There was a Press Release issued on Business Wire today for Nathan’s Famous 2nd Quarter Fiscal 2007 earnings.  What a dramatic drop from where they were last year… what’s going on? Cutbacks in the labor force, better profits with franchising, yet a large drain from Upgrades to Financial Software, Integration of Internal Controls, and continued Preparations for the 2007 SMB Deadline.

Sept 2005 = 4.28 million dollar company

Sept 2006 = 3.23 million dollar company

The biggest DRAG in profits? Section 404 of Sarbanes-Oxley Act, that’s what the official Earnings Release said today. 

Nathans incurred new administrative expenses during the twenty-six weeks ended September 24, 2006 of $122,000 in connection with the adoption of a new accounting standard requiring that the fair value of options granted be charged against earnings, $92,000 in connection with professional services associated with its preparations to comply with the Sarbanes-Oxley Section 404 requirements and severance expense of $73,000.

Nathans is doing the right thing - growing their business while spending money on the business to straighten out internal controls, processes, accounting oversights, and fair value of shares reporting to their stock holders.