Company~~Cutter ~~since~~Capital ~~November 2002.~~Group MrInc. ~~DeWolfe has~~ ~~been the Chief Executive Officer of MySpace.com., a social networking portal,~~ since ~~December 2003. From~~ October ~~2002~~ to2001. ~~December 2003,~~ Mr. ~~DeWolfe~~ ~~was~~Kotler ~~the President of ResponseBase Marketing, LLC, an Internet direct marketing company. ResponseBase Marketing, LLC~~ is ~~a subsidiary of eUniverse, Inc.,~~ an ~~operator~~ ofattorney ~~entertainment-related~~whose ~~web~~practice ~~sites.~~primarily ~~From~~deals ~~June 2001~~with tocommercial ~~October 2002, Mr. DeWolfe~~litigation ~~was the Chief Executive Officer of ResponseBase, LLC, a predecessor business to ResponseBase Marketing, LLC~~matters. ~~In October 2002, ResponseBase, LLC sold substantially all of its assets to ResponseBase Marketing, LLC. From October 1999 to March 2001,~~ Mr. ~~DeWolfe was~~ ~~the~~Kotler ~~Vice~~has ~~President~~been ~~of Marketing at Xdrive Technologies, Inc.,~~ a ~~provider~~ ofsole ~~software~~practitioner ~~and~~since ~~service for presenting, storing and sharing of information via the Internet~~1991. From July 1997 to October 1999, Mr. DeWolfe was the Vice President of Marketing of FBBH. Mr. DeWolfe holds a B.A. in Finance from the University of Washington and an M.B.A. in Marketing from the University of Southern California.

32Kenneth J. Anderson has been a director of Fog Cutter Capital Inc. since April 2007. Mr. Anderson co-founded Quintile Wealth Management, an integrated wealth management firm in 2002, which merged with Kochis Fitz in 2008, becoming Aspirant. Mr. Anderson has over twenty-five years of financial consulting and accounting experience. Prior to co-founding Quintile, Mr. Anderson was a Client Service Director at myCFO from March 2000 to November 2002. Prior to joining myCFO, he was a tax partner with Arthur Andersen, LLP. During his 20 years at Arthur Andersen, Mr. Anderson was a founding board member of Arthur Andersen Financial Advisors, a wholly-owned registered investment advisor, and also served on the firm's national Compensation Planning Specialty Team as well as the Family Wealth and Private Client Services Specialty Team. He is both an attorney and a CPA and holds a BSBA in Accounting and Economics as well as a Juris Doctor degree from Valparaiso University. He was a founding member of the Advisory Board of the University of Southern California Family Business Program and sits on several boards, including Step Up On Second, Idyllwild Arts Academy, the Boy Scouts of America Western Council and the National Council for Valparaiso University School of Law.

K. Kenneth Kotler (age 52) has been a director of the Company since October 2001. Mr. Kotler is a lawyer and was admitted to the California bar in 1978. Mr. Kotler has been a sole practitioner since July of 1991, with a practice focusing on commercial collection matters. From 1994 to 1999, Mr. Kotler was a member of the boards of directors of FBBH and Girard Savings Bank, FSB, a predecessor to FBBH.29

M. Ray Mathis (age 65) has been a director of the Company since January 2003. In the spring of 2004, Mr. Mathis founded The Mathis Group, LLC, which consults on business security issues, corporate due diligence, pre-employment background checks and other business related issues. Mr. Mathis was the Executive Director for the Portland Oregon Citizens Crime Commission, an advocate for business to reduce crime in the community, from 1994 to 2002. Mr. Mathis began his career in public safety and served over 20 years as a special agent for the FBI, including serving as a branch chief for NATO from 1986 to 1989. He was the European systems director of security for Pan American Airlines from 1989 to 1990. He is the former president of Alert Management Systems, whose 2,000 employees provided security services at airports in the United States and Europe. Mr. Mathis holds a BBA degree from the University of Texas at Austin. He currently serves on the boards of directors of two non-profit organizations in Portland, Oregon.Index

Andrew A. Wiederhorn (age 39) has been a director, the Treasurer and the Secretary of the Company since its formation and the Chief Strategic Officer of the Company since August 2004. Mr. Wiederhorn was the Chairman and the Chief Executive Officer of the Company from its formation until June 2004 and was the Co-Chairman and the Co-Chief Executive Officer of the Company from June 2004 to August 2004. Until August 1999, Mr. Wiederhorn was also the Chairman of the Board of Directors, Chief Executive Officer, Secretary and Treasurer of WFSG. In 1987, Mr. Wiederhorn founded Wilshire Credit Corporation (“WCC”), and served as the Chief Executive Officer of WCC and certain of its affiliates until August 1999. Mr. Wiederhorn received a B.S. degree in Business Administration from the University of Southern California. Mr. Wiederhorn is the son-in-law of Donald J. Berchtold, the sole Chief Executive Officer and a director of the Company. Mr. Wiederhorn is currently on a leave of absence from his positions at the Company, but is expected to return during the 2005 term.Officers

R.The ~~Scott~~names ~~Stevenson (age 48) has been Senior Vice President~~ of ~~the~~our ~~Company~~executive ~~since~~officers, ~~October 1999~~their titles and ~~was~~their ~~appointed~~ages ~~Chief Financial~~as ~~Officer in June 2001. Mr. Stevenson was Senior Vice President~~ of ~~WFSG~~December ~~from September 1997 to October 1999. Mr. Stevenson was a director and President of Girard Savings Bank~~31, ~~FSB~~2009 ~~from~~are ~~1991~~as ~~to September 1997. Mr. Stevenson holds B.S. and Masters degrees in accounting from Brigham Young University. He is a certified public accountant licensed in California and Oregon.~~follows:

Matt Green (age 38) has been Vice President of the Company since October 1999. From 1996 to 1999, Mr. Green was a vice president of WFSG in Europe, where it had established offices in London and Paris. Since the inception of Fog Cutter Capital Group Inc., Mr. Green has focused on the acquisition and management of all of the group’s international assets. Prior to 1996 Mr. Green was the Vice President of International Sales and Leasing for Evergreen International Aviation. He holds a BA degree in International Business from the University of Washington.

Name	Age	Position
Andrew A. Wiederhorn	43	Chairman of the Board and Chief Executive Officer
R. Scott Stevenson	52	Chief Financial Officer
Donald J. Berchtold	63	Director and Senior Vice President

OnBiographical ~~December 8,~~information ~~2004, at~~with ~~our~~respect ~~annual~~to ~~stockholders’~~our ~~meeting,~~executive ~~the~~officers ~~Company’s~~is ~~stockholders~~presented ~~elected~~below, ~~seven persons~~except tofor the ~~Board~~biography of ~~Directors,~~Mr. ~~each~~Wiederhorn toand ~~serve~~Mr. ~~until the 2005 annual meeting of stockholders~~Berchtold, orwho ~~until their successors~~ are ~~elected~~also ~~and qualified~~directors.

R. Scott Stevenson has been our Senior Vice President since October 1999 and served as the Co-Chief Financial Officer since June 2009 and the Chief Financial Officer from June 2001 to June 2009. Mr. Stevenson was senior vice president of WFSG from September 1997 to October 1999. Mr. Stevenson was a director and President of Girard Savings Bank, FSB from 1991 to September 1997. Mr. Stevenson holds B.S. and Masters degrees in accounting from Brigham Young University. He is a certified public accountant licensed in California (inactive) and Oregon.

Involvement in Certain Legal Proceedings

~~Until~~Warlick August 1999, Mr. Wiederhorn was the Chief Executive Officer and Chairman of the Board of WFSG. Until October 1999, Mr. Stevenson and Mr. Berchtold were Senior Vice Presidents of WFSG. Mr. Coleman and Mr. Dale-Johnson were directors of WFSG until July 1999. In order to address liquidity concerns and to improve WFSG’s financial condition, WFSG and an unofficial committee of holders of a majority of WFSG’s outstanding publicly issued notes agreed to a restructuring of WFSG. In connection with the restructuring, WFSG filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Complaint

33Please see the information provided under the heading “Warlick Complaint” in Item 3. LEGAL PROCEEDINGS included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

~~Code in~~Fatburger ~~the~~Bankruptcy ~~Federal Court of Wilmington, Delaware on March 3, 1999. On April 12, 1999, the bankruptcy court approved the restructuring plan. On June 10, 1999, the plan became effective.~~Proceedings

~~Mr. Wiederhorn~~Please ~~pled guilty~~see ~~on June 3, 2004 to two federal counts. The first count, a violation of an ERISA provision, involved a federal law that required no criminal intent and for which his reliance on~~ the ~~advice~~information ofprovided ~~counsel~~under was not a defense. The second count related to a violation involving a deduction on a personal tax return. The deduction was structured and approved by Mr. Wiederhorn’s tax advisors and did not reduce Mr. Wiederhorn’s tax liability or reduce the ~~government’s~~ ~~tax~~heading ~~collections.~~“Bankruptcy ~~The~~Proceedings” ~~charges~~in toItem ~~which Mr~~3. ~~Wiederhorn~~ ~~has~~LEGAL ~~pled guilty~~PROCEEDINGS ~~pursuant~~included toin the ~~Settlement are not based upon any acts or omission of the~~ Company’s orAnnual ofReport ~~Mr. Wiederhorn~~on inForm ~~his~~10-K ~~capacity~~for ~~as an officer or director of~~ the ~~Company.~~year ~~See~~ended ~~Item~~December ~~3—Legal~~31, ~~Proceedings~~2008.

~~AUDIT COMMITTEE~~Capital ~~FINANCIAL~~Consultants, ~~EXPERT~~L.L.C.

~~The~~On ~~Audit~~June ~~Committee currently~~3, ~~consists~~2004, ofwe ~~Don~~announced Hthat Mr. ~~Coleman~~Wiederhorn, K.then ~~Kenneth~~Chief ~~Kotler,~~Executive ~~Christopher~~Officer ~~T. DeWolfe~~ and M.Chairman ~~Ray~~of ~~Mathis~~the Board, ~~each~~had ofentered ~~whom~~into ~~are~~a ~~independent~~settlement, (asthe ~~independence~~“Settlement”), iswith ~~defined~~the inUnited ~~Rule 4200(a) (15) of~~States ~~the~~Attorney’s ~~National~~Office ~~Association~~for the District of ~~Securities~~Oregon ~~Dealers’~~regarding ~~listing~~its ~~standards)~~investigation into the failure of Capital Consultants, L.L.C. ~~David Dale-Johnson~~and ~~was~~would take a ~~member~~leave of ~~the~~absence ~~Audit~~from ~~Committee~~his ~~until~~corporate ~~June 2004,~~positions ~~when~~at ~~he was~~Fog ~~appointed~~Cutter ~~Chief~~Capital ~~Investment~~Group ~~Officer~~Inc. ~~The~~Under ~~Audit~~the ~~Committee~~Settlement isterms, ~~responsible~~Mr. ~~for the~~Wiederhorn ~~appointment~~pled ~~and~~guilty ~~oversight~~on ofJune ~~the~~3, ~~independent~~2004 ~~public~~to ~~accountants,~~two ~~reviews with~~federal ~~the~~counts, ~~independent~~was ~~public~~sentenced ~~accountants~~to ~~the~~18-months ~~plans~~incarceration and ~~results~~fined of$2.0 ~~the~~million. ~~audit engagement,~~The ~~approves~~charges ~~professional~~to ~~services~~which ~~provided~~Mr. byWiederhorn ~~the~~pled ~~independent~~guilty ~~public accountants,~~pursuant ~~reviews~~to the ~~independence~~Settlement ofwere ~~the~~not ~~independent~~based ~~public~~upon ~~accountants, considers~~any ~~the~~acts ~~range~~or ofomissions ~~audit~~involving ~~and~~us ~~non-audit~~or ~~fees~~Mr. ~~and~~Wiederhorn ~~reviews~~in ~~the~~his ~~adequacy~~capacity ofas ~~the Company’s~~our ~~internal~~officer ~~accounting~~or ~~controls~~director.

~~The Board~~On ofJune ~~Directors~~2, ~~has~~2004, ~~determined~~we ~~that~~and weMr. ~~have~~Wiederhorn atentered ~~least~~into ~~one~~a ~~Audit~~leave ~~Committee Financial~~of ~~Expert~~absence asagreement. ~~defined~~In byentering ~~Section 407~~into the leave of ~~the~~absence ~~Sarbanes-Oxley~~agreement, ~~Act~~the board of ~~2002~~ ~~serving~~directors onconsidered ~~our~~the ~~audit~~nature ~~committee.~~of ~~The~~the ~~directors~~statutes ~~have~~to ~~determined~~which ~~that~~Mr. ~~Don Coleman~~Wiederhorn ispled ~~independent,~~and asthe fact that ~~term~~he isrelied ~~used~~on inthe ~~Item~~advice ~~7(d)(3)(iv)~~ of ~~Schedule~~ ~~14a~~expert ~~under~~legal ~~the~~counsel ~~Securities~~and ~~Exchange~~a ~~Act,~~national ~~and~~accounting ~~has~~firm. ~~all~~The board of ~~the~~directors ~~following five~~also ~~attributes~~believed ~~due~~it towas ~~his~~important ~~experience~~to ~~overseeing~~assure ~~and~~Mr. ~~assessing~~Wiederhorn’s ~~the~~return ~~performance of~~to ~~companies~~active involvement with ~~respect~~us tobecause ~~the~~of ~~preparation~~his expertise and ~~evaluation~~knowledge of ~~financial statements:~~our business and investments.

~~· An understanding~~Mr. Wiederhorn began his leave of ~~GAAP~~absence on August 2, 2004, returned to active service with us in October 2005 as Chief Strategic Officer and ~~financial~~resumed ~~statements;~~his role as Chairman of the Board and Chief Executive Officer in November 2005.

· The ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves;

· Experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by the Company’s financial statements, or experience actively supervising one or more persons engaged in such activities;

· An understanding of internal controls and procedures for financial reporting; and

· An understanding of audit committee functions.

Section 16(a) Beneficial Ownership Reporting Compliance

Based solely on a review of Forms 3, 4 and 5 and amendments thereto furnished to us for the ~~year~~years ended December 31, ~~2004,~~ ~~the~~2008 ~~Company’s~~and 2009, our directors, officers, or beneficial owners of more than 10% of ~~the~~our ~~Company’s~~common ~~Common~~stock ~~Stock~~ timely furnished reports on all Forms 3, 4 orand 5, except that (i) ~~Mr. Wiederhorn~~ ~~reported~~Kenneth ~~seven~~Anderson ~~transactions~~filed one late Form 4 reporting a stock option grant received on ~~three~~ ~~Forms~~March 31, 2008, a second late Form 4 ~~filed~~reporting ina ~~2004~~stock option grant received on December 31, 2008, and ~~one~~a third late Form 5 ~~filed~~4 inreporting ~~2005~~three stock option grants received on June 30, 2009, September 30, 2009 and December 31, 2009, respectively; (ii) ~~Clarence B.~~ Don Coleman ~~reported~~filed ~~twenty-~~a late Form 4 reporting three ~~transactions~~stock ~~late~~option grants received on ~~one~~June ~~Form 4~~30, 2009, September 30, 2009 and ~~filed a~~December ~~late~~31, ~~Form 3~~2009, respectively; (iii) ~~Christopher~~ ~~DeWolfe~~K. ~~reported~~Kenneth ~~three~~Kotler ~~transactions~~ filed a late onForm 4 reporting three ~~Forms~~stock 4option grants received on June 30, 2009, September 30, 2009 and December 31, 2009, respectively; and (iv) ~~Matt~~ ~~Green~~Andrew ~~reported~~Wiederhorn ~~two~~filed ~~transactions~~one late ~~on one~~ Form 4; ~~(v) David~~reporting ~~Dale-Johnson~~two ~~reported~~acquisitions ~~one~~of ~~transaction~~common ~~late~~shares on ~~one~~ ~~Form 4;~~December 18, 2009 and December 19, 2008.

3430

~~(vi) K. Kenneth Kotler reported three transactions late on one Form 4 and (vii) M. Ray Mathis reported five transactions late on one Form 4 filed in 2004 and one Form 5 filed in 2004.~~Index

Code of Ethics

The Board of Directors has adopted a code of ethics designed, in part, to deter wrongdoing and to promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships, full, fair, accurate, timely and understandable disclosure in reports and documents that we file with or submit to the Securities and Exchange Commission and in our other public communications, compliance with applicable governmental laws, rules and regulations, ~~the~~ prompt internal reporting of violations of the code to an appropriate person or persons, as identified in the code, and accountability for adherence to the code. The code of ethics applies to officers, directors and employees of the Company. A copy of the code is posted in the “Management Team” section on our internet website, www.fccgi.com. In addition, we intend to post any future amendments to or waivers of our code of ethics as it applies to certain persons on our website.

The code of ethics applies to officers, directors and employees of the Company. A copy of the code is posted in the “Management Team” section on our internet website, www.fogcutter.com. In addition, we intend to post any future amendments to or waivers of our code of ethics as it applies to certain persons on our website.

Audit Committee

The Audit Committee currently consists of Don H. Coleman, K. Kenneth Kotler, and Kenneth J. Anderson, three independent directors, and met five times during the year ended December 31, 2008. The Audit Committee selects our independent registered public accounting firm, reviews with the independent registered public accounting firm the plans and results of the audit engagement, approves professional services provided by the independent registered public accounting firm, reviews the independence of the independent registered public accounting firm, considers the range of audit and non-audit fees and reviews the adequacy of our internal accounting controls. The board of directors has determined that each of Mr. Coleman and Mr. Anderson is an Audit Committee financial expert within the meaning of applicable SEC rules and regulations and each of the members of the Audit Committee are independent (as independence is defined in both the listing standards of The NASDAQ Stock Market LLC (“Nasdaq”) and Rule 10A-3(b)(1) under the Securities Exchange Act of 1934, as amended). The board of directors adopted a revised charter for the Audit Committee on March 30, 2004. A copy of the Audit Committee charter is available in the “Management Team” section of our website at www.fogcutter.com. The Audit Committee engaged PKF, Certified Public Accountants, A Professional Corporation, Glendale, California, as our independent registered public accounting firm on January 22, 2007.

ITEM 11. EXECUTIVE COMPENSATION

~~The following~~SUMMARY ~~table~~COMPENSATION sets forth the total compensation paid or accrued by the Company for services rendered during the years ended December 31, 2004, 2003 and 2002 to the current Chief Executive Officer of the Company, the former Chief Executive Officer and to each of the four other most highly compensated executive officers of the Company whose total cash compensation for the year ended December 31, 2004 exceeded $100,000.TABLE

									Long-Term Compensation
Name and Principal Position	Year	Salary			Bonus		Stock Awards			Option Awards		Non-Equity Incentive Plan Compensation		Nonqualified Deferred Compensation Earnings		All Other Compensation		Total
				Actual Compensation					Restricted Stock			Securities Underlying
		($)			($)		($)			($)		($)		($)		($)		($)
Name and Principal Position:			Year	Salary($)(1)			Bonus($)(2)		Awards($)(3)			Options/SARs (#)
					(1)		(2)			(3)						(4)
Andrew A. Wiederhorn			2004		$	556,830	$	5,508,329		$	544,025		—
Andrew A. Wiederhorn,	2008	$	359,120		$	4,262,421	$	-		$	418,308		-		-	$	58,802	$	5,098,651
Former Chairman and CEO,			2003		$	377,507	$	2,000,000		—			—
Chief Executive Officer	2007		1,723,909			915,000		541,908			920,278		-		-		36,608		4,137,703
Current Chief Strategy Officer, Secretary and Treasurer			2002		$	350,140	$	1,500,000		$	340,987		—
R. Scott Stevenson,	2008		182,648			-		-			61,114		-		-		1,280		245,042
Robert G. Rosen			2004		$	128,083	$	391,829		—			—
Chief Financial Officer	2007		182,648			-		170,971			134,451		-		-		1,280		489,350
Former President			2003		$	262,397	$	2,009,902		—			—
Donald J. Berchtold,	2008		181,448			-		-			50,697		-		-		8,000		240,145
			2002		$	281,091	$	2,261,117		$	151,550		—
Senior Vice President	2007		180,529			-		65,932			111,534		-		-		2,752		360,747
R. Scott Stevenson			2004		$	172,472	$	275,000		$	231,500		100,000
Senior Vice President and Chief			2003		$	165,967	$	200,000		—			—
Financial Officer			2002		$	158,621	$	150,000		$	75,775		50,000
Lisa Colacurcio			2004		$	153,969	$	250,000		—			50,000
Former Vice President(4)			2003		$	141,595	$	200,000		—			—
			2002		$	68,671	$	25,000		$	15,155		—
Matthew Green			2004		$	203,891	$	1,116,700		$	46,300		50,000
Vice President			2003		$	174,979	$	141,525		—			—
			2002		$	188,026	$	160,000		$	15,155		—
Donald J. Berchtold			2004		$	168,246	$	50,000		$	115,750		100,000
Current Chief Executive Officer			2003		$	159,770	$	25,000		—			—
			2002		$	126,551	$	25,000		$	15,155		—
David Dale-Johnson(5)			2004		$	80,208	$	50,000		$	231,500		100,000
Chief Investment Officer

~~(1) Salary~~Explanatory ~~amounts include payments for unused vacation time and other sundry benefits.~~Notes:

(1) As of December 31, 2008 there remained accrued but unpaid bonuses relating to years prior to 2007 of $230,000 for Mr. Berchtold and $10,000 for Mr. Stevenson.

(2) Represents the value of shares distributed to each named executive on March 1, 2007 from the Fog Cutter Long-Term Vesting Trust (the “Trust”). In fiscal year 2000, the Company established the Trust, which purchased 525,000 shares of our common stock from an unrelated stockholder. Our contribution to the Trust of approximately $1.3 million was included in compensation expenses for the year ended December 31, 2000. Subsequently, the Trust used Trust earnings to fund the purchase of 389,755 additional shares of our common stock. The Trust was established for the benefit of our employees and directors to raise their ownership in the Company, thereby strengthening the mutuality of interests between them and our stockholders. On March 1, 2007, by action of the Trustees, all allocated shares under the Trust became fully vested to the beneficiaries. As a result, during March 2007, the Trust distributed 368,645 shares to Mr. Wiederhorn, 116,307 shares to Mr. Stevenson and 44,852 shares to Mr. Berchtold. At the time of the distribution, the shares were valued at $1.47 per share. The Trust terminated upon completion of the distribution process.

Index

(3) Reflects the dollar amount recognized for financial statement reporting purposes for the fiscal year ended December 31, 2008 and 2007, in accordance with FAS 123R of awards pursuant to the Stock Option Plan and thus include amounts from awards granted in and prior to 2008. Assumptions used in the calculation of this amount for fiscal years ended December 31, 2007 and 2008 are included in footnote 2 to the Company’s audited financial statements for the fiscal year ended December 31, 2008, included in Part IV of this Annual Report on Form 10-K.

(4) Other compensation for Mr. Wiederhorn is comprised of (a) $36,389 for the aggregate incremental cost of Mr. Wiederhorn’s personal use of the corporate aircraft, determined using the Standard Industry Fare Level formula outlined in Internal Revenue Regulation 1.61-21(g) and (b) $22,413 for the aggregate incremental cost of Mr. Wiederhorn’s automobile, determined by the actual car lease payments made by the Company. Other compensation for Mr. Stevenson and Mr. Berchtold consists exclusively of premiums paid by the Company on $1 million term life insurance policies owned by each of these named executives.

Executive Employment Agreements

The Company has employment agreements with Andrew A. Wiederhorn (as Chief Executive Officer), and R. Scott Stevenson (as Senior Vice President and Chief Financial Officer) (each an “Executive” and collectively, the “Executives”).

The latest employment agreement with Mr. Wiederhorn was effective June 1, 2006. The employment agreement provides for an initial three-year term commencing June 1, 2006, which is automatically renewable for successive two-year terms unless either party gives written notice of termination to the other at least 180 days prior to the expiration of the then-current employment term. The employment agreement with Mr. Wiederhorn provides for a base salary of not less than $350,000 annually, plus an annual bonus, which is typically paid in quarterly installments, as determined by the Compensation Committee of the Board of Directors.

The latest employment agreement with Mr. Stevenson was effective June 1, 2006. The employment agreement provides for an initial two year term commencing June 1, 2006, which is automatically renewable for successive one year terms unless either party gives written notice of termination to the other at least 60 days prior to the expiration of the then-current employment term. The employment agreement with Mr. Stevenson provides for a base salary of not less than $175,000 annually, plus an annual bonus as determined by the Compensation Committee of the Board of Directors.

The Company incurred salary and bonus expenses of $4.8 million and $2.8 million, respectively, for the years ended December 31, 2008, and 2007, relating to the Executives under employment agreements in effect at that time.

Prior to the passage of the Sarbanes-Oxley Act of 2002, Mr. Wiederhorn’s employment agreement allowed him to borrow a specified maximum amount from the Company to purchase shares of common stock. Under this program, on February 21, 2002, the Company loaned Mr. Wiederhorn $175,000 to finance the purchase of common stock. This loan was full recourse to Mr. Wiederhorn and was secured by all of Mr. Wiederhorn’s rights under his employment agreement. At Mr. Wiederhorn’s direction (in accordance with the terms of his employment agreement), on February 21, 2002, the Company also loaned a limited partnership controlled by Mr. Wiederhorn’s spouse (the “LP”) $687,000 to finance the purchase of common stock. The loan was secured by the membership interests of two limited liability companies owned by the LP. The limited liability companies each own a parcel of real property in Oregon and have no liabilities. At the time of the loan, the real property had an appraised value of $725,000. The loan was also guaranteed by Mr. Wiederhorn. The common stock purchased with the proceeds of these loans did not serve as security for the loans. The loans bore interest at the prime rate, as published in the Wall Street Journal, which interest was added to the principal annually.

The total amount of loans receivable from Mr. Wiederhorn in the amount of $1.1 million, including compounded interest, was repaid in full on February 21, 2008.

Effective October 15, 2009, the Board of Directors approved the terms of an employment agreement with Mr. Berchtold. The agreement provides for an initial term of one year , which is automatically renewable for successive one year terms unless either party gives written notice of termination to the other at least 60 days prior to the expiration of the then-current employment term. The employment agreement with Mr. Berchtold will provide for a base salary of not less than $175,000 annually, plus an annual bonus as determined by the Compensation Committee of the Board of Directors.

Index

OUTSTANDING EQUITY AWARDS AT FISCAL 2008 YEAR END

The following table summarizes the outstanding equity award holdings of our named executive officers as of December 31, 2008.

Option Awards

Stock Awards

Name

Number of Securities Underlying Unexercised Options

(#)

Exercisable

Number of Securities Underlying Unexercised Options

(#)

Unexercisable

Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options

(#)

Option Exercise Price

($)

Option Expiration

Date

Number of Shares or Units of Stock That Have Not Vested

(#)

Market Value of Shares or Units of Stock That Have Not Vested

($)

Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested

(#)

Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested

($)

(1)

Andrew A. Wiederhorn, Chief Executive Officer

920,000

460,000

1.32

12/31/16

R. Scott Stevenson, Chief Financial Officer

173,333

86,667

1.32

12/31/16

Donald J. Berchtold, Senior Vice President

140,000

70,000

1.32

12/31/16

Explanatory Notes:

(1) On December 29, 2006, the Company adopted a plan (the “Exchange Plan”) under which all holders of unexpired options granted by the Company were entitled to exchange previously issued options (the “Old Options”) for new options (the “New Options”) issued under the Stock Option Plan. Eligible participants included all employees, officers, and directors. The exercise price of each of the New Options was 110% of the closing price of the Company’s common stock on that date. Under the Exchange Plan, all current holders were entitled to surrender their Old Options, whether vested or not, for an equal number of New Options with a 10 year term and vesting of one-third each year beginning on December 31, 2007. All of the Company’s named executive officers participated in the exchange.

Option Exercises and Stock Vested

None of the named executives acquired shares of the Company’s stock through exercise of options during the year ended December 31, 2008. On March 1, 2007, by action of the Trustees, all allocated shares under the Long -Term Vesting Trust became fully vested to the beneficiaries. As a result, during March 2007, the Trust distributed 368,645 shares to Mr. Wiederhorn, 116,307 shares to Mr. Stevenson and 44,852 shares to Mr. Berchtold.

DIRECTOR COMPENSATION

The Company uses a combination of cash and stock-based incentive compensation to attract and retain qualified candidates to serve on the board of directors. In setting director compensation, the Company considers the significant amount of time that our directors expend in fulfilling their duties to the Company as well as the skill-level required by the Company of members of the board of directors.

Effective November 1, 2005, our non-employee directors are paid an annual directors fee of $24,000, an additional annual fee of $24,000 for membership on one or more committees of the board of directors and an additional annual fee of $24,000 for each subsidiary board on which they serve, up to a maximum total annual compensation of $120,000. In addition, on the last day of each calendar quarter, each non-employee director receives a non-statutory stock option to purchase 1,500 shares of our common stock at an exercise price equal to 110% of the fair market value of our common stock on that date. These options vest one-third on each of the first three anniversaries following the grant date and expire on the tenth anniversary of the grant date.

Index

The following table sets forth a summary of the compensation we paid or accrued to our non-employee directors during 2008:

Name	Fees Earned or Paid in Cash ($)(1) (2)		Stock Awards ($)		Option Awards ($)(3)		Non-Equity Incentive Plan Compensation ($)		Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
Don H. Coleman	$	120,000	$	—	$	53,893	$	—	$	—	$	—	$	173,893
K. Kenneth Kotler	$	72,000	$	—	$	53,893	$	—	$	—	$	—	$	125,893
Kenneth J. Anderson	$	72,000	$	—	$	4,213	$	—	$	—	$	—	$	76,213

Explanatory Notes:

(1)

Mr. Coleman serves on the Compensation Committee, the Audit Committee, the Nominating Committee, the DAC International board of directors and the Fatburger Holdings board of directors. Mr. Kotler serves on the Compensation Committee, the Audit Committee, the Nominating Committee and the Fatburger Holdings board of directors. Mr. Anderson serves on the Compensation Committee, the Audit Committee, the Nominating Committee and the Fatburger Holdings board of directors.

(2)	All director fees were accrued but unpaid during 2008 for each director.

(3)

Reflects the dollar amount recognized for financial statement reporting purposes for the fiscal year ended December 31, 2008, in accordance with FAS 123(R), of awards pursuant to the Stock Option Plan, and thus includes amounts from awards granted in and prior to 2008. Assumptions used in the calculation of this amount for fiscal years ended December 31, 2006, 2007 and 2008 are included in footnote 2 to the Company’s audited financial statements for the fiscal year ended December 31, 2008, included in Part IV of the Company’s Annual Report on Form 10-K. During 2008, Mr. Kotler, Mr. Anderson and Mr. Coleman were granted 6,000 options each with a grant date fair value of $2,805. As of December 31, 2008, Mr. Coleman held 190,000 options; Mr. Kotler held 190,500 options and Mr. Anderson held 15,500 options.

Index

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

SECURITIES OWNERSHIP

As of March 15, 2010, we had outstanding 7,954,928 shares of common stock, which are our only outstanding voting securities.

The following table sets forth, as of March 15, 2010, the beneficial ownership of the common stock with respect to (i) each person who is known by us to own beneficially more than 5% of the outstanding shares of common stock, (ii) each director, (iii) each of our executive officers, and (iv) all directors and executive officers as a group.

Name and Address of Beneficial Owner(1)	Amount and Nature of Beneficial Ownership(2)			Percent of Class
Andrew A. Wiederhorn, Chairman of the Board, Chief Executive Officer, Treasurer, Secretary		3,833,205	(3)		41.1	%
Tiffany A. Wiederhorn		2,453,205	(4)		30.8
TTMM, L.P.		929,592	(5)		11.7
Orin S. Kramer		626,900	(6)		7.9
Donald J. Berchtold, Senior Vice President, Director		733,403	(7)		9.0
Richard Terrell		562,100	(8)		7.1
Knight Equity Markets, L.P.		452,076	(9)		5.7
Don H. Coleman, Director		315,822	(10)		3.9
R. Scott Stevenson, Senior Vice President, Chief Financial Officer		379,032	(11)		4.6
K. Kenneth Kotler, Director		277,322	(12)		3.4
Kenneth J. Anderson, Director		76,300	(13)		1.0
All directors and executive officers as a group (6 persons)		5,625,606	(14)		55.2	%

*	Less than one percent.

(1)	The address for each stockholder is c/o Fog Cutter Capital Group Inc., 301 Arizona Avenue, Santa Monica, CA 90401.

(2)

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission (“SEC”). Shares of common stock subject to options or warrants exercisable within 60 days of March 15, 2010 are deemed outstanding for computing the amount and percentage beneficially owned by the person or group holding such options or warrants, but are not deemed outstanding for computing the percentage of any other person or group. Except as noted, each stockholder has sole voting and investment power with respect to all shares beneficially owned by such stockholder.

(3)

Includes (a) 421,645 shares held by Mr. Wiederhorn, of which 368,645 shares were acquired pursuant to a distribution from the Fog Cutter Long -Term Vesting Trust on March 1, 2007; (b) 1,500 shares held by the Andrew and Tiffany Wiederhorn Revocable Trust; (c) 474,536 shares held by Tiffany Weiderhorn (Mr. Wiederhorn’s spouse); (d) 423,189 shares held jointly by Mr. Wiederhorn and Tiffany Wiederhorn (e) 929,592 shares held by TTMM, L.P., a partnership controlled by Mr. Wiederhorn’s spouse; (f) 13,826 shares of common stock owned by W.M. Starlight Investments, LLC (Mr. Wiederhorn’s spouse is the manager and majority owner of this limited liability company); (g) 188,917 shares of common stock owned by Andrew and Tiffany Wiederhorn’s minor children; and (h) 1,380,000 shares of common stock issuable upon the exercise of options exercisable currently or within 60 days of March 15, 2010. Includes a total of 1,417,954 shares of common stock owned by the other reporting persons. While Andrew Wiederhorn may be deemed to share voting and dispositive power with respect to the shares of common stock owned by Tiffany Wiederhorn, TTMM, L.P., and W.M. Starlight Investments, LLC, and may be deemed to be the beneficial owner of all such shares, Mr. Wiederhorn disclaims beneficial ownership of such shares. While the shares owned by Mr. Wiederhorn’s minor children are held in custody for the benefit of such children pursuant to arrangements that do not give Mr. Wiederhorn any dispositive or voting power over such shares, Mr. Wiederhorn may be deemed to share voting and/or dispositive power with respect to such shares of common stock and may be deemed to be the beneficial owner of such shares. Mr. Wiederhorn also disclaims beneficial ownership of such shares. Of the 3,833,205 shares, Andrew Wiederhorn shares power to vote or to direct the vote of all of such shares and shares power to dispose or to direct the disposition of all of such shares

(2) At December 31, 2004, bonuses were accrued but unpaid in the amount of $1.0 million for Mr. Green and $1.5 million for Mr. Wiederhorn (in accordance with his Leave of Absence Agreement). At December 31, 2003, bonuses were accrued but unpaid in the amount of $0.5 million for Mr. Wiederhorn. At December 31, 2002, bonuses were accrued but unpaid in the amount of $1.5 million for Mr. Wiederhorn and $0.2 million for Mr. Rosen.Index

(34) ~~Determined~~ ~~by multiplying~~Represents ~~the~~(a) ~~number~~474,536 of shares ofheld ~~restricted~~by ~~stock~~Tiffany ~~awarded~~Weiderhorn by(b) ~~the~~1,500 ~~closing market~~shares ~~price~~held ofby the ~~Common~~Andrew ~~Stock~~and onTiffany ~~the~~Wiederhorn ~~date~~Revocable ofTrust; ~~award.~~(c) ~~The~~421,645 shares ofheld ~~restricted stock~~by ~~shown~~Andrew ~~are~~Wiederhorn ~~allocations~~(Ms. ~~under~~Wiederhorn’s ~~the~~spouse); ~~Trust.~~(d) ~~The~~423,189 ~~Trust~~shares ~~allocations~~held ~~vest~~jointly onby ~~the fifth~~Mr. ~~anniversary~~Wiederhorn ofand ~~the~~Tiffany ~~date~~Wiederhorn; of(e) ~~award~~929,592 onshares ~~the~~held ~~condition~~by ~~that~~TTMM, ~~the~~L.P. ~~employee~~a ~~has been~~partnership ~~continually~~controlled ~~employed~~ by ~~the~~Ms. ~~Company~~Wiederhorn; ~~since~~(f) ~~the~~13,826 ~~date~~shares of ~~award,~~common ~~provided however~~stock owned by W.M. Starlight Investments, ~~that~~LLC (Ms. Wiederhorn is the ~~Trustees~~manager and ~~the~~majority ~~Company~~owner ~~may~~of ~~agree~~this inlimited ~~writing~~liability ~~that~~company); ~~the~~and ~~period of~~(g) ~~service~~188,917 ~~need~~shares ~~not~~of becommon ~~continuous~~stock ~~for~~owned anby ~~officer~~Andrew orand ~~employee~~Tiffany ~~that~~Wiederhorn’s ~~leaves~~minor ~~the Company~~children. ~~for~~Includes a ~~period~~total of ~~not~~1,312,063 ~~more~~shares ~~than~~of 36common ~~months~~stock owned by other Reporting Persons. ~~The~~While ~~Trustees~~Ms. Wiederhorn shares voting and ~~the~~dispositive ~~Company have~~power ~~agreed~~with ~~that~~respect ~~Andrew~~to ~~Wiederhorn~~the ~~need~~shares ~~not~~of ~~provide~~common ~~continuous~~stock ~~service~~owned by TTMM, L.P. and may ~~leave~~ ~~the~~be ~~Company~~deemed ~~for~~to abe ~~period~~the beneficial owner of ~~not~~such ~~more~~shares ~~than~~and 36the ~~months~~shares ~~without~~held ~~forfeiting his~~by Andrew Wiederhorn, Ms. Wiederhorn disclaims beneficial ~~rights~~ownership ~~under~~of all of such shares of common stock. While the ~~Trust~~shares owned by Ms. ~~Trust~~Wiederhorn’s ~~allocations~~minor ~~were~~children ~~awarded~~are held in custody for the ~~fiscal~~ ~~year~~benefit ~~ended~~of ~~December 31,~~such ~~2004~~children inpursuant ~~the~~to ~~following~~arrangements ~~amounts~~that ofdo ~~shares:~~not Mrgive Ms. Wiederhorn~~—117,500; Mr. Stevenson—50,000;~~ ~~Mr. Berchtold—25,000~~any ~~and~~dispositive ~~Mr. Green—10~~or voting power over such shares,~~000~~ Ms. ~~There~~ ~~were~~Wiederhorn nomay ~~allocations~~be ofdeemed ~~Trust~~to ~~assets~~share ~~during~~voting ~~the~~and/or ~~year~~dispositive ~~ended~~power ~~December 31, 2003.~~with ~~Trust~~respect ~~allocations~~to ~~were~~such ~~awarded~~shares inof ~~the~~common ~~fiscal~~stock ~~year~~and ~~ended~~may ~~December 31, 2002~~be indeemed to be the ~~following~~beneficial ~~amounts~~owner of ~~shares:~~such Mrshares. ~~Wiederhorn—112,500;~~ ~~Mr. Rosen—50,000; Mr. Stevenson—25,000;~~ Ms. ~~Colacurcio—5,000;~~ ~~Mr. Berchtold—5,000 and~~Wiederhorn ~~Mr. Green—5,000.~~also ~~The~~disclaims ~~value~~beneficial ownership of such ~~Trust~~shares. ~~allocations~~Of ~~held~~the ~~as of December 31~~2, ~~2004~~453,205 ~~calculated~~shares, byTiffany ~~multiplying~~Wiederhorn ~~the~~shares ~~number~~power ofto ~~shares~~vote ~~allocated~~or atto ~~December 31, 2004,~~direct by the ~~closing~~vote ~~market~~of ~~price~~all of ~~the~~such ~~Common~~shares ~~Stock~~and atshared ~~December 31, 2004,~~power ~~was~~to asdispose ~~follows:~~or ~~Mr. Wiederhorn—$713,000;~~to ~~Mr. Rosen—forfeited;~~direct ~~Mr. Stevenson—$232,500; Mr. Berchtold~~the -disposition ~~$93,000;~~of ~~Ms. Colacurcio—forfeited,~~all ~~and~~of Mrsuch shares. ~~Green—$46,500.~~

(45) Ms TTMM, L. ~~Colacurcio’s employment~~P. ~~with~~shares ~~the~~voting ~~Company~~power ~~began~~and ininvestment ~~June 2002~~power with Andrew Wiederhorn and ~~terminated~~Tiffany inWiederhorn ~~December~~over ~~2004~~such shares.

(56) ~~Mr. Dale-Johnson began~~ ~~employment~~Based on information obtained from a Schedule 13G filed with the ~~Company~~SEC on ~~July 1~~January 12, ~~2004~~2009 in which Mr. Kramer reported sole voting and dispositive power as to 29,000 shares and shared voting and dispositive power as to 597,900 shares. Mr. Kramer disclaims beneficial ownership of such 597,900 shares.

~~There~~(7) ~~were~~Includes ~~options~~(a) 44,832 shares of common stock held by Mr. Berchtold acquired pursuant to ~~purchase~~ ~~627~~a distribution from the Fog Cutter Long -Term Vesting Trust on March 1, 2007; (b) 188,917 shares of common stock held by Mr. Berchtold as trustee of trusts for certain minor children; (c) 287,670 shares of common stock owned by an entity which is managed by Mr. Berchtold; (d)1,984 shares of common stock held by Mr. Berchtold’s spouse as trustee of trusts for certain minor children; and (e) 210,000 shares ~~granted~~of incommon stock issuable upon the ~~year~~exercise ~~ended~~of ~~December 31~~options exercisable currently or within 60 days of March 15, ~~2004~~2010. Mr. Berchtold may be deemed to ~~Company~~ ~~employees~~share voting and ~~directors~~investment power over such shares. Mr. Berchtold disclaims beneficial ownership of 478,571 of such shares.

~~Option~~(8) ~~Grants~~Based in on information obtained from a Schedule 13G filed with the ~~Year~~SEC ~~Ended~~on ~~December 31~~February 14, ~~2004~~2003 by Mr. Richard Terrell, in which Mr. Terrell reported (i) 537,600 shares of common stock held directly by Mr. Terrell, and (ii) an aggregate of 24,500 shares of common stock held by trusts for minor children, of which Mr. Terrell is trustee and of which shares Mr. Terrell disclaims beneficial ownership.

~~During 2004,~~(9) ~~the~~Based ~~Compensation~~on ~~Committee~~information ~~awarded~~obtained ~~the~~from ~~following~~a ~~options~~Schedule to13G ~~purchase stock~~filed towith ~~Executive~~the ~~Officers:~~SEC on February 11, 2010.

Individual Grants											Potential Realizable
	Number Of Securities Underlying Option/		Percent Of Total Options/SARs Granted To			Exercise Of					Value at Assumed Annual Rates Of Stock Price Appreciation For Options Term
Name (a)	SARs Granted (#) (b)		Employees In Fiscal Year (c)			Base Price ($/Sh) (d)			Expiration Date (e)		5% ($000) (f)			10% ($000) (g)
Donald J. Berchtold		100,000		25.0	%		$	4.27		7/22/14		$	206		$	580
R. Scott Stevenson		100,000		25.0	%		$	4.27		7/22/14		$	206		$	580
David Dale-Johnson		100,000		25.0	%		$	4.27		7/22/14		$	206		$	580
Matt Green		50,000		12.5	%		$	4.27		7/22/14		$	103		$	290
Lisa Colacurcio		50,000		12.5	%		$	4.27		7/22/14		$	103		$	290

(10)	Includes 80,322 shares of common stock acquired pursuant to a distribution from the Fog Cutter Long-Term Vesting Trust on March 1, 2007 and 185,500 shares of common stock issuable upon the exercise of options exercisable currently or within 60 days of March 15, 2010.

(11)

Includes (a) 116,307 shares of common stock acquired pursuant to a distribution from the Fog Cutter Long-Term Vesting Trust on March 1, 2007; (b) 450 shares held in an individual retirement account; (c) 75 shares held by his spouse; and (d) 260,000 shares of common stock issuable upon the exercise of options exercisable currently or within 60 days of March 15, 2010.

(12)	Includes 80,322 shares of common stock acquired pursuant to a distribution from the Fog Cutter Long-Term Vesting Trust on March 1, 2007 and 186,000 shares of common stock issuable upon the exercise of options exercisable currently or within 60 days of March 15, 2010.

(13)

Includes (a) 25,000 shares of common stock acquired pursuant to a distribution from the Fog Cutter Long-Term Vesting Trust on March 1, 2007; (b) 4,500 shares of common stock held by an IRA/SEP for the benefit of Mr. Anderson; (c) 5,000 shares of common stock held by in an individual retirement account for the benefit of Mr. Anderson’s spouse; (d) 3,000 shares held by Mr. Anderson’s minor children and (e) 11,000 shares of common stock issuable upon the exercise of options exercisable currently or within 60 days of March 15, 2010.

(14)	Includes 2,232,500 shares of common stock issuable upon the exercise of options exercisable currently or within 60 days of March 15, 2010.

Arrangements That Could Result in a Change in Control

Wiederhorn Assignment and Voting Agreement. Pursuant to an Amended and Restated Assignment and Voting Agreement, entered into as of April 6, 2007, or the Wiederhorn Assignment and Voting Agreement, by and among Tiffany Wiederhorn, TTMM, L.P. and WM Starlight Investments, LLC, collectively, the Tiffany Wiederhorn Entities, and Mr. Wiederhorn, the Tiffany Wiederhorn Entities have agreed to vote their common stock in the manner specified by Mr. Wiederhorn during the term of the Wiederhorn Assignment and Voting Agreement, which terminates upon the earlier to occur of the fifth anniversary of the Wiederhorn Assignment and Voting Agreement and any date on which Mr. Wiederhorn is no longer the Chairman of the Board of Directors and Mr. Wiederhorn’s employment agreement has been terminated by us.

~~Aggregated Option Exercises in the Year Ended December 31, 2004 and Fiscal Year-End Option Values:~~Index

Name

Shares Acquired on Exercise

Value Realized

Number of Securities Underlying Unexercised Options Held at December 31, 2004 Exercisable/Unexercisable

Value of Unexercised In-the-Money Options at December 31, 2004 Exercisable/Unexercisable

Andrew A. Wiederhorn

None

630,000

—

$— / $—

Robert G. Rosen

30,973

22,000

189,027

—

$— / $—

Matthew Green

None

10,000

50,000

$— / $—

R. Scott Stevenson

None

43,333

116,667

$— / $—

Employment Agreements

The Company has employment agreements with Andrew A. Wiederhorn and R. Scott Stevenson (each an “Executive” and collectively, the “Executives”).

The Company entered into a new employment agreement with Mr. Wiederhorn effective June 30, 2003. The employment agreement provides for an initial three-year term commencing July 1, 2003, which is automatically renewable for successive two-year terms unless either party gives written notice of termination to the other at least 90 days prior to the expiration of the then-current employment term. The employment agreement with Mr. Wiederhorn provides for a base salary of not less than $350,000 annually, plus an annual bonus as determined by the Compensation Committee of the Board of Directors.

Mr. Wiederhorn may terminate his employment agreement at any time for Good Reason or with or without Good Reason during the Change in Control Protection Period (if a Change in Control occurs) (capitalized terms as defined in the employment agreement of Mr. Wiederhorn). If Mr. Wiederhorn terminates his employment agreement at any time for Good Reason or with or without Good Reason during the Change in Control Protection Period (if a Change in Control occurs), or if Mr. Wiederhorn is terminated by the Company without Cause or the employment agreement is not renewed in accordance with the employment agreement, Mr. Wiederhorn will be entitled to receive (i) any unreimbursed business expenses, (ii) any base salary, bonus, vacation pay or other deferred compensation accrued or earned but not yet paid at the date of termination, (iii) three years base salary in effect on the date of termination and (iv) three times the amount of his annual bonus for the prior fiscal year. Mr. Wiederhorn will also be entitled to (i) accelerated full vesting under all outstanding equity-based and long-term incentive plans with options remaining outstanding as provided under the applicable stock option plan and a pro rata payment under any long term incentive plans based on actual coverage under such plans payment being made at the time payments would normally be made under such plans; (ii) any other amounts or benefits due Mr. Wiederhorn under the then applicable employee benefit plans of the Company (in accordance with such plan, policy or practice); (iii) three years of additional service and compensation credit (at his then compensation level) for pension purposes under any defined benefit type qualified or nonqualified pension plan or arrangement of the Company, measured from the date of termination of employment and not credited to the extent that Mr. Wiederhorn is otherwise entitled to such credit during such three year period, which payments shall be made through and in accordance with the terms of the nonqualified defined benefit pension arrangement if any then exists, or, if not, in an actuarially equivalent lump sum (using the actuarial factors then applying in the Company’s defined benefit plan covering Mr. Wiederhorn); (iv) three years of the maximum Company contribution (assuming Mr. Wiederhorn deferred the maximum amount and continued to earn his then current salary) measured from the date of termination under any type of qualified or nonqualified 401(k) plan (payable at the end of each such year); and (v) continued medical coverage for Mr. Wiederhorn, his spouse and dependents for three years.

The Company entered into a new employment agreement with Mr. Stevenson effective June 30, 2003. The employment agreement provides for an initial one year term commencing July 1, 2003, which is automatically renewable for successive one year terms unless either party gives written notice of termination to the other at least 60 days prior to the expiration of the then-current employment term. The employment agreement with Mr. Stevenson provides for a base salary of not less than $150,000 annually, plus an annual bonus as determined by the Compensation Committee of the Board of Directors.

The employment agreements also provide that the Executives may participate in the Company’s Stock Plan.

The employment agreements provide that during the employment term and thereafter, the Company will indemnify the Executives to the fullest extent permitted by law, in connection with any claim against the Executive as a result of the Executive serving as an officer or director of the Company or in any capacity at the request of the Company in or with regard to any other entity, employee benefit plan or enterprise.

If termination is the result of an Executive’s death, the Company will pay to the Executive’s spouse (or his estate), an amount equal to (i) any earned but not yet paid compensation (as described in the agreements), (ii) accelerated full vesting under all outstanding equity-based and long term incentive plans with options remaining outstanding as provided under the applicable stock option plan and a pro rata payment under any long term incentive plans based on actual coverage under such plans at the time payments normally would be made under such plans, (iii) any other amounts or benefits due under then applicable employee benefit plans of the Company (in accordance with such plan, policy or practice), (iv) payment of six months of base salary to the Executive’s spouse or dependents and (vi) in the case of Mr. Wiederhorn, continued medical coverage for the Executive’s spouse and dependents for the maximum period allowed under COBRA.

If an Executive’s employment is terminated by reason of disability, the Executive will be entitled to receive payments and benefits to which his representatives would be entitled in the event of his termination by reason of death, provided that the payment of base salary will be reduced by any long-term disability payments under any policy maintained by the Company. If the Executive is terminated by the Company with Cause or the Executive terminates his employment without Good Reason outside of the Change in Control Protection Period, the Executive will be entitled to receive only his base salary through the date of termination and any unreimbursed business expenses.

Compensation Committee Interlocks and Insider Participation

The Compensation Committee currently consists of Don Coleman, Christopher DeWolfe, and K. Kenneth, Kotler. No member of the Compensation Committee was formerly an officer of the Company. In the year ended December 31, 2004, no executive officer of the Company served as a member of the board of directors or the compensation committee of another entity, one of whose executive officers served on the Compensation Committee of the Company.

Stock Purchase Loans to Officers. Prior to the passage of the Sarbanes-Oxley Act of 2002, we had negotiated employment agreements with senior executives, which allowed these executives to borrow a specified maximum amount from us to purchase shares of common stock. These loans are full recourse, secured loans bearing interest at the prime rate. At December 31, 2004, in addition to the $2.0 million loan to Mr. Wiederhorn described below, we had outstanding stock purchase loans to Mr. Wiederhorn including accrued interest, of approximately $1.0 million. The Company is not obligated to make additional advances on loans under the employment agreements, and all other loans to executive officers have been paid in full. The remaining outstanding loans are described as follows:

On February 21, 2002, we loaned Mr. Wiederhorn $175,000 to finance the purchase of common stock. This loan is fully recourse to Mr. Wiederhorn and is secured by all of Mr. Wiederhorn’s rights under his employment agreement. We are entitled to net amounts payable under the employment agreement against any amounts payable by Mr. Wiederhorn upon any default or at maturity of the loan. At Mr. Wiederhorn’s direction (in accordance with the terms of his employment agreement), on February 21, 2002, we loaned a limited partnership controlled by Mr. Wiederhorn’s spouse (the “LP”) $687,000 to finance the purchase of common stock. The loan is secured by the membership interests of two limited liability companies owned by the LP. The limited liability companies each own a parcel of real property in Oregon and have no liabilities. At the time of the loan, the real property had an appraised value of $725,000. The loan is also guaranteed by Mr. Wiederhorn. The common stock purchased with the proceeds of these loans does not serve as security for the loans. The loans are due on February 21, 2007, and bear interest at the prime rate, as published in the Wall Street Journal, which interest is added to the principal annually.

At December 31, 2004, the total amount of loans receivable from Mr. Wiederhorn, including compounded interest and the $2 million loan described below, was $3.0 million. Further information on these loans to Mr. Wiederhorn is included in our annual proxy statement for 2004 and prior years and Mr. Wiederhorn’s employment agreement has been previously filed with the SEC.

Loan to Executive Officer. Prior to the passage of the Sarbanes-Oxley Act of 2002, we had loaned Mr. Wiederhorn $2.0 million. This loan is fully recourse to Mr. Wiederhorn and is secured by trust deeds on two residences located in Oregon. The loan is due on August 1, 2007 and bears interest at 8.5% per annum, payable monthly. The Board of Directors (with Mr. Wiederhorn abstaining) concluded that the terms of the loan were at least as favorable to the Company as would be available in an arms length, third party transaction and approved the loan on July 9, 2002.

Fog Cutter Long-Term Vesting Trust. In the fourth quarter of 2000, we established a trust which purchased 525,000 shares of the Company’s common stock from an unrelated shareholder. Our contribution to the trust of approximately $1.3 million was included in compensation expense for the year ended December 31, 2000. The trust was established for the benefit of our employees and directors to raise their ownership in the Company, thereby strengthening the mutuality of interests between them and our shareholders. While these shares are held in trust, they will be voted ratably with ballots cast by all other shareholders. Using the retained earnings on trust assets, the trust has subsequently purchased an additional 169,500 shares of our stock from various shareholders and is expected to purchase approximately 90,000 additional shares during the second quarter of 2005.

Andrew Wiederhorn, K. Kenneth Kotler and Don H. Coleman are the trustees for the trust. Pursuant to the terms of the trust, the trustees will, from time to time, allocate the shares to our employees. An employee shall not have any rights with respect to any shares allocated to him unless and until the employee completes five years of continuous service with the Company, commencing with the date the employee is first allocated such shares, provided however, that the trustees and the Company may agree in writing that the period of service need not be continuous for an officer or employee who leaves the Company for a period of not more than 36 months. The trustees and the Company have agreed that Andrew Wiederhorn need not provide continuous service and may leave the Company for a period of not more than 36 months without forfeiting his beneficial rights under the Trust. Upon the employee’s completion of the vesting period, the trustees shall promptly distribute to such employee the shares allocated to such employee; provided, however, that the trustees may, in lieu of distributing the shares, make a cash payment to the employee equal to the fair market value of the shares allocated to such employee as of the date immediately prior to the date of distribution or distribute any combination of cash or shares, as determined by the trustees, in their sole discretion.

As of December 31, 2004, the trustees had allocated 598,000 shares to our employees and directors.

Call Option. On March 14, 2005, we exercised an option (the “Call Option”) to acquire 423,245 shares of the Company’s Common Stock from Mr. Wiederhorn, the Company’s former Chief Executive Officer and current Chief Strategic Officer for an exercise price of $3.99 per share. The Call Option had been acquired from Mr. Wiederhorn on April 27, 2004. The original purchase price for the Call Option was $750,000, resulting in an “all-in” cost to the Company on exercise of approximately $5.76 per share. The aggregate price to the Company on exercise of $5.76 per share represented a small premium to the Company’s book value per share and market price per share at the time the option was purchased. The strike price for the shares was less than the Company’s book value per share and approximated the recent trading range of the stock in the marketplace. At the time the Call Option was purchased, the Company and its directors also considered the following factors: (1) the potentially negative impact on the Company’s share price if the Option Shares were disposed of publicly; (2) the Company’s favorable liquidity position; (3) the potential reduction in the risk that shares are transferred in a transaction which would have an adverse impact on its NOL position; and (4) the reduction in the future expenditure of cash dividends by the Company once the Company exercises the Call Option. The Board of Directors reviewed the transaction to confirm that the transaction was in the best interest of the Company and its other stockholders.

Business Use of Private Aircraft. During 2004, we paid $342,000 to Peninsula Capital Partners LLC (“Peninsula Capital”), an entity owned by Mr. Wiederhorn, for the Company’s business use of certain private aircraft. The Board of Directors is aware of the relationship and approved the fees for the use of the aircraft. The fee paid is a reimbursement of costs to Peninsula Capital for the Company’s use of the aircraft.

Compensation Committee Report on Executive Compensation

The Compensation Committee of the Board of Directors administers the executive compensation programs of the Company. The Compensation Committee currently consists of Don H. Coleman, Christopher T. DeWolfe and K. Kenneth Kotler, three non-employee directors. David Dale-Johnson was a member of the Compensation Committee until August 2004, when he was appointed Chief Investment Officer and replaced by Christopher T. DeWolfe. All actions of the Compensation Committee pertaining to executive compensation are submitted to the Board of Directors for approval.

The Company’s executive compensation program is designed to attract, retain, and motivate high caliber executives and to focus the interests of the executives on objectives that enhance stockholder value. These goals are attained by emphasizing “pay for performance” by having a portion of the executive’s compensation dependent upon business results and by providing equity interests in the Company. The principal elements of the Company’s executive compensation program are base salary, bonus, and stock options. In addition, the Company recognizes individual contributions as well as overall business results, using a discretionary bonus program.

Base Salary. Base salaries for the Company’s executives are intended to reflect the scope of each executive’s responsibilities, the success of the Company, and contributions of each executive to that success. Executive salaries are adjusted gradually over time and only as necessary to meet this objective. Increases in base salary may be moderated by other considerations, such as geographic or market data, industry trends or internal fairness within the Company.

Bonuses. The Company paid annual bonuses in 2004. The Committee determined the amount of the annual discretionary and other bonuses paid by the Company. The bonus for Mr. Green was based upon a percentage of revenues generated through Mr. Green’s direct efforts. The bonuses for other executive officers were based upon their contribution and value to the Company.

Stock Option Plan. At its initial public offering in April 1998, the Company adopted the Stock Plan. The purpose of the Stock Plan is to enable the Company to attract, retain and motivate key employees and

directors by providing them with equity participation in the Company. Accordingly, the Stock Plan permits the Company to grant stock options, restricted stock and stock appreciation rights (collectively “Awards”) to employees, directors, consultants, and vendors of the Company and subsidiaries of the Company. The Board of Directors has delegated administration of the Stock Plan to the Compensation Committee.

Under the Stock Plan, the Compensation Committee may grant stock options with an exercise price not less than the fair market value of the shares covered by the option on the date the option is granted. The Compensation Committee may also grant Awards of restricted shares of Common Stock. Each restricted stock Award would specify the number of shares of Common Stock to be issued to the recipient, the date of issuance, any consideration for such shares and the restrictions imposed on the shares (including the conditions of release or lapse of such restrictions). The Compensation Committee may also grant Awards of stock appreciation rights. A stock appreciation right entitles the holder to receive from the Company, in cash or Common Stock, at the time of exercise, the excess of the fair market value at the date of exercise of a share of Common Stock over a specified price fixed by the Compensation Committee in the Award, multiplied by the number of shares as to which the right is being exercised. The specified price fixed by the Compensation Committee will not be less than the fair market value of shares of Common Stock at the date the stock appreciation right was granted. In 2004, the Company issued options to purchase 577,000 shares (net of forfeitures) to executive officers, directors and employees.

In the fourth quarter of 2000, the Company established the Fog Cutter Long-Term Vesting Trust (the “Trust”), which purchased 525,000 shares of the Company’s Common Stock from an unrelated stockholder. The Company’s contribution to the Trust of approximately $1.3 million was included in the Company’s compensation expenses in 2000. The Trust was established for the benefit of the Company’s employees and directors to raise their ownership in the Company, thereby strengthening the mutuality of interests between them and the Company’s stockholders. In December 2002, the Trust purchased an additional 100,000 shares of the Company’s Common Stock from an unrelated stockholder. Retained earnings from the Trust were used to fund the December 2002 purchase. In addition, during April 2004, the Trust again used its retained earnings and purchased 69,500 shares of the Company’s stock from Clarence Coleman, a shareholder who, at the time, owned 10% of the common stock.

Pursuant to the terms of the Trust, the trustees will, from time to time, allocate the shares to the Company’s employees. An employee will not have any rights with respect to any shares allocated to him unless and until the employee completes five years of continuous service with the Company, commencing with the date the employee is first allocated such shares; provided however, that the trustees and the Company may agree in writing that the period of service need not be continuous for an officer or employee who leaves the Company for a period of not more than 36 months. The trustees and the Company have agreed that Andrew Wiederhorn need not provide continuous service and may leave the Company for a period of not more than 36 months without forfeiting his beneficial rights under the Trust. Prior to the completion of the vesting period, the trustees will vote the shares ratably with ballots cast by all other stockholders. Upon the employee’s completion of the vesting period, the trustees shall promptly distribute to such employee the shares allocated to such employee; provided, however, that the trustees may, in lieu of distributing the shares, make a cash payment to the employee equal to the fair market value of the shares allocated to such employee as of the date immediately prior to the date of distribution or distribute any combination of cash or shares, as determined by the trustees, in their sole discretion.

In September 2002, the trustees allocated 285,500 shares to the Company’s employees or directors. During July 2004, the trustees allocated an additional 367,500 shares to Company’s employees and directors. Of this amount, 55,000 shares previously allocated to former employees were forfeited. As a result, at December 31, 2004, a total of 598,000 shares have been allocated to employees and directors and 96,500 shares remain unallocated.

Policy of Deductibility of Compensation. Section 162(m) of the Internal Revenue Code limits the Company’s tax deduction to $1 million for compensation paid to the Named Executive Officers, unless certain requirements are met. One of these requirements is that compensation over $1 million must be performance based. The Compensation Committee intends to continue to use performance-based compensation in the future, which should minimize the effect of this deduction limitation. However, the Compensation Committee strongly believes that its primary responsibility is to provide a compensation program that will attract, retain and reward the executive talent necessary to maximize the return to stockholders, and that the loss of a tax deduction may be necessary in some circumstances. Base salary does not qualify as performance-based compensation under IRS regulations.

CEO Compensation and President Compensation. Mr. Wiederhorn was appointed the Company’s Chief Executive Officer at its formation and Mr. Rosen was appointed as its President in December 2002. The base salaries for Mr. Wiederhorn and Mr. Rosen for 2004 were determined by the Compensation Committee and are set forth in their employment agreements, which are described under “Employment Agreements.” Mr. Rosen resigned as the Company’s President on March 26, 2004. On June 3, 2004, the Company announced that Mr. Wiederhorn would take a leave of absence from his corporate positions at the Company. To address the management transition, the Board of Directors appointed Donald J. Berchtold as Co-Chief Executive Officer in June 2004. Mr. Wiederhorn began his leave of absence on August 2, 2004. In August 2004, the Board of Directors, with Mr. Wiederhorn’s consent, changed Mr. Wiederhorn’s position from Co-Chief Executive Officer to Chief Strategic Officer, and changed Mr. Berchtold’s position from Co-Chief Executive Officer to sole Chief Executive Officer.

COMPENSATION COMMITTEE Don H. Coleman Christopher T. DeWolfe K. Kenneth Kotler

Director Compensation

From January 1, 2002 to April 1, 2002, each non-employee director was paid an annual director’s fee equal to $12,000 and from January 1, 2002 to April 1, 2002, each non-employee director was paid an annual committee fee of $12,000 for their participation on one or more Company committees, such as the Audit or Compensation Committee. Effective as of April 1, 2002 through December 31, 2003, each non-employee director was paid an annual director’s fee of $24,000 and each non-employee director was paid an annual committee fee of $24,000 for their participation on one or more Company committees. Effective March 1, 2003 through December 31, 2003, each non-employee director who also serves as a director of a subsidiary of the Company received an additional director’s fee of $24,000 annually. Effective January 1, 2004, each non-employee director is paid an annual director’s fee of $24,000 and an additional annual fee of $24,000 for each committee on which they serve, other than the Executive Committee, up to a maximum total compensation of $72,000 annually. Effective July 1, 2004, non-employee members of the Executive Committee are entitled to an additional director fee of $50,000 per annum up to a maximum total annual compensation of $122,000. In addition, on the last day of each calendar quarter, each non-employee director receives a non-statutory stock option for 1,500 shares of Common Stock at an exercise price equal to 110% of the fair market value of the Common Stock on that day. Such grants vest one-third on each of the first three anniversaries of the grant date and expire on the tenth anniversary of the grant date.

Performance Graph

The following performance graph covers the period beginning December 31, 1998 through December 31, 2004. The graph compares the return on the Company’s Common Stock to the Standard & Poor’s 500 Stock Index (“S&P 500”) and a peer group of companies (“PGI”).

	1999 Base Measurement Period(1)(2)
	December 31, 1999			December 31, 2000			December 31, 2001			December 31, 2002			December 31, 2003			December 31, 2004
Company		$	100.00		$	110.67		$	162.26		$	278.12		$	441.41		$	302.01
PGI(3)		$	100.00		$	64.24		$	129.62		$	123.71		$	204.66		$	285.48
S&P 500		$	100.00		$	89.86		$	78.14		$	59.88		$	75.68		$	82.49

(1) Assumes all distributions to stockholders are reinvested on the payment dates.

(2) Assumes $100 invested on December 31, 1999 in the Company’s Common Stock, the S&P 500 and the PGI.

(3) The companies included in the PGI are FirstCity Financial; Back Yard Burgers Inc.; Rubio’s Restaurants Inc.; Sonic Corp.; MCG Capital Corp.; and New Valley Corp.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

As of February 28, 2005, the Company had outstanding 8,380,673 shares of Common Stock, which are the only outstanding voting securities of the Company.

The following table sets forth, as of February 28, 2005, the beneficial ownership of Common Stock with respect to (i) each person who was known by the Company to own beneficially more than 5% of the

outstanding shares of Common Stock, (ii) each director and nominee for director, (iii) each executive officer of the Company named in the Summary Compensation Table of this proxy statement and (iv) directors and executive officers as a group.

Name and Address of Beneficial Owner(1)	Amount and Nature of Beneficial Ownership(2)			Percent of Class
Andrew A. Wiederhorn, former Chief Executive Officer,current Chief Strategic Officer, Treasurer, Secretary,Director		2,843,094	(3)		31.6	%
Tiffany A. Wiederhorn		2,843,094	(4)		31.6
TTMM, L.P.		991,709	(5)		11.8
Fog Cutter Long-Term Vesting Trust		694,500	(6)		8.3
Donald J. Berchtold, current Chief Executive Officer, Director		651,112	(7)		7.8
Richard Terrell		562,100	(8)		6.7
Patrick Terrell		470,000	(9)		5.6
Clarence B. and Joan F. Coleman		423,189	(10)		5.0
Robert G. Rosen, former President, former Director		189,027	(11)		2.6
Don H. Coleman, Director		54,500	(12)		*
R. Scott Stevenson, Senior Vice President, Chief Financial Officer		46,058	(13)		*
Christopher T. DeWolfe, Director		28,500	(14)		*
Matthew Green, Vice President		10,000	(15)		*
David Dale-Johnson, Chief Investment Officer, Director		14,509	(16)		*
K. Kenneth Kotler, Director		13,000	(17)		*
M. Ray Mathis, Director		4,000	(18)		*
Lisa M. Colacurcio, Vice President		—			*
All executive officers and directors as a group (11 persons)		3,884,773	(19)		40.5	%

(1) The address for each stockholder is c/o Fog Cutter Capital Group Inc., 1410 SW Jefferson Street, Portland, Oregon 97201-2548.

(2) Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. Shares of Common Stock subject to options or warrants exercisable within 60 days of February 28, 2005 are deemed outstanding for computing the amount and percentage beneficially owned by the person or group holding such options or warrants, but are not deemed outstanding for computing the percentage of any other person or group. Except as noted, each stockholder has sole voting power and sole investment power with respect to all shares beneficially owned by such stockholder.

(3) Based upon information obtained from a Schedule 13D filed with the Securities and Exchange Commission, as amended. Consists of (a) 404,026 shares of Common Stock outstanding held directly by Mr. Wiederhorn, (b) 630,000 shares of Common Stock issuable upon the exercise of currently exercisable outstanding options held directly by Mr. Wiederhorn, (c) 539,817 shares of Common Stock held directly by Mr. Wiederhorn’s spouse, Tiffany Wiederhorn, (d) 991,709 shares of Common Stock owned by TTMM, L.P., a partnership controlled by Ms. Wiederhorn, (e) 98,938 shares of Common Stock held by the Tiffany A. Wiederhorn Grantor Retained Annuity Trust I, with respect to which Ms. Wiederhorn exercises voting and investment power, (f) 13,826 shares of Common Stock owned by W.M. Starlight Investments, LLC, a limited liability company of which Ms. Wiederhorn is the manager and majority owner and (g) an aggregate of 164,778 shares of Common Stock owned by Mr. and Ms. Wiederhorn’s minor children, which are held in custody for the benefit of such minor children pursuant to arrangements that do not give Mr. Wiederhorn any voting or investment power over such shares. Mr. Wiederhorn may be deemed to share voting power and investment power with

respect to all such shares of Common Stock with the other beneficial owners thereof and may be deemed to be the beneficial owner of all such shares of Common Stock. Mr. Wiederhorn disclaims beneficial ownership of all shares of Common Stock not held directly by him. Excludes 112,500 shares of Common Stock which were allocated to Mr. Wiederhorn by a Long-Term Vesting Trust established for the benefit of certain employees and directors of the Company (the “Trust”) but which will not have vested or be deliverable to Mr. Wiederhorn within 60 days of February 28, 2005. Excludes the remaining 582,000 shares of Common Stock held in the Trust which have been allocated to other employees or Directors or have not been allocated. Although Mr. Wiederhorn acts as a Trustee for the Trust, he does not have any beneficial ownership, voting power or investment power over the shares of Common Stock remaining in the Trust or allocated to other employees or Directors.

(4) Based upon information obtained from a Schedule 13D filed with the Securities and Exchange Commission, as amended. Consists of (a) 539,817 shares of Common Stock held directly by Ms. Wiederhorn, (b) 404,026 shares of Common Stock outstanding held directly by Ms. Wiederhorn’s spouse, Andrew Wiederhorn, (c) 630,000 shares of Common Stock issuable upon the exercise of currently exercisable outstanding options held directly by Mr. Wiederhorn, (d) 991,709 shares of Common Stock owned by TTMM, L.P., a partnership controlled by Ms. Wiederhorn, (e) 98,938 shares of Common Stock held by the Tiffany A. Wiederhorn Grantor Retained Annuity Trust I, with respect to which Ms. Wiederhorn exercises voting and investment power, (f) 13,826 shares of Common Stock owned by W.M. Starlight Investments, LLC, a limited liability company of which Ms. Wiederhorn is the manager and majority owner and (g) an aggregate of 164,778 shares of Common Stock owned by Mr. and Ms. Wiederhorn’s minor children, which are held in custody for the benefit of such minor children pursuant to arrangements that do not give Ms. Wiederhorn any voting or investment power over such shares. Ms. Wiederhorn may be deemed to share voting power and investment power with respect to all such shares of Common Stock with the other beneficial owners thereof and may be deemed to be the beneficial owner of all such shares of Common Stock. Ms. Wiederhorn disclaims beneficial ownership of all shares of Common Stock not held directly by her.

(5) Based upon information obtained from a Schedule 13D filed with the Securities and Exchange Commission, as amended. TTMM, L.P. shares voting power and investment power with Andrew Wiederhorn and Tiffany Wiederhorn over such shares.

(6) Based upon information provided to the Company.

(7) Based upon information obtained from a Schedule 13G filed with the Securities and Exchange Commission, as amended. Includes 10,000 shares of Common Stock issuable upon the exercise of outstanding options currently exercisable. Also includes 164,778 shares of Common Stock held by Mr. Berchtold as trustee for certain minor children, 396,170 shares of Common Stock owned by an entity which is managed by Mr. Berchtold, 2,462 shares of Common Stock held by Mr. Berchtold’s spouse, 1,984 shares of Common Stock held by Mr. Berchtold’s spouse as trustee for certain minor children and 4,678 shares of Common Stock owned by Mr. Berchtold’s dependent son. Mr. Berchtold may be deemed to share voting and investment power over such shares. Mr. Berchtold disclaims beneficial ownership of such shares. Excludes 5,000 shares of Common Stock which were allocated to Mr. Berchtold by the Trust but which will not have vested or be deliverable to Mr. Berchtold within 60 days of February 28, 2005.

(8) Based upon information obtained from a Schedule 13G filed with the Securities and Exchange Commission. Consists of (i) 537,600 shares of Common Stock held directly by Mr. Richard Terrell, (ii) 9,500 shares of Common Stock held by a Trust, of which Mr. Terrell is Trustee, for Kimberly Terrell, a minor child, of which shares Mr. Terrell disclaims beneficial ownership, and (iii) 15,000 shares of Common Stock held by a Trust, of which Mr. Terrell is Trustee, for Meagan Terrell, a minor child, of which shares Mr. Terrell disclaims beneficial ownership.

(9) Based upon information obtained from a Schedule 13G filed with the Securities and Exchange Commission, as amended. Mr. Patrick Terrell may be deemed to share voting and investment power over such shares with his spouse.

(10) Based upon information obtained from a Schedule 13G filed with the Securities and Exchange Commission, as amended.

(11) Includes 189,027 shares of Common Stock issuable upon the exercise of outstanding options currently exercisable. Mr. Rosen resigned as the Company’s President and director on March 26, 2004.

12. Includes 4,500 shares of Common Stock issuable upon the exercise of outstanding options currently exercisable.

(13) Includes 43,333 shares of Common Stock issuable upon the exercise of outstanding options currently exercisable.

(14) Includes 3,500 shares of Common Stock issuable upon the exercise of outstanding options currently exercisable.

15. Includes 10,000 shares of Common Stock issuable upon the exercise of outstanding options currently exercisable.

(16) Includes 13,500 shares of Common Stock issuable upon the exercise of outstanding options currently exercisable.

(17) Includes 5,000 shares of Common Stock issuable upon the exercise of outstanding options currently exercisable.

(18) Includes 3,000 shares of Common Stock issuable upon the exercise of outstanding options currently exercisable.

(19) Includes 911,860 shares of Common Stock issuable upon the exercise of outstanding options currently exercisable.

* Less than one percent.

Arrangements That Could Result In A Change In Control

Rosen Agreement. On January 28, 2002, Andrew A. Wiederhorn entered into a Stock Option and Voting Agreement (the “Rosen Agreement”) by and among Andrew A. Wiederhorn, Robert G. Rosen and Valerie Rosen, as joint tenant with Robert G. Rosen (Valerie Rosen, together with Robert G. Rosen, the “Rosen Agreement Stockholders”), Robert G. Rosen, as Agent for the Rosen Agreement Stockholders, and Tiffany Wiederhorn solely with respect to certain payment obligations. The Rosen Agreement granted Mr. Wiederhorn the right to vote or direct the vote of all of the shares held by each such Rosen Agreement Stockholder, which number 423,245 in the aggregate (the “Rosen Shares”). The Rosen Agreement allowed Mr. Wiederhorn to direct the voting of the Rosen Shares at his discretion at any annual and special meetings of the stockholders of the Company and in written consents of stockholders in lieu of a meeting of stockholders. In exchange for the voting rights over the Common Stock held by the Rosen Agreement Stockholders, Mr. Wiederhorn granted each Rosen Agreement Stockholder a Put Option (as defined in the Rosen Agreement) whereupon each Rosen Agreement Stockholder could require Mr. Wiederhorn to purchase such Rosen Agreement Stockholder’s shares in a specified time period at a price determined from the book value of the Company at the month end prior to the time of exercise of the Put Option.

On March 30, 2004, the Rosen Agreement Stockholders exercised the Put Option to require Mr. Wiederhorn to purchase all of the shares subject to the Rosen Agreement. Mr. Wiederhorn delegated the obligation to purchase 21,219 of the Rosen Shares to his minor children. On April 27, 2004, Mr. Wiederhorn and his minor children acquired such 423,245 shares of Common Stock from the Rosen Agreement Stockholders. On the same day the Company purchased a three year call option (the “Call Option”) from Mr. Wiederhorn pursuant to a Call Option Agreement between the Company and Mr. Wiederhorn (the “Call Option Agreement”). The Call Option gives the Company the right, but not the obligation, to purchase 423,245 shares of outstanding Common Stock from Mr. Wiederhorn for a purchase price of $3.99 per share. The option may be exercised at any time from April 27, 2004 to April 27, 2007. The Company paid $750,000 ($1.77 per option share) for the Call Option. The premium paid for the Call Option, together with the strike price, represented a small premium to the Company’s book value per share and market price per share at the time the option was purchased.

On March 14, 2005, the Company exercised the Call Option to acquire 423,245 shares of the Company’s Common Stock from Mr. Wiederhorn for an exercise price of $3.99 per share.

Wiederhorn Assignment and Voting Agreement. Pursuant to an Amended and Restated Assignment and Voting Agreement, entered into as of May 13, 2004 (the “Wiederhorn Assignment and Voting Agreement”), by and among Tiffany Wiederhorn, TTMM, L.P. and WM Starlight Investments, LLC (collectively, the “Tiffany Wiederhorn Entities”) and Mr. Wiederhorn, the Tiffany Wiederhorn Entities agreed to vote their Common Stock in the manner specified by Mr. Wiederhorn during the term of the Wiederhorn Assignment and Voting Agreement, which shall terminate upon the earlier to occur of the fifth anniversary of the Wiederhorn Assignment and Voting Agreement or any date on which Mr. Wiederhorn is no longer the Chairman of the Board of Directors and Mr. Wiederhorn’s employment agreement has been terminated by the Company.

Coleman/Wiederhorn Letter Agreement. Pursuant to a letter agreement dated April 30, 2004 (the “Coleman/Wiederhorn Letter Agreement”), Andrew A. Wiederhorn and Clarence B. Coleman agreed (i) that Mr. Coleman would, with some exceptions, retain ownership of 100,000 shares of Common Stock until at least March 1, 2005, (ii) that Mr. Coleman may put (the “Coleman Put”) such 100,000 shares of Common Stock to Mr. Wiederhorn at a price of $5.40 upon written notice at least 30 days prior to the closing date specified in the notice, which may not occur before March 1, 2005 nor later than March 31, 2005 and (iii) Mr. Wiederhorn may assign the Coleman Put to the Company at any time. This option has not been assigned to the Company and the Company has not agreed to accept an assignment. The Company believes that Mr. Wiederhorn has not received a notice of exercise from Mr. Coleman. Further, the window for providing a notice of exercise has passed. Accordingly, unless amended, the agreement will expire unexercised.

Coleman Foundation/ Wiederhorn Letter Agreement. Pursuant to a letter agreement dated July 9, 2004 (the “Coleman Foundation Wiederhorn Letter Agreement”), Andrew A. Wiederhorn and Clarence and Joan Coleman Charitable Foundation (the “Foundation”) agreed (i) that the Foundation would, with some exceptions, retain ownership of 323,000 shares of Common Stock until at least October 31, 2005, (ii) that the Foundation may put (the “Foundation Put”) such 323,000 shares of Common Stock to Mr. Wiederhorn at a price of $5.40 upon written notice at least 30 days prior to the closing date specified in the notice, which may not occur before October 31, 2005 nor later than November 29, 2005 and (iii) Mr. Wiederhorn may assign the Foundation Put to the Company at any time. This option has not been assigned to the Company and the Company has not agreed to accept an assignment.

The foregoing summaries of the Rosen Agreement, the Call Option Agreement, the Wiederhorn Assignment and Voting Agreement and the Coleman/Wiederhorn Letter Agreement are qualified in their entirety by reference to such agreements, which were filed as exhibits to Schedules 13D, as amended, filed with the Securities and Exchange Commission.

Equity Compensation Plan Information

~~The~~ Please see the information ~~presented~~provided inunder the ~~table~~heading ~~below~~“Equity isCompensation asPlan ofInformation” in Item 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES included in this Annual Report on Form 10-K for the year ended December 31, ~~2004~~2008.

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights			Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)		(b)			(c)
Equity compensation plans approved by security holders		1,528,527		$	4.54		1,714,500
Equity compensation plans not approved by security holders(1)		598,000		$	0.00		96,500
Total		2,126,527		$	3.26		1,811,000

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

~~(1) In~~Review ~~the~~and ~~fourth~~Approval ~~quarter~~ of ~~2000,~~ ~~the~~Related ~~Company~~Person established the Fog Cutter Long-Term Vesting Trust (the “Trust”), which purchased 525,000 shares of the Company’s Common Stock from an unrelated shareholder. The Company’s contribution to the Trust of approximately $1.3 million was included in the Company’s compensation expenses for the year ended December 31, 2000. Subsequently, the Trust has used Trust earnings to fund the purchase of 169,500 additional shares of Company stock.Transactions

~~The~~We ~~Trust~~have ~~was~~adopted, ~~established~~by ~~for~~resolution ~~the~~of ~~benefit~~our Board of ~~the Company’s~~Directors, ~~employees~~a policy that any transactions between us and any of our affiliates or related parties, including our executive officers, directors, toshareholders ~~raise~~who ~~their~~own ~~ownership~~5% inor more of our common stock, the ~~Company~~family members of those individuals and any of their affiliates, ~~thereby~~ ~~strengthening~~must (1) be approved by a majority of the ~~mutuality~~members of ~~interests~~the ~~between~~Board ~~them~~of Directors and ~~the~~by ~~Company’s shareholders.~~a ~~While~~majority ~~these~~of ~~shares~~the ~~are~~disinterested ~~held~~members inof ~~trust,~~the ~~they~~Board ~~will~~of Directors and (2) be ~~voted~~on ~~ratably with~~terms ~~ballots~~no ~~cast~~less byfavorable ~~all~~to ~~other~~us ~~shareholders~~than could be obtained from unaffiliated third parties.

~~Pursuant~~Reportable toRelated ~~the~~Person terms of the Trust, the trustees will, from time to time, allocate the shares to the Company’s employees. An employee will not have any rights with respect to any shares allocated to him unless and until the employee completes five years of continuous service with the Company, commencing with the date the employee is first allocated such shares; provided however, that the trustees and the Company may agree in writing that the period of service need not be continuous for an officer or employee who leaves the Company for a period of not more than 36 months. The trustees and the Company have agreed that Andrew Wiederhorn need not provide continuous service and may leave the Company for a period of not more than 36 months without forfeiting his beneficial rights under the Trust. Upon the employee’s completion of the vesting period, the trustees shall promptly distribute to such employee the shares allocated to such employee; provided, however, that the trustees may, in lieu of distributing the shares, make a cash payment to the employee equal to the fair market value of the shares allocated to such employee as of the date immediately prior to the date of distribution or distribute any combination of cash or shares, as determined by the trustees, in their sole discretion.Transactions

AsOther ofthan ~~December 31~~the employment arrangements described elsewhere in this Annual Report on Form 10-K and the transactions described below, ~~2004~~ since January 1, ~~the~~2008, ~~trustees~~there ~~had~~has ~~allocated~~not ~~598~~been,~~000~~ ~~shares~~nor is there currently proposed, any transaction or series of similar transactions to ~~the~~which ~~Company’s~~we ~~employees~~were ~~and directors.~~or will be a party:

~~ITEM~~· ~~13. CERTAIN~~in ~~RELATIONSHIPS~~which ~~AND RELATED~~the ~~TRANSACTIONS~~amount involved exceeds $120,000; and

~~Stock~~· ~~Purchase~~in ~~Loans~~which toany ~~Officers~~director, executive officer, shareholder who beneficially owns 5% or more of our common stock or any member of their immediate family had or will have a direct or indirect material interest.

~~Prior~~Loans to ~~the~~Senior passage of the Sarbanes-Oxley Act of 2002, we had negotiated employment agreements with senior executives, which allowed these executives to borrow a specified maximum amount from us to purchase shares of common stock. These loans are full recourse, secured loans bearing interest at the prime rate. At December 31, 2004, in addition to the $2.0 million loan to Mr. Wiederhorn described below, we had outstanding stock purchase loans to Mr. Wiederhorn including accrued interest, of approximately Executives

48As of December 31, 2007, we had two loans to our Chairman and Chief Executive Officer, Andrew Wiederhorn, for a total of $1.1 million. Both loans were made on February 21, 2002 (prior to the passage of the Sarbanes-Oxley Act of 2002). The loans matured on February 21, 2007, and bore interest at the prime rate, as published in the Wall Street Journal, which interest was added to the principal. We did not extend the maturity date of the loans or amend any other terms. The loans were repaid in full, including interest, on February 21, 2008.

$1.0 million. The Company is not obligated to make additional advances on loans under the employment agreements, and all other loans to executive officers have been paid in full. The remaining outstanding loans are described as follows:

Loan to Executive Officer

Prior to the passage of the Sarbanes-Oxley Act of 2002, we had loaned Mr. Wiederhorn $2.0 million. This loan is fully recourse to Mr. Wiederhorn and is secured by trust deeds on two residences located in Oregon. The loan is due on August 1, 2007 and bears interest at 8.5% per annum, payable monthly. The Board of Directors (with Mr. Wiederhorn abstaining) concluded that the terms of the loan were at least as favorable to the Company as would be available in an arms length, third party transaction and approved the loan on July 9, 2002.

Fog Cutter Long-Term Vesting Trust

In the fourth quarter of 2000, we established athe ~~trust~~ Fog Cutter Long-Term Vesting Trust (the “Trust”), which purchased 525,000 shares of ~~the~~our ~~Company’s~~ common stock from an unrelated ~~shareholder~~ stockholder. The Trustees were Andrew A. Wiederhorn, Chief Executive Officer, K. Kenneth Kotler, Director and Don H. Coleman, Director. Our contribution to the ~~trust~~Trust of approximately $1.3 million was included in compensation expense for the year ended December 31, 2000. The ~~trust~~ Trust was established for the benefit of our employees and directors to raise their equity ownership in ~~the~~Fog ~~Company~~Cutter, thereby strengthening the mutuality of interests between them and our ~~shareholders~~stockholders. While these shares ~~are~~were held in trust, they ~~will~~were be voted ratably with ballots or proxies cast by all other ~~shareholders~~stockholders. Using the retained earnings on trust assets, the ~~trust~~Trust ~~has~~ subsequently purchased an additional ~~169~~389,~~500~~755 shares of ~~our~~common stock from various ~~shareholders and is expected to purchase approximately 90,000 additional shares during the second quarter of 2005~~stockholders.

~~Andrew~~On ~~Wiederhorn~~March 1, K.2007, ~~Kenneth~~by ~~Kotler~~action ~~and~~of ~~Don H. Coleman are~~ the ~~trustees~~Trustees, ~~for~~all ~~the~~allocated ~~trust.~~shares ~~Pursuant~~under to the ~~terms~~Trust ofbecame ~~the~~fully ~~trust,~~vested ~~the trustees will, from time~~ to ~~time, allocate~~ the ~~shares to our employees~~beneficiaries. ~~An employee~~The ~~shall~~following ~~not~~distributions ~~have~~were ~~any~~made ~~rights with respect~~ to ~~any~~officers ~~shares~~and ~~allocated~~directors: toMr. ~~him unless~~Berchtold ~~and~~received ~~until~~44,852 ~~the~~shares, ~~employee~~with ~~completes~~a ~~five~~total ~~years~~value of ~~continuous~~$65,932, ~~service~~Mr. ~~with the~~Coleman ~~Company~~received 80,322 ~~commencing~~shares, with ~~the~~a ~~date~~total ~~the~~value ~~employee~~of is$118,073, ~~first~~Mr. ~~allocated~~Dale-Johnson ~~such shares;~~received ~~provided~~116,306 ~~however~~shares, ~~that~~with ~~the~~a ~~trustees~~total ~~and~~value ~~the~~of ~~Company~~$170,970, ~~may~~Mr. ~~agree~~Kotler ~~in writing~~received ~~that~~80,322 ~~the~~shares ~~period~~with ofa ~~service~~total ~~need~~value ~~not~~of be$118,073, ~~continuous~~Mr. ~~for~~Stevenson anreceived ~~officer~~116,307 ~~or employee~~shares, ~~who~~with ~~leaves the Company for~~ a ~~period~~total value of ~~not~~$170,971, ~~more than 36 months~~Mr. ~~The trustees~~Wiederhorn ~~and~~received ~~the~~368,645 ~~Company~~shares ~~have~~with ~~agreed~~a ~~that~~total ~~Andrew~~value ~~Wiederhorn~~of ~~need~~$541,908 ~~not provide continuous service~~ and ~~may~~Mr. ~~leave~~Anderson ~~the~~received ~~Company~~25,000 ~~for~~shares, with a ~~period~~total value of ~~not more than~~ $36 ~~months without forfeiting his beneficial rights under the Trust~~,750. ~~Upon the employee’s~~

49Fractional Lease of Aircraft

~~completion~~In ofJuly ~~the vesting period~~2006, the ~~trustees~~we ~~shall~~accepted ~~promptly~~an ~~distribute~~assignment toof ~~such~~a ~~employee~~fractional ~~the~~interest ~~shares allocated~~lease, tobetween ~~such~~NetJets ~~employee;~~Services ~~provided,~~Inc. ~~however,~~and ~~that~~an ~~the~~entity ~~trustees~~controlled ~~may,~~by inour ~~lieu of~~chief ~~distributing~~executive ~~the shares~~officer, ~~make~~Andrew aA. ~~cash~~Wiederhorn, ~~payment~~for to the ~~employee~~lease ~~equal~~of toa ~~the fair~~6.25% ~~market~~undivided ~~value~~interest ofin ~~the~~an ~~shares~~aircraft. ~~allocated~~The tolease ~~such~~expires ~~employee~~in asDecember of2010; however, the ~~date immediately~~Company ~~prior~~has to the ~~date~~right ofto ~~distribution~~terminate orthe ~~distribute~~lease ~~any~~with ~~combination~~90 ~~of cash~~days ornotice ~~shares,~~beginning asin ~~determined~~December by2008. The ~~the~~lease ~~trustees,~~was insubsequently ~~their~~terminated ~~sole~~in ~~discretion~~2009.

~~As of December 31, 2004, the trustees had allocated 598,000 shares to our employees and directors.~~37

~~Call Option~~Index

OnCapital ~~March 14,~~Lease ~~2005, we exercised an option (the “Call Option”) to acquire 423,245 shares~~ of the Company’s Common Stock from Mr. Wiederhorn, the Company’s former Chief Executive Officer and current Chief Strategic Officer for an exercise price of $3.99 per share. The Call Option had been acquired from Mr. Wiederhorn on April 27, 2004. The original purchase price for the Call Option was $750,000, resulting in an “all-in” cost to the Company on exercise of approximately $5.76 per share. The aggregate price to the Company on exercise of $5.76 per share represented a small premium to the Company’s book value per share and market price per share at the time the option was purchased. The strike price for the shares was less than the Company’s book value per share and approximated the recent trading range of the stock in the marketplace. At the time the Call Option was purchased, the Company and its directors also considered the following factors: (1) the potentially negative impact on the Company’s share price if the Option Shares were disposed of publicly; (2) the Company’s favorable liquidity position; (3) the potential reduction in the risk that shares are transferred in a transaction which would have an adverse impact on its NOL position; and (4) the reduction in the future expenditure of cash dividends by the Company once the Company exercises the Call Option. The Board of Directors reviewed the transaction to confirm that the transaction was in the best interest of the Company and its other stockholders.Aircraft

~~Business~~In ~~Use~~October 2006, we acquired an aircraft through a capital lease from and entity in which Mr. Wiederhorn has a 25% ownership interest. Under the terms of ~~Private~~the ~~Aircraft~~lease, we paid $6,409 per month for the lease from October 2006 to July 2008. From August 2008 through the end of the lease we are required to pay $36,021 per month. After August 1, 2008 we have the option to purchase the aircraft for $2.0 million, and we are required to purchase the aircraft for that amount by July 31, 2009. A portion of the lease payments is being applied toward the purchase price. We did not complete the purchase of the aircraft as of the lease maturity date, but we are continuing to make the scheduled lease payments against the purchase price until such time as the acquisition can be completed.

~~During~~Purchase ~~2004, we paid $342,000 to Peninsula Capital Partners LLC (“Peninsula Capital”), an entity owned by Mr. Wiederhorn, for the Company’s business use~~ of certain private aircraft. The Board of Directors is aware of the relationship and approved the fees for the use of the aircraft. The fee paid is a reimbursement of costs to Peninsula Capital for the Company’s use of the aircraft.Land

~~ITEM~~On 14December 24, 2009, we acquired all of the membership interests in Highland Road Properties LLC (“HRP”) from an entity controlled by Mr. ~~PRINCIPAL~~ ~~ACCOUNTANT~~and ~~FEES AND~~Mrs. ~~SERVICES~~Wiederhorn. HRP is a special purpose entity that owns approximately 6 acres of residential land in Portland Oregon. Mr. and Mrs. Wiederhorn had previously allowed the land to be part of a pool of collateral securing indebtedness of the Company and it was necessary for us to have direct ownership of HRP in order to protect the remaining collateral. We paid $750,000 for the HRP interests. The Board of Directors approved the purchase and determined that the transaction was in the best interests of the Company and its shareholders. On February 17, 2010, we caused HRP to transfer the land to certain of our lenders for a partial reduction in debt of $350,000.

~~Ernst~~Guarantee &of Young LLP served as the Company’s principal accounting firm for the year ended December 31, 2003. On September 7, 2004, the Audit Committee appointed UHY, LLP as the Company’s principal accounting firm for the year ended December 31, 2004.Debt

~~The~~Certain ~~aggregate~~of ~~fees~~the Company’s lenders have, from time to time, required that Mr. Wiederhorn personally guarantee the Company’s ~~for~~debt ~~the~~obligations. ~~years~~As ~~ended~~of ~~December 31~~March 15, ~~2004~~2010, ~~and~~Mr. ~~2003~~Wiederhorn ~~from~~had personally guaranteed approximately $8.9 million in debt of the Company~~’s principal~~ ~~accounting~~and ~~firms~~its subsidiaries. On March 23, ~~are~~2010, asthe ~~follows~~Company ~~(dollars~~granted Mr. Wiederhorn a security interest in ~~thousands):~~the assets of Fog Cutter Capital Group Inc. to secure his performance in the event he is required to perform under the guarantees.

	December 31, 2004			December 31, 2003
Audit fees		$	390		$	470
Audit related fees		$	—		$	—
Tax fees		$	—		$	300
All other fees		$	—		$	—

Director Independence

~~Audit~~The ~~Committee~~board ~~Pre-Approval Policies~~has determined that each of the directors, except Mr. Wiederhorn and ~~Procedures~~Mr. ~~The~~Berchtold, ~~Audit~~is ~~Committee~~independent ~~reviews~~within the ~~independence~~meaning of the ~~Company’s~~applicable ~~auditors~~rules onand anregulations ~~annual~~of ~~basis~~the Securities and Exchange Commission (“SEC”) and the director independence standards of The NASDAQ Stock Market, Inc. (“NASDAQ”), as currently in effect. Furthermore, the board has determined that ~~UHY,~~each ~~LLP~~of ~~is independent.~~the Inmembers ~~addition,~~of each of the ~~Audit~~committees ~~Committee~~of ~~pre-approves~~the ~~all~~board ~~work~~is “independent” under the applicable rules and ~~fees for~~regulations ~~work~~of ~~performed~~the bySEC and the ~~Company’s~~director ~~independent~~independence ~~auditors~~standards of NASDAQ, as currently in effect.

50ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

PKF, Certified Public Accountants, A Professional Corporation, Glendale, California, (“PKF”) currently serves as our independent registered public accounting firm. The aggregate accounting fees for the years ended December 31, 2008, and 2007 are as follows (dollars in thousands):

	December 31, 2008		December 31, 2007
Audit fees	$	232	$	232
Audit related fees	$	-	$	-
Tax fees	$	-	$	-
All other fees (1)	$	15	$	15

(1)

Other fees are comprised of audit fees relating to the audit of Fatburger’s IRC Section 401(k) plan.

Audit Committee Pre-Approval Policies and Procedures. The Audit Committee reviews the independence of our independent registered public accounting firm on an annual basis and has determined that PKF is independent. In addition, the Audit Committee pre-approves all work and fees that are performed by our independent registered public accounting firm.

Index

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)

Financial Statements

Consolidated Statements of Financial Condition at December 31, ~~2004~~2008 and 2003 Consolidated Statements of Operations for the Years Ended December 31, 2004, 2003, and 2002 Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2004, 2003, and 2002 Consolidated Statements of Cash Flows for the Years Ended December 31, 2004, 2003, and 2002 All financial statement schedules of the Company are omitted because they are not required or are not applicable.2007

Consolidated Statements of Operations for the Years Ended December 31, 2008, and 2007

Consolidated Statements of Stockholders’ Equity (Deficiency) for the Years Ended December 31, 2008 and 2007

Consolidated Statements of Cash Flows for the Years Ended December 31, 2008 and 2007

Notes to Consolidated Financial Statements

(b)

Exhibits

See Exhibit Index immediately following the signature pages.

The Company has determined that Bourne End was a “significant subsidiary” for the year ended December 31, 2004. Bourne End is a foreign business and audited financial statements are in the process of being prepared for 2004. The Company intends to file an amended Form 10-K/A prior to the due date of June 30, 2005, which will include, as an exhibit, the audited, stand-alone, financial statements of Bourne End as required by Reg. S-X 3-09(b)(2).39

51Index

INDEX TO FINANCIAL STATEMENTS

		Page
Report of Independent Registered Public Accounting Firms		F-2
Reports of Independent Registered Public Accounting Firms		F-2
Consolidated Financial Statements:
Consolidated Financial Statements:
Consolidated Statements of Financial Condition at December 31, 2008 and 2007		F-3
Consolidated Statements of Financial Condition at December 31, 2004 and 2003		F-4
Consolidated Statements of Operations for the years ended December 31, 2008and 2007		F-4
Consolidated Statements of Operations for the years ended December 31, 2004, 2003 and 2002		F-5
Consolidated Statements of Stockholders' Equity (Deficiency) for the years ended December 31, 2008 and 2007		F-5
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2004, 2003 and 2002		F-7
Consolidated Statements of Cash Flows for the years ended December 31, 2008 and 2007		F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2004, 2003 and 2002		F-8
Notes to Consolidated Financial Statements		F-7
Notes to Consolidated Financial Statements		F-9

The accompanying notes are an integral part of these consolidated financial statements.

F-1

Index

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of Fog Cutter Capital Group Inc.

We have audited the accompanying consolidated statement of financial condition of Fog Cutter Capital Group Inc. and subsidiaries (the “Company’’'') as of December 31, 2008 and 2007, and the related consolidated statements of operations, stockholders’' equity (deficiency), and cash flows for each of the ~~year~~two years in the period ended December 31, ~~2004~~2008. These financial statements are the responsibility of the Company’'s management. Our responsibility is to express an opinion on these financial statements based on our ~~audit~~audits.

We conducted our ~~audit~~audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our ~~audit~~audits ~~provides~~provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, ~~2004~~ 2008 and 2007, and the consolidated results of its operations and its consolidated cash flows for each of the ~~year~~two years in the period ended December 31, ~~2004~~2008, in conformity with ~~U.S.~~ accounting principles generally accepted ~~accounting~~in ~~principles~~the United States of America.

/s/ ~~UHY~~PKF, ~~LLP~~Certified Public Accountants, A Professional Corporation

~~Los Angeles~~Glendale, California ~~March 17, 2005~~

March 30, 2010

The accompanying notes are an integral part of these consolidated financial statements.

F-2

~~REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~Index

~~Board~~FOG ofCUTTER ~~Directors~~CAPITAL ~~and~~GROUP ~~Stockholders Fog Cutter Capital Group Inc~~INC.

WeCONSOLIDATED ~~have~~STATEMENTS ~~audited~~OF ~~the~~FINANCIAL accompanying consolidated statement of financial condition of Fog Cutter Capital Group Inc. and subsidiaries (the “Company”) as of December 31, 2003, and the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the two years in the period ended December 31, 2003. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.CONDITION

~~We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board~~ (~~United~~dollars States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in ~~the circumstances~~thousands, ~~but~~except ~~not~~share for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.data)

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Fog Cutter Capital Group Inc. and subsidiaries at December 31, 2003, and the consolidated results of their operations and their consolidated cash flows for each of the two years in the period ended December 31, 2003, in conformity with U.S. generally accepted accounting principles.

	December 31,
Assets	2008			2007
Current Assets:
Cash and cash equivalents	$	390		$	1,131
Accounts receivable		2,712			1,491
Notes receivable, current portion		18			566
Loans to senior executives		-			1,147
Inventories		2,964			2,505
Investments in real estate held for sale, net		-			19,658
Current assets held for sale		-			66
Other current assets		294			536
Total current assets		6,378			27,100

Notes receivable		34			46
Property, plant and equipment, net		8,253			10,203
Intangible assets, net		4,068			4,986
Goodwill		8,028			9,526
Other assets held for sale		-			21
Other assets		812			1,887
Total assets	$	27,573		$	53,769

Liabilities and Stockholders' Equity (Deficiency)
Liabilities:
Accounts payable and accrued liabilities	$	17,486		$	13,260
Current liabilities associated with assets held for sale		-			1,232
Obligations under capital leases on real estate held for sale		-			9,994
Borrowings and notes payable, current portion		14,330			12,914
Obligations under capital leases, current portion		1,927			141
Total current liabilities		33,743			37,541

Borrowings and notes payable		-			6,355
Obligations under capital leases		-			1,929
Deferred income		2,572			5,247
Total liabilities		36,315			51,072

Commitments and contingencies
Minority interests in consolidated subsidiaries		365			701

Stockholders' Equity (Deficiency):
Preferred stock, $.0001 par value; 25,000,000 shares authorized; no shares issued and outstanding		-			-
Common stock, $.0001 par value; 200,000,000 shares authorized; 11,757,073 shares issued as of December 31, 2008 and 2007; 7,954,928 shares outstanding as of December 31, 2008, and 2007		172,102			170,956
Accumulated deficit		(169,198	)		(156,949	)
Treasury stock, 3,802,145 common shares as of December 31, 2008 and 2007, at cost		(12,011	)		(12,011	)
Total stockholders' equity (deficiency)		(9,107	)		1,996
Total liabilities and stockholders' equity (deficiency)	$	27,573		$	53,769

~~/s/~~The ~~Ernst &~~accompanying ~~Young LLP~~notes are an integral part of these consolidated financial statements.

Los Angeles, California February 13, 2004

F-3

~~FOG CUTTER CAPITAL GROUP INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (Dollars in thousands)~~Index

	December 31,
	2004			2003
Assets
Cash and cash equivalents	$	11,948		$	19,607
Securities available for sale, pledged under repurchase agreements, at estimated fair value	—			35,010
Securities available for sale, at estimated fair value	9			500
Loans	6,651			3,744
Investments in real estate, net	26,660			22,577
Loans to senior executives	2,983			2,964
Investment in Bourne End	1,901			2,141
Restaurant property, plant and equipment, net	6,228			5,897
Intangible assets, net	5,401			5,640
Goodwill	7,063			7,300
Other assets	5,054			3,596
Total assets	$	73,898		$	108,976
Liabilities and Stockholders’ Equity
Liabilities:
Repurchase agreements	$	—		$	25,318
Borrowings and notes payable	7,977			7,804
Obligations under capital leases	12,401			12,942
Dividend payable	51			1,216
Deferred income	4,466			3,700
Deferred income taxes	5,782			6,980
Leave of absence costs payable	1,771			—
Accrued expenses and other liabilities	7,143			5,635
Total liabilities	39,591			63,595
Commitments and contingencies
Stockholders’ Equity:
Preferred stock, $.0001 par value; 25,000,000 shares authorized; no shares issued and outstanding	—			—
Common stock, $.0001 par value; 200,000,000 shares authorized; 11,757,073 shares issued as of December 31, 2004 and 11,716,600 shares issued as of December 31, 2003; 8,380,673 shares outstanding as of December 31, 2004 and 8,670,700 shares outstanding as of December 31, 2003	168,214			168,018
Accumulated deficit	(123,916		)	(115,588		)
Option to purchase common stock	(593		)
Accumulated other comprehensive income	329			968
Treasury stock; 3,376,400 common shares as of December 31, 2004, and 3,045,900 common shares as of December 31, 2003, at cost	(9,727		)	(8,017		)
Total stockholders’ equity	34,307			45,381
Total liabilities and stockholders’ equity	$	73,898		$	108,976

FOG CUTTER CAPITAL GROUP INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(dollars in thousands, except share data)

	Year Ended December 31,
	2008		2007
Revenue:
Restaurant and manufacturing sales	$	44,247	$	41,106
Restaurant franchise and royalty fees		5,418		2,228
Total revenue		49,665		43,334

Operating costs and expenses:
Restaurant and manufacturing cost of sales		26,096		24,033
Real estate operating expense		-		9
Engineering and development		1,145

Filing Compare · FOG CUTTER CAPITAL GROUP INC