What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-02-15 compared with 2021-08-17 · 81 added, 96 removed, 136 unchanged (57% of the section changed)

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COVID-19 Pandemic

The COVID-19 pandemic has adversely affected, and is expected to continue to adversely affect, our operations and financial results for the foreseeable future.

As of July 3, 2021, all of our restaurants have re-opened and currently, national, state and local jurisdictions have removed their capacity restrictions on businesses and therefore our restaurants are serving customers in our dining rooms without social distancing requirements.

However, we cannot predict whether we will be required to limit capacity or close again in the future, as these decisions will depend primarily on the actions of a number of governmental bodies over which we have no control.

It is possible additional outbreaks could require us to reduce our capacity, implement social distancing or further suspend our in-restaurant dining operations, and there is no guarantee that state and local jurisdictions, that have currently eased restrictions, will not reverse or roll-back the restrictions, as many have done in the past.

Additionally, our restaurant operations have been and could continue to be disrupted by employee staffing issues because of illness, fear of contracting COVID-19 or caring for family members due to COVID-19, or for other reasons.

Furthermore, we remain in regular contact with our major suppliers and while to date we have not experienced significant disruptions in our supply chain due to COVID-19, we could see significant future disruptions should the impacts of COVID-19 extend for a considerable amount of time.

As a result of the COVID-19 pandemic, the Company experienced a significant negative impact on its revenues, results of operations and cash flows, and has a working capital deficiency of $(2,134,000) as of July 3, 2021.

However, we believe that our existing cash balances, current banking facilities and cash provided by operations will be sufficient to meet our liquidity and capital spending requirements through August 18, 2022.

As of July 3, 2021, the Company owned and operated 18 restaurants and bars, 17 fast food concepts and catering operations, exclusively in the United States, that have similar economic characteristics, nature of products and service, class of customer and distribution methods.

We are subject to continued risks and uncertainties as a result of the outbreak of, and local, state and federal governmental responses to, the COVID-19 pandemic which was declared a National Public Health Emergency in March 2020.

We experienced significant disruptions to our business as suggested and mandated social distancing and shelter-in-place orders led to the temporary closure of all of our restaurants.

In the third quarter of fiscal 2020, certain jurisdictions began allowing the reopening of restaurant dining rooms, and we began to reopen dining rooms.

While restrictions on the type of permitted operating model and occupancy capacity may continue to change, all of our restaurants are operating with no indoor dining restrictions other than in New York City where customers are required to show proof of vaccination.

We cannot predict how long the COVID-19 pandemic will last, whether vaccines will be effective at eliminating or slowing the spread of the virus or variants, whether it will reoccur or whether variants will spike, what additional restrictions may be enacted, to what extent we can maintain sales volumes during or following any resumption of mandated social distancing protocols or vaccination or mask mandates and what long-lasting effects the COVID-19 pandemic may have on the restaurant industry as a whole.

The ongoing effects of the COVID-19 pandemic, including, but not limited to, labor-related impacts, supply chain disruption and consumer behavior, will determine the continued significance of the impact of the COVID-19 pandemic to our operating results and financial position.

As of January 1, 2022, the Company owned and operated 17 restaurants and bars, 17 fast food concepts and catering operations, exclusively in the United States, that have similar economic characteristics, nature of products and service, class of customer and distribution methods.

The Company believes it meets the criteria for aggregating its operating segments into a single reporting segment in accordance with applicable accounting guidance.

The consolidated condensed statements of operations for the 13 and 39 weeks ended July 3, 2021 include revenues and income of approximately $2,141,000 and $4,582,000 and $432,000 and $887,000, respectively, related to Blue Moon Fish Company , which was acquired on December 1, 2020.

The consolidated condensed statements of operations for the 13 weeks ended January 1, 2022 include revenues and income of approximately $1,982,000 and $356,000, respectively, related to Blue Moon Fish Company , which was acquired on December 1, 2020.

Accounting Period

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Under this method certain years will contain 53 weeks.

The periods ended July 3, 2021 and June 27, 2020 each included 13 and 39 weeks.

The Company has substantial fixed costs that do not decline proportionately with sales.

At our properties located in the northeast, the first and second fiscal quarters, which include the winter months, usually reflect lower customer traffic than in the third and fourth fiscal quarters.

However, sales in the third and fourth fiscal quarters can be adversely affected by inclement weather due to the significant amount of outdoor seating at the Company’s restaurants.

The periods ended January 1, 2022 and January 2, 2021 each included 13.

The Company has substantial fixed costs that do not decline proportionally with sales.

Although our business is highly seasonal, our broader geographical reach as a result of recent acquisitions mitigates some of the risk.

For instance, the second quarter of

our fiscal year, consisting of the non-holiday portion of the cold weather season in New York and Washington, D.C.

(January, February and March), is the poorest performing quarter;

however, in recent years this has been partially offset by our locations in Florida as they experience increased results in the winter months.

We generally achieve our best results during the warm weather, attributable to our extensive outdoor dining availability, particularly at Bryant Park in New York and Sequoia in Washington, D.C.

(our largest restaurants) and our outdoor cafes.

However, even during summer months these facilities can be adversely affected by unusually cool or rainy weather conditions.

Our facilities in Las Vegas are indoor and generally operate on a more consistent basis throughout the year.

Results of Operations

The Company’s operating income for the 13 weeks ended July 3, 2021 was $5,113,000, as compared to an operating loss of $(5,623,000) for the 13 weeks ended June 27, 2020.

This increase resulted primarily from the strong performance of our Florida, Alabama and Las Vegas operations in the current period combined with the fact that all of our properties were closed for the majority of the prior period and operated at limited capacity when they reopened as a result of government mandates in connection with the COVID-19 pandemic.

The Company’s operating income for the 39 weeks ended July 3, 2021 was $309,000, as compared to an operating loss of $(5,123,000) for the 39 weeks ended June 27, 2020.

This increase also resulted primarily from the strong performance of our Florida, Alabama and Las Vegas operations in the current quarter combined with the fact that all of our properties were closed for the majority of the third quarter of the prior fiscal year and operated at limited capacity when they reopened as a result of government mandates in connection with the COVID-19 pandemic.

The following table summarizes the significant components of the Company’s operating results for the 13- and 39-week periods ended July 3, 2021 and June 27, 2020:

13 Weeks Ended Variance 39 Weeks Ended Variance

2021 June 27,

2020 $ % July 3,

2021 June 27,

(in thousands) (in thousands)

The Company’s operating income for the 13 weeks ended January 1, 2022 was $2,791,000, as compared to an operating loss of $(3,307,000) for the 13 weeks ended January 2, 2021.

This increase resulted primarily from all of our restaurants operating with no indoor dining restrictions, other than in New York City where customers are required to show proof of vaccination, in the current period in comparison to the prior period as a result of government mandates in connection with the COVID-19 pandemic combined with a modest recovery in our event business in Washington, D.C.

and New York City in the current period.

The following table summarizes the significant components of the Company’s operating results for the 13-week periods ended January 1, 2022 and January 2, 2021:

13 Weeks Ended Variance

2022 January 2,

(in thousands)

Food and beverage sales $ 43,237 $ 19,889 $ 23,348 117.4 %

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Other operating costs and expenses 5,138 2,811 2,327 82.8 %

4,737 852 3,885 456.0 % 11,077 11,834 (757) -6.4 %

General and administrative expenses 2,963 1,787 1,176 65.8 %

2,802 2,437 365 15.0 % 7,625 7,888 (263) -3.3 %

Loss on termination of lease — — — — % — 364 (364) -100.0 %

Depreciation and amortization 1,079 941 138 14.7 %

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OPERATING INCOME (LOSS) $ 2,791 $ (3,307) $ 6,098 184.4 %

During the 13-week period ended July 3, 2021, revenues increased 496.8% as compared to revenues in the 13-week period ended June 27, 2020.

This increase resulted primarily from all of our properties operating with no capacity restrictions in the current period combined with the fact that all of our properties were closed for the majority of the prior period and operated at limited capacity when they reopened as a result of government mandates in connection with the COVID-19 pandemic.

During the 13-week period ended January 1, 2022, revenues increased 116.7% as compared to revenues in the 13-week period ended January 2, 2021.

Food and Beverage Same-Store Sales

On a Company-wide basis, same-store sales increased 455.0% during the third fiscal quarter of 2021 as compared to the same period last year as follows:

On a Company-wide basis, same-store sales increased 112.8% during the first fiscal quarter of 2022 as compared to the same period last year as follows:

13 Weeks Ended Variance

2021 June 27,

2022 January 2,

(in thousands)

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2,328 903 1,425 157.8 %

Atlantic City, NJ 554 — 554 N/A

Connecticut 103 — 103 N/A

Atlantic City, NJ 661 171 490 286.5 %

Connecticut 67 88 (21) -23.9 %

Alabama 3,079 2,016 1,063 52.7 %

3 unchanged sentences

Food and beverage sales $ 43,237 $ 19,889

The increases in same-store sales for the 13-week period ended July 3, 2021 as compared to the same period of the prior year are the result of all of our properties operating with no capacity restrictions in the current period combined with the fact that all of our properties were closed for the majority of the prior period and operated at limited capacity when they reopened as a result of government mandates in connection with the COVID-19 pandemic.

The increase in company-wide same-store sales was driven primarily by increased customer traffic as a result of the impact of the COVID-19 pandemic on the prior period combined with targeted increases in menu pricing and a modest recovery in our event business in Washington, D.C.

and New York City in the current period.

Same-store sales in Connecticut decreased 23.9% due to disruption to our business as a result of its relocation within the Foxwoods Resort and Casino where our property is located.

Other food and beverage sales consist of sales related to new restaurants opened or acquired during the applicable period, sales related to properties that were closed ( Clyde Frazier's Wine and Dine, Gallagher's Steakhouse and Gallagher's Burger Bar ) and other adjustments and fees.

Costs and Expenses

Costs and expenses for the 13- and 39-weeks ended July 3, 2021 and June 27, 2020 were as follows (in thousands):

Costs and expenses for the 13 weeks ended January 1, 2022 and January 2, 2021 were as follows (in thousands):

13 Weeks Ended

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Revenues Increase

(Decrease) 39 Weeks

Revenues 39 Weeks

Revenues Increase

Food and beverage cost of sales $ 12,542 28.5 % $ 5,943 29.3 % 6,599 111.0 %

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General and administrative expenses 2,963 6.7 % 1,787 8.8 % 1,176 65.8 %

Loss on termination of lease — — % — — % — — % — — % 364 0.4 % (364) -100.0 %

Depreciation and amortization 1,079 2.5 % 941 4.6 % 138 14.7 %

Total costs and expenses $ 41,195 $ 23,606 $ 17,589

Food and beverage costs as a percentage of total revenues for the 13- and 39-weeks ended July 3, 2021 increased as compared with the same period of last year primarily as a result of increases in costs of seafood and other high-volume items.

Payroll expenses as a percentage of total revenues for the 13- and 39-weeks ended July 3, 2021 decreased as compared with the same period of last year primarily as a result of retaining key restaurant management personnel with lower corresponding revenues in the prior period as a result of the government mandated closures and/or capacity restrictions at all of our restaurants in connection with the COVID-19 pandemic.

Occupancy expenses as a percentage of total revenues for the 13- and 39-weeks ended July 3, 2021 decreased as compared with the same period of last year primarily as a result of the fixed nature of many of these expenses and lower sales in the prior period as a result of the COVID-19 pandemic.

Other operating costs and expenses as a percentage of total revenues for the 13- and 39-weeks ended July 3, 2021 as compared to the same period of last year decreased primarily as a result of the fixed nature of some of these expenses and lower sales in the prior period as a result of the COVID-19 pandemic, decreased maintenance at properties where we are experiencing lower traffic and increased professional fees at the restaurant-level in the prior periods.

General and administrative expenses (which relate solely to the corporate office in New York City) for the 13-weeks ended July 3, 2021 increased as compared with the same period of last year primarily as a result of headcount and salary reductions of corporate personnel in the prior period as a result of the impacts on our business from the COVID-19 pandemic.

General and administrative expenses for the 39-weeks ended July 3, 2021 decreased as compared with the same period of last year primarily as a result of lower legal fees in the current period partially offset by headcount and salary reductions of corporate personnel in the prior period as a result of the impacts on our business from the COVID-19 pandemic.

Depreciation and amortization expense for the 13-weeks ended July 3, 2021 increased as compared to the same period of last year primarily as a result of assets placed in service in the current period.

Depreciation and amortization expense for the 39-weeks ended July 3, 2021 decreased as compared to the same period of last year primarily as a result of lower charges in the current period as a result of asset impairments in the first quarter of 2020.

Food and beverage costs as a percentage of total revenues for the 13 weeks ended January 1, 2022 decreased as compared with the same period of last year primarily as a result of targeted increases in menu pricing and a modest recovery in our event business in Washington, D.C.

and New York City in the current period, partially offset by increases in costs of seafood and other high-volume items.

Payroll expenses as a percentage of total revenues for the 13 weeks ended January 1, 2022 decreased as compared with the same period of last year primarily as a result of retaining key restaurant management personnel with lower corresponding revenues in the prior period as a result of the government mandated closures and/or capacity restrictions at several of our restaurants in connection with the COVID-19 pandemic.

Occupancy expenses as a percentage of total revenues for the 13 weeks ended January 1, 2022 decreased as compared with the same period of last year primarily as a result of the fixed nature of many of these expenses and lower sales in the prior period as a result of the COVID-19 pandemic.

Other operating costs and expenses as a percentage of total revenues for the 13 weeks ended January 1, 2022 as compared to the same period of last year decreased primarily as a result of the fixed nature of some of these expenses and lower sales in the prior period as a result of the COVID-19 pandemic, decreased maintenance at properties where we are experiencing lower traffic and increased professional fees at the restaurant-level in the prior periods.

General and administrative expenses (which relate solely to the corporate office in New York City) for the 13 weeks ended January 1, 2022 increased as compared with the same period of last year primarily as a result of headcount and salary reductions of corporate personnel in the prior period as a result of the impacts on our business from the COVID-19 pandemic.

Depreciation and amortization expense for the 13 weeks ended January 1, 2022 increased as compared to the same period of last year primarily as a result of assets placed in service since January 1, 2021.

We calculate our interim income tax provision in accordance with ASC Topic 270, Interim Reporting and ASC Topic 740, Accounting for Income Taxes.

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In addition to the PPP loans, the CARES Act made various tax law changes including among other things (i) modifications to the federal net operating loss rules including permitting federal net operating losses incurred in 2018, 2019, and 2020 tax years to be carried back to the five preceding taxable years in order to generate a refund of previously paid income taxes, (ii) enhanced recoverability of AMT tax credit carryforwards, (iii) increased the limitation under IRC Section 163(j) for 2019 and 2020 to permit additional expensing of interest, and (iv) enacted a technical correction so that qualified improvement property can be immediately expensed under IRC Section 168(k).

On December 27, 2020, the Consolidated Appropriations Act of 2021 (“CAA”) was enacted and provided clarification on the tax deductibility of expenses funded with PPP loans as fully deductible for tax purposes.

During the 13 and 39-weeks ended July 3, 2021, the Company recorded income for financial reporting purposes related to the forgiveness of some of its PPP loans.

The forgiveness of these PPP loans is not taxable.

The income recorded for financial reporting purposes was considered an unusual or infrequent event and the tax effect was recorded discretely in the quarter in which the loans were forgiven.

Any income recorded for financial reporting purposes is considered an unusual or infrequent event and the tax effect is recorded discretely in the quarter in which the loans were forgiven.

No PPP Loans were forgiven during the 13 weeks ended January 1, 2022 and January 2, 2021.

As a result of the CARES Act and the CAA, the Company carried back taxable losses from fiscal year 2020 and is expected to carryback taxable losses from fiscal 2021 to generate a refund of previously paid income taxes.

As a result of these carrybacks, the Company recorded income tax benefits as the taxable losses from fiscal 2020 and fiscal 2021 are being carried back to tax years in which the Company was subject to a higher federal corporate income tax rate.

The carryback of taxable losses from fiscal 2021 was recorded as a component of the estimated annual effective tax rate.

The adjustment to the fiscal 2020 carryback was recorded as a discrete item.

The provision for income taxes for the 13-week period ended July 3, 2021 was $4,684,000.

The effective tax rate for the 13-week period ended July 3, 2021 of 58.5% differed from the statutory rate of 21% primarily related to changes in the annual effective tax rate as a result of updated forecasts of pre-tax earnings coupled with a discrete tax benefit attributable to the income related to the PPP loan forgiveness which is not taxable for income tax reporting purposes.

The income tax benefit for the 39-week period ended July 3, 2021 was $(155,000).

The effective tax rate for the 39-week period ended July 3, 2021 of -2.31% differed from the statutory rate of 21% primarily related to the discrete tax benefit attributable to the income related to the PPP loan forgiveness which is not taxable for income tax reporting purposes.

The income tax benefit for the 13- and 39-week periods ended June 27, 2020 was ($3,118,000) and $(3,213,000), respectively.

The effective tax rate for the 13 and 39-week periods ended June 27, 2020 of 52.3% and 53.1%, respectively, differed from the statutory rate of 21% primarily as a result of the tax benefits related to the generation of FICA tax credits and the incremental benefit arising from the ability to carryback fiscal 2020 net operating losses to prior years when the tax rate was 34%.

For the 13-week period ended January 2, 2021, the Company recorded income tax benefits as the taxable losses from fiscal 2020 and the projected taxable losses from fiscal 2021 are being carried back to tax years in which the Company was subject to a higher federal corporate income tax rate.

The adjustment related to the fiscal 2020 carryback was recorded as a discrete item during the 13-week period ended January 2, 2021 and the carryback of the projected taxable losses from fiscal 2021 was recorded as a component of the estimated annual effective tax rate for the 13-week period ended January 2, 2021.

The provision for income taxes for the 13-week period ended January 1, 2022 was $309,000.

The effective tax rate for the 13-week period ended January 1, 2022 of 11.3% differed from the statutory rate of 21% primarily as a result of the tax benefits

related to the generation of FICA tax credits and operating income attributable to non-controlling interests that is not taxable to the Company.

The income tax benefit for the 13-week period ended January 2, 2021 was $(2,919,000).

The effective tax rate for the 13-week period ended January 2, 2021 of -80.7% differed from the statutory rate of 21% primarily as a result of the tax benefits related to the generation of FICA tax credits, the carryback of the projected fiscal 2021 taxable losses to prior years when the Federal corporate tax rate was 34% and operating income attributable to non-controlling interests that is not taxable to the Company.

The effective tax rate also includes a discrete benefit of $(352,000) primarily related to an adjustment of the estimated fiscal year 2020 carryback claim.

The Company’s overall effective tax rate in the future will be affected by factors such as changes in tax law, the utilization of state and local net operating loss carryforwards, the generation of FICA tax credits.

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We believe that our operating lease arrangements provide appropriate leverage of our capital structure in a financially efficient manner.

As of July 3, 2021, we had a cash and cash equivalents balance of $18,280,000.

The Company had a working capital deficiency of $(2,134,000) at July 3, 2021 as compared with a deficiency of $(3,234,000) at October 3, 2020.

This increase resulted primarily from cash provided by operations offset by a change in our debt maturities in connection with conversion of our revolving credit borrowings to term loans.

We believe that our existing cash balances and current banking facilities will be sufficient to meet our liquidity and capital spending requirements and finance our operating activities for at least the next 12 months.

Our liquidity has been adversely affected primarily by decreased customer traffic as a result the government mandated closures and capacity restrictions at all our of restaurants in connection with the COVID-19 pandemic.

The COVID-19 pandemic has adversely affected, and may continue to adversely affect, our operations and financial results for the foreseeable future.

As of January 1, 2022, we had a cash and cash equivalents balance of $20,167,000.

Due to the fluidity of the COVID-19 pandemic, management cannot determine the ultimate impact that it will have on the Company’s consolidated financial condition, liquidity, future results of operations, suppliers, industry, and workforce and therefore any prediction as to the ultimate material adverse impact on the Company’s consolidated financial condition, liquidity, and future results of operations is uncertain.

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The extent of such negative impact will be determined, in part, by the longevity and severity of the pandemic.

Cash Flows for 39 Weeks Ended July 3, 2021 and June 27, 2020

Net cash provided by operating activities for the 39-weeks ended July 3, 2021 increased to $6,648,000 as compared to $(2,510,000) used in operations in the same period of last year.

Cash Flows for 13 Weeks Ended January 1, 2022 and January 2, 2021

Net cash provided by operating activities for the 13 weeks ended January 1, 2022 increased to $3,852,000 as compared to $(2,985,000) used in operations in the same period of last year.

This increase was attributable to an increase in operating income as a result of the continued recovery from the COVID-19 pandemic and changes in net working capital primarily related to accounts receivable, inventory and accounts payable and accrued expenses.

Net cash used in investing activities for the 39-weeks ended July 3, 2021 and June 27, 2020 was $(3,455,000) and $(1,986,000), respectively, and resulted primarily from purchases of fixed assets at existing restaurants and, in the current period, the cash portion of the purchase price of the Blue Moon Fish Company acquisition.

Net cash used in financing activities for the 39-weeks ended July 3, 2021 of $(1,799,000) resulted primarily from principal payments on notes payable and the payment of distributions to non-controlling interests partially offset by proceeds from stock option exercises.

Net cash provided by financing activities for the 39-weeks ended June 27, 2020 of $18,044,000 resulted primarily from borrowings under our credit facility and proceeds from PPP loans partially offset by principal payments on notes payable and the payment of dividends.

Net cash used in investing activities for the 13 weeks ended January 1, 2022 and January 2, 2021 was $(408,000) and $(2,413,000), respectively, and resulted primarily from purchases of fixed assets at existing restaurants and, in the prior period, the cash portion of the purchase price of the Blue Moon Fish Company acquisition.

Net cash used in financing activities for the 13 weeks ended January 1, 2022 of $(2,448,000) resulted primarily from principal payments on notes payable and the payment of distributions to non-controlling interests.

Net cash used in financing activities for the 13 weeks ended January 2, 2021 of $(675,000) resulted primarily from principal payments on notes payable.

Recent Restaurant Expansions and Other Developments

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Rent payments under the lease are approximately $360,000 per year and increase by approximately 15% as each option is exercised.

On January 26, 2021, the Company exercised its right-of-first-refusal to acquire the land, building and parking lot associated with JB’s on the Beach and immediately contributed such rights and interest to an unrelated entity ("Newco") that purchased the properties on March 22, 2021.

In exchange, the Company received a 5% interest in Newco, as defined, which plans future development of the sites.

In addition, all rights and privileges under the current lease were assigned to Newco, as landlord and the lease terms remain unchanged.

purchased the properties on March 22, 2021.

In exchange, the Company received a 5% interest in Sandcastle 1, LLC, which plans future development of the sites.

In addition, all rights and privileges under the current lease were assigned to Sandcastle 1, LLC, as landlord and the lease terms remain unchanged.

Our restaurants generally do not achieve substantial increases in revenue from year to year, which we consider to be typical of the restaurant industry.

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This closure did not result in a material charge to the Company’s operations.

On September 1, 2021, the Company advised the landlord of Clyde Frazier's Wine and Dine that we would be closing the property permanently and terminated the lease.

In connection with termination, the Company recorded a gain of $810,000 during the year ended October 2, 2021 consisting of:

(i) rent and other costs incurred in accordance with the termination provisions of the lease in the amount of $318,000, (ii) impairment of long-lived assets in the amount of $69,000 and (iii) the write-off of our security deposit in the amount of $121,000 offset by the write-off of ROU assets and related lease liabilities in the net amount of $1,318,000.

Included in the consolidated condensed statement of operations for the 13 weeks ended January 2, 2021 are revenues and net operating losses of approximately $582,000 and $(131,000) related to the above properties.

Investment in and Receivable from New Meadowlands Racetrack

On March 12, 2013, the Company made a $4,200,000 investment in the New Meadowlands Racetrack LLC (“NMR”) through its purchase of a membership interest in Meadowlands Newmark, LLC, an existing member of NMR with a then 63.7% ownership interest.

On November 19, 2013, the Company invested an additional $464,000 in NMR through the purchase of an additional membership interest in Meadowlands Newmark, LLC resulting in a total ownership of 11.6% of Meadowlands Newmark, LLC,

and an effective ownership interest in NMR of 7.4%, subject to dilution.

In 2015, the Company invested an additional $222,000 in NMR and in February 2017, the Company invested an additional $222,000 in NMR, both as a result of capital calls with no change in ownership, bringing its total investment to $5,108,000.

During the 13 weeks ended January 1, 2022, the Company received a distribution of $222,000 from NMR which has been recorded as other income in the consolidated condensed statement of operations.

In addition to the Company’s ownership interest in NMR, if casino gaming is approved at the Meadowlands and NMR is granted the right to conduct said gaming, the Company shall be granted the exclusive right to operate the food and beverage concessions in the gaming facility with the exception of one restaurant.

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Such amount is subject to the same terms and conditions as the original loan as discussed above.

The principal and accrued interest related to this note in the amounts of $1,807,000 and $1,766,000 are included in Investment In and Receivable from New Meadowlands Racetrack in the consolidated condensed balance sheets at July 3, 2021 and October 3, 2020, respectively.

On June 7, 2018, the New Jersey State Legislature voted to legalize sports betting at casinos and racetracks in the state.

Pursuant to this legislation NMR opened a sports book in partnership with FanDuel, a leading provider of daily fantasy sports.

The principal and accrued interest related to this note in the amounts of $1,327,000 and $1,317,000 are included in Investment In and

Receivable from New Meadowlands Racetrack in the consolidated condensed balance sheets at January 1, 2022 and October 2, 2021, respectively.

Notes Payable – Bank

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The Revolving Facility provides for total availability of the lesser of (i) $10,000,000 and (ii) $35,000,000 less the then aggregate amount of all indebtedness and obligations to BHBM.

On July 26, 2021, all outstanding Revolver Borrowings, in the amount of $9,666,000, were converted to a promissory note with quarterly principal payments of $500,000 commencing on September 1, 2021, with a balloon payment of $2,166,000 on June 1, 2025.

On July 26, 2021, all outstanding borrowings under the Revolving Facility, in the amount of $9,666,000, were converted to a promissory note with quarterly principal payments of $500,000 commencing on September 1, 2021, with a balloon payment of $2,166,000 on June 1, 2025.

Such note bears interest at LIBOR plus 3.5% per annum.

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On June 12, 2020 and again on February 15, 2021, as a result of the impact of the COVID-19 pandemic on our business, BHBM agreed to modified financial covenants through fiscal Q2 2022.

The Company was in compliance with all of its financial covenants under the Revolving Facility as of July 3, 2021.

The Company was in compliance with all of its financial covenants under the Revolving Facility as of January 1, 2022.

Paycheck Protection Program Loans

During the year ended October 3, 2020, subsidiaries (the “Borrowers”) of the Company received loan proceeds from several banks (the “Lenders”) in the aggregate amount of $14,995,000 (the “PPP Loans”) under the Paycheck Protection Program (the “PPP”) of the CARES Act, which was enacted March 27, 2020.

During the year ended October 3, 2020, subsidiaries and consolidated VIEs (the “Borrowers”) of the Company received loan proceeds from several banks (the “Lenders”) in the aggregate amount of $14,995,000 (the “PPP Loans”) under the Paycheck Protection Program (the “PPP”) of the CARES Act, which was enacted March 27, 2020.

In addition, during the 13 weeks ended April 3, 2021, one of our consolidated VIEs received a second draw PPP Loan in the amount of $111,000.

The PPP Loans are evidenced by individual promissory notes of each of the Borrowers (together, the “Notes”) in favor of the Lender, which Notes bear interest at the rate of 1.00% per annum.

Funds from the PPP Loans may be used only for payroll and related costs, costs used to continue group health

care benefits, mortgage payments, rent, utilities, and interest on other debt obligations that were incurred by a Borrower prior to February 15, 2020 (the “Qualifying Expenses”).

Funds from the PPP Loans may be used only for payroll and related costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations that were incurred by a Borrower prior to February 15, 2020 (the “Qualifying Expenses”).

Under the terms of the PPP Loans, some or all of the amounts thereunder, including accrued interest, may be forgiven if they are used for Qualifying Expenses as described in and in compliance with the CARES Act.

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Forgiveness applications can be submitted up to 10 months after the end of the related notes covered period (which is defined as 24 weeks after the date of the loan) (the “Deferral Period”) and the ultimate forgiveness decisions can be made by the Lenders up to 60 days after submitting the applications and possibly longer if forgiveness is fully or partially denied and the Borrower appeals the decision.

While the Company and each Borrower used the PPP Loan proceeds exclusively for Qualifying Expenses, it is unclear and uncertain whether the conditions for forgiveness of the PPP Loans outstanding at July 3, 2021 will be met under the current guidelines of the CARES Act.

While the Company and each Borrower believe that all PPP Loan proceeds were used exclusively for Qualifying Expenses, it is unclear and uncertain whether the conditions for forgiveness of the remaining PPP Loans outstanding at January 1, 2022 will be met under the current guidelines of the CARES Act.

Therefore, we cannot make any assurances that the Company, or any of the Borrowers, will be eligible for forgiveness of the remaining PPP Loans, in whole or in part.

During the 13 and 39 weeks ended July 3, 2021, $3,195,000 (including $36,000 of accrued interest) and $7,318,000 of PPP Loans (including $63,000 of accrued interest), respectively, were forgiven.

To the extent, if any, that any of the remaining PPP Loans are not forgiven, beginning one month following expiration of the Deferral Period, and continuing monthly until 24 months from the date of each applicable Note (the “Maturity Date”), each respective Borrower is obligated to make monthly payments of principal and interest to the Lender with respect to any unforgiven portion of the Notes, in such equal amounts required to fully amortize the principal amount outstanding on such Notes as of the last day of the applicable Deferral Period by the applicable Maturity Date.

To the extent that any of the remaining PPP Loans are not forgiven, beginning one month following expiration of the Deferral Period, and continuing monthly until 24 months from the date of each applicable Note (the “Maturity Date”), each respective Borrower is obligated to make monthly payments of principal and interest to the Lender with respect to any unforgiven portion of the Notes, in such equal amounts required to fully amortize the principal amount outstanding on such Notes as of the last day of the applicable Deferral Period by the applicable Maturity Date.

During the 13 weeks ended January 1, 2022, the Company made payments related to the unforgiven portion of PPP Loans in the aggregate amount of $666,000.

Recent Events

On August 3, 2021, New York City became the first U.S.

city to require proof of at least one dose of a COVID-19 vaccine for a variety of activities for workers and customers, including indoor dining.

The requirements are effective starting on August 16, 2021 with enforcement to begin on September 13, 2021.

As a result of these new requirements, the Company temporarily closed Clyde Frazier's Wine & Dine on August 8, 2021.

On January 28, 2022, the Board of Directors terminated the Company's 2016 Option Plan and approved the 2022 Stock Option Plan for authorizing the future issuance of options to acquire 500,000 shares of common stock, subject to shareholder approval at our annual meeting to be held on March 15, 2022.

Critical Accounting Policies

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What changed 10-Q

Item 2. Management’s Discussion and Analysis