What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-02-14 compared with 2022-08-16 · 74 added, 130 removed, 104 unchanged (66% of the section changed)

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Unless otherwise stated, references to particular years, quarters, months or periods refer to our fiscal years and the associated quarters, months and periods of those fiscal years.

COVID-19 Pandemic

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.

While restrictions on the type of permitted operating model and occupancy capacity may continue to change, all of our restaurants are currently operating with no dining restrictions.

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 July 2, 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.

COVID-19 Pandemic and Inflation

Recent global events, including the COVID-19 pandemic ("COVID-19"), have adversely affected global economies, disrupted global supply chains and labor force participation and created significant volatility and disruption of financial markets.

As a result, we experienced significant and variable disruptions to our business as federal, state and local restrictions were mandated, among other remedial measures, to mitigate the spread of the COVID-19 virus.

While restrictions on the type of permitted operating model and occupancy capacity may continue to change, during fiscal 2022 all of our restaurants operated with no restrictions, other than in New York City where customers were required to show proof of vaccination through November 1, 2022.

In addition to the associated impacts of COVID-19, our operating results have been impacted by geopolitical and other macroeconomic factors, leading to increased commodity and wage inflation and other increased costs.

The ongoing effects of COVID-19 and its variants, along with other geopolitical and macroeconomic events, could lead to further government mandates, including but not limited to capacity restrictions, shifts in consumer behavior, wage inflation, staffing challenges, product and services cost inflation and disruptions in our supply chain.

If these factors significantly impact our cash flow in the future, we may again implement mitigation actions such as suspending dividends, increasing borrowings or modifying our operating strategies.

Some of these measures may have an adverse impact on our business, including possible impairments of assets.

As of December 31, 2022, the Company owned and operated 17 restaurants and bars, 16 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 components into a single operating segment in accordance with applicable accounting guidance.

Accounting Period

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Under this method certain years will contain 53 weeks.

The periods ended July 2, 2022 and July 3, 2021 each included 13 and 39 weeks.

The periods ended December 31, 2022 and January 1, 2022 each included 13 weeks.

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

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(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.

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 2, 2022, as compared to the prior period increased primarily as a result of a 23.9% increase in sales partially offset by increases in commodity prices and other high-volume items caused by inflation, increased labor costs in connection with ongoing COVID-related labor challenges and percentage rents paid on higher sales in the current period.

The Company’s operating income for the 39 weeks ended July 2, 2022, as compared to the prior period increased primarily as a result of a 53.6% increase in sales as all of our restaurants were operating with no dining restrictions in the current period in comparison to the prior period 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 2, 2022 and July 3, 2021:

13 Weeks Ended Variance 39 Weeks Ended Variance

2021 $ % July 2,

(in thousands) (in thousands)

The Company’s operating income for the 13 weeks ended December 31, 2022 decreased 21.1% to $2,203,000 as compared to $2,791,000 for the 13 weeks ended January 1, 2022.

This decrease resulted primarily from increased labor costs in connection with record low unemployment and ongoing COVID-related labor challenges, percentage rents paid on higher sales in the current period and the inflationary impact on commodity prices and other high-volume items partially offset by a 7.9% increase in revenues.

The following table summarizes the significant components of the Company’s operating results for the 13-week periods ended December 31, 2022 and January 1, 2022:

13 Weeks Ended Variance

2022 January 1,

(in thousands)

Food and beverage sales $ 46,539 $ 43,237 $ 3,302 7.6 %

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OPERATING INCOME $ 2,203 $ 2,791 $ (588) -21.1 %

During the 13-week period ended July 2, 2022, revenues increased 23.9% as compared to revenues in the 13-week period ended July 3, 2021.

This increase resulted primarily from increased customer traffic in Las Vegas, targeted menu price increases and in New York and Washington, D.C.

strong revenues from our event business in the current period.

During the 39-week period ended July 2, 2022, revenues increased 53.6% as compared to revenues in the 39-week period ended July 3, 2021.

This increase also resulted primarily from increased customer traffic at all of our properties as they are operating with no dining restrictions in the current period in comparison to the prior period where there were restrictions as a result of government mandates in connection with the COVID-19 pandemic combined with targeted menu price increases and in New York and Washington, D.C.

strong revenues from our event business in the current period.

During the 13-week period ended December 31, 2022, revenues increased 7.9% as compared to revenues in the 13-week period ended January 1, 2022.

This increase resulted primarily from an increase in same-store sales discussed below.

Food and Beverage Same-Store Sales

On a Company-wide basis, same-store sales increased 21.7% during the 13 weeks ended July 2, 2022 as compared to the same period of last year as follows:

13 Weeks Ended Variance

(in thousands)

Las Vegas $ 14,117 $ 12,144 $ 1,973 16.2 %

New York 11,669 5,102 6,567 128.7 %

Washington, D.C.

4,021 3,192 829 26.0 %

Atlantic City, NJ 957 554 403 72.7 %

Connecticut 63 103 (40) -38.8 %

Alabama 5,231 5,073 158 3.1 %

Florida 15,259 16,014 (755) -4.7 %

Same-store sales 51,317 42,182 $ 9,135 21.7 %

Other 752 (45)

Food and beverage sales $ 52,069 $ 42,137

The increases in company-wide same-store sales for the 13 weeks ended July 2, 2022 as compared to the prior period were driven primarily by increased customer traffic and targeted menu price increases in Las Vegas, New York, Washington, D.C.

and Atlantic City, NJ as the impact of the COVID-19 pandemic continues to subside.

In New York and Washington, D.C., the current period also benefited from very strong revenues from our event business in the current period.

Same-store sales in Connecticut decreased 38.8% due to the continued disruption to our business as a result of its relocation within the Foxwoods Resort and Casino where our property is located.

Same-store sales in Alabama increased 3.1% primarily as a result of increased traffic due to closure of several competitors.

Same-store sales in Florida decreased 4.7% primarily as a result of lower traffic in the current period as the prior period benefited from outsized volumes as a result of the sudden population increase Southeast Florida as a result of the migration of people during the pandemic, partially offset by targeted menu price increases.

On a Company-wide basis, same-store sales increased 51.5% during the 39 weeks ended July 2, 2022 as compared to the same period of last year as follows:

On a Company-wide basis, same-store sales increased 6.4% during the 13 weeks ended December 31, 2022 as compared to the same period of last year as follows:

13 Weeks Ended Variance

2022 January 1,

(in thousands)

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New York 10,744 8,525 2,219 26.0 %

Washington, D.C.

7,555 4,850 2,705 55.8 %

Washington, DC 2,818 2,328 490 21.0 %

Atlantic City, NJ 592 661 (69) -10.4 %

Connecticut 206 294 (88) -29.9 %

Alabama 3,128 3,079 49 1.6 %

3 unchanged sentences

Food and beverage sales $ 46,539 $ 43,237

The increases in company-wide same-store sales for the 39 weeks ended July 2, 2022 as compared to the prior period were 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 very strong recovery in our event business in Washington, D.C.

and New York City in the current period.

Same-store sales in Connecticut decreased 29.9% 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 - see Liquidity and Capital Resources - Recent Restaurant Dispositions) and other adjustments and fees.

The increases in company-wide same-store sales for the 13 weeks ended December 31, 2022 as compared to the prior period were driven primarily by increased customer traffic and targeted menu price increases in Las Vegas, New York and Washington, D.C.

as the impact of the COVID-19 pandemic continues to subside.

In New York and Washington, D.C., the current period also benefited from very strong revenues from our event business.

Same-store sales in Alabama increased 1.6% primarily as a result of targeted menu rice increases.

Same-store sales in Florida decreased 9.2% primarily as a result of lower traffic in the current period as the prior period benefited from outsized volumes as a result of the population increase in Southeast Florida as a result of the migration of people during the pandemic, partially offset by targeted menu price increases.

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 and other adjustments and fees.

Costs and Expenses

Costs and expenses for the 13 and 39 weeks ended July 2, 2022 and July 3, 2021 were as follows (in thousands):

Costs and expenses for the 13 weeks ended December 31, 2022 and January 1, 2022 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 $ 12,435 26.2 % $ 12,542 28.5 % (107) -0.9 %

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Total costs and expenses $ 45,242 $ 41,195 $ 4,047

Food and beverage costs as a percentage of total revenues for the 13 and 39 weeks ended July 2, 2022 as compared with the same periods of last year decreased as a result of targeted increases in menu pricing, changes in menu mix and a very strong event business in Washington, D.C.

Food and beverage costs as a percentage of total revenues for the 13 weeks ended December 31, 2022 as compared with the same period of last year decreased as a result of targeted increases in menu pricing, changes in menu mix and a very strong event business in Washington, D.C.

and New York City in the current period, partially offset by increases in commodity prices and other high-volume items caused by inflation.

Payroll expenses as a percentage of total revenues for the 13 weeks ended July 2, 2022 increased as compared with the same period of last year primarily as a result of increased labor costs in connection with ongoing COVID-related labor challenges partially offset by increased volumes, targeted increases in menu pricing and changes in menu mix.

Payroll expenses as a percentage of total revenues for the 39 weeks ended July 2, 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 for several months at the beginning of 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 combined with increased labor costs in connection with ongoing COVID-related labor challenges partially offset by increased volumes, targeted increases in menu pricing and changes in menu mix.

Occupancy expenses as a percentage of total revenues for the 13 weeks ended July 2, 2022 increased as compared with the same period of last year primarily as a result of percentage rents paid on higher sales in the current period.

Occupancy expenses as a percentage of total revenues for the 39 weeks ended July 2, 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 July 2, 2022 as compared to the same period of last year increased slightly primarily as a result of increased maintenance at properties which was deferred as we were experiencing lower traffic in prior periods combined with higher restaurant-level professional fees in the current period.

Other operating costs and expenses as a percentage of total revenues for the 39 weeks ended July 2, 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.

General and administrative expenses (which relate solely to the corporate office in New York City) for the 13 weeks ended July 2, 2022 increased as compared with the same period of last year primarily as a result of increased bonus accruals in the current period.

General and administrative expenses for the 39 weeks ended July 2, 2022 increased as compared with the same period of last year primarily as a result of increased bonus accruals 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 2, 2022 decreased as compared to the same period of last year primarily as a result of the timing of additions in the prior period.

Depreciation and amortization expense for the 39 weeks ended July 2, 2022 increased as compared to the same period of last year primarily as a result of assets placed in service in the current period.

Payroll expenses as a percentage of total revenues for the 13 weeks ended December 31, 2022 increased as compared with the same period of last year primarily as a result of record low unemployment and ongoing COVID-related labor challenges combined with merit increases.

Occupancy expenses as a percentage of total revenues for the 13 weeks ended December 31, 2022 increased as compared with the same period of last year primarily as a result of increases in base rents, percentage rents paid on higher sales in the current period and increases in property and liability insurance premiums.

Other operating costs and expenses as a percentage of total revenues for the 13 weeks ended December 31, 2022 as compared to the same period of last year increased slightly primarily as a result of inflation.

General and administrative expenses (which relate solely to the corporate office in New York City) for the 13 weeks ended December 31, 2022 increased slightly as compared with the same period of last year primarily as a result of annual merit increases.

Depreciation and amortization expense for the 13 weeks ended December 31, 2022 decreased slightly as compared to the same period of last year primarily as a result of the timing of additions in the prior period.

Liquidity and Capital Resources

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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 2, 2022, we had a cash and cash equivalents balance of $26,602,000.

The Company had working capital of $5,489,000 at July 2, 2022 as compared with working capital of $2,572,000 at October 2, 2021.

This increase resulted primarily from cash provided by operations offset by a change in our debt maturities as one of our balloon payments moved into current maturities.

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.

On May 11, 2022, the Board of Directors (the "Board") of the Company declared a quarterly cash dividend of $0.125 per share which was paid on June 13, 2022 to the stockholders of record of each share of the Company's common stock at the close of business on May 31, 2022.

Future decisions to pay or to increase or decrease dividends are at the discretion of the Board and will depend upon operating performance and other factors.

COVID-19 and Inflation

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.

The disruption in operations has led the Company to consider the impact of the COVID-19 pandemic on its liquidity, debt covenant compliance, and recoverability of long-lived and ROU assets, goodwill and intangible assets, among others.

If these disruptions were to re-occur, they could have a material negative impact on our consolidated financial condition, future results of operations and liquidity.

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

As of December 31, 2022, we had a cash and cash equivalents balance of $19,427,000 and a certificate of deposit in the amount of $5,044,000 that matured in January 2023.

In addition, the Company had working capital of $4,850,000 at December 31, 2022 as compared with working capital of $4,210,000 at October 1, 2022.

The country is currently experiencing multi-decade high inflation.

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While we have not had material disruptions in our supply chain, we have experienced some product shortages and higher costs for many commodities.

There has also been a general shortage in the availability of restaurant staff and hourly workers in certain geographic areas in which we operate, which has been exacerbated by continuing effects of the COVID-19 pandemic on the labor market, and has caused increases in the costs of recruiting and compensating such employees.

There has also been a general shortage in the availability of restaurant staff and hourly workers in certain geographic areas in which we operate and has caused increases in the costs of recruiting and compensating such employees.

In addition, certain operating and other costs, including health benefits, taxes, insurance, and other outside services, continue to increase with the general level of inflation and may also be subject to other cost and supply fluctuations outside of our control.

While we have been able to partially offset inflation and other changes in the costs of key operating resources by targeted increases in menu prices, coupled with more efficient purchasing practices, there can be no assurance that we will be able to continue to do so in the future.

While we have been able to offset inflation and other changes in the costs of key operating resources by targeted increases in menu prices, coupled with more efficient purchasing practices, there can be no assurance that we will be able to continue to do so in the future.

From time to time, competitive conditions will limit our menu pricing flexibility.

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There can be no assurance that all of our future cost increases can be offset by higher menu prices or that higher menu prices will be accepted by our restaurant customers without any resulting changes in their visit frequencies or purchasing patterns.

Cash Flows for 39 Weeks Ended July 2, 2022 and July 3, 2021

Net cash provided by operating activities for the 39 weeks ended July 2, 2022 increased to $15,836,000 as compared to $6,648,000 provided by operating activities 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 2, 2022 and July 3, 2021 was $(1,774,000) and $(3,455,000), 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 39 weeks ended July 2, 2022 of $(6,631,000) resulted primarily from principal payments on notes payable, the payment of dividends and the payment of distributions to non-controlling interests.

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 the exercise of stock options.

Cash Flows for 13 Weeks Ended December 31, 2022 and January 1, 2022

Net cash used in operating activities for the 13 weeks ended December 31, 2022 decreased to $(903,000) as compared to $3,852,000 provided by operating activities in the same period of last year.

This decrease was primarily attributable to a decrease in accrued expenses related to catering deposits, the payment of bonuses and changes in net working capital primarily related to accounts receivable, inventory and accounts payable.

Net cash used in investing activities for the 13 weeks ended December 31, 2022 and January 1, 2022 was $(751,000) and $(408,000), respectively, and resulted primarily from purchases of fixed assets at existing restaurants.

Net cash used in financing activities for the 13 weeks ended December 31, 2022 of $(2,358,000) resulted primarily from principal payments on notes payable, the payment of dividends and the payment of distributions to non-controlling interests.

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.

Recent Restaurant Expansions and Other Developments

On December 1, 2020, the Company, through a newly formed, wholly-owned subsidiary, acquired the assets of Bear Ice, Inc.

and File Gumbo Inc., which collectively operated a restaurant and bar named Blue Moon Fish Company located in Lauderdale-by-the-Sea, FL.

The total purchase price of $2,820,000 was paid with cash in the amount of $1,820,000 and a four-year note held by the sellers in the amount of $1,000,000 payable monthly with 5% interest.

Concurrent with the acquisition, the Company assumed the related lease which expires in 2026 and has four five-year extension options.

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 ("Sandcastle 1, LLC") that 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.

On April 8, 2022, the Company extended its lease for Gallagher's Steakhouse at the New York-New York Hotel and Casino in Las Vegas, NV through December 31, 2032.

In connection with the extension, the Company has agreed to spend a minimum of $1,500,000 to materially refresh the premises by September 30, 2022, subject to various extensions as set out in the agreement.

In connection with the extension, the Company has agreed to spend a minimum of $1,500,000 (of which approximately $500,000 has been spent to date) to materially refresh the premises by April 30, 2023 (as extended from September 30, 2022 due to supply chain issues), subject to various extensions as set out in the agreement.

On June 24, 2022, the Company extended its lease for America at the New York-New York Hotel and Casino in Las Vegas, NV through December 31, 2033.

In connection with the extension, the Company has agreed to spend a minimum of $4,000,000 to materially refresh the premises by December 31, 2024, subject to various extensions as set out in the agreement.

The above refresh obligations are to be consistent with designs approved by the Landlord which shall not be unreasonably withheld.

On July 21, 2022, the Company extended its lease for the Village Eateries at the New York-New York Hotel and Casino in Las Vegas, NV through December 31, 2034.

As part of this extension, the Broadway Burger Bar and Grill and Gonzalez y Gonzalez, were carved out of the Village Eateries footprint and the extended date for those two locations is December 31, 2033.

In connection with the extension, the Company has agreed to spend a minimum of $3,500,000 to materially refresh all three of these premises by June 30, 2023, subject to various extensions as set out in the agreement.

Each of the above refresh obligations are to be consistent with designs approved by the Landlord which shall not be unreasonably withheld.

We will continue to pay all rent as required by the leases without abatement during construction.

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Recent Restaurant Dispositions

On November 13, 2020, the Company was advised by the landlord that it would have to vacate Gallagher’s Steakhouse and Gallagher’s Burger Bar at the Resorts Casino Hotel located in Atlantic City, NJ which were on a month-to-month, no rent lease.

The closure of these properties occurred on January 2, 2021 and did not result in a material charge to the Company’s operations.

As of January 2, 2021, the Company determined that, given the then-current situation regarding the COVID-19 pandemic, it will not reopen Thunder Grill in Washington, D.C.

which has been closed since March 20, 2020.

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 the 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.

On July 5, 2022, the Company terminated its lease for Lucky 7 at the Foxwoods Resort Casino.

The closure did not result in a material change to the Company's operations.

Notes Payable – Bank

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

We expect that the LIBOR rate will be discontinued at some point during 2022 and to work with BHBM to identify a suitable replacement rate and amend our debt agreements to reflect this new reference rate accordingly.

We expect that the LIBOR rate will be discontinued by June 30, 2023 and will continue to work with BHBM to identify a suitable replacement rate and amend our debt agreements to reflect this new reference rate accordingly.

We do not expect the discontinuation of LIBOR as a reference rate in our debt agreements to have a material adverse effect on our financial position or materially affect our interest expense.

Borrowings under the Revolving Facility, which include the promissory notes as discussed in Note 8 of the consolidated condensed financial statements, are secured by all tangible and intangible personal property (including accounts receivable, inventory, equipment, general intangibles, documents, chattel paper, instruments, letter-of-credit rights, investment property, intellectual property and deposit accounts) and fixtures of the Company.

inventory, equipment, general intangibles, documents, chattel paper, instruments, letter-of-credit rights, investment property, intellectual property and deposit accounts) and fixtures of the Company.

The Revolving Facility also requires, among other things, that the Company meet minimum quarterly tangible net worth amounts, maintain a minimum fixed charge coverage ratio and meet minimum annual net income amounts.

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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”).

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.

Each Note may be prepaid by the respective Borrower at any time prior to maturity with no prepayment penalties.

No payments of principal or interest are due under the Notes until the date on which the amount of loan forgiveness (if any) under the CARES Act for each respective Note is remitted to the Lender and a forgiveness decision is received by the Borrower.

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 believe that 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 July 2, 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 weeks ended July 2, 2022 and July 3, 2021, $1,298,000 and $3,195,000 of PPP Loans, respectively (including $46,000 and $36,000 of accrued interest, respectively) were forgiven.

During the 39 weeks ended July 2, 2022 and July 3, 2021, $2,420,000 and $7,318,000 of PPP Loans, respectively (including $66,000 and $63,000 of accrued interest, respectively) were forgiven.

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.

Accordingly, based on the above, we have classified the PPP Loan amounts expected to be forgiven as long-term in accordance with SEC interpretative guidance and the remaining

amounts expected to be repaid in the next 12 months of $797,000 and $2,032,000 as short-term in the consolidated condensed balance sheets as of July 2, 2022 and October 2, 2021, respectively.

During the 39 weeks ended July 2, 2022, the Company made payments related to the unforgiven portion of PPP Loans in the aggregate amount of $1,571,000.

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

Funds from the PPP Loans were to 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, were to be forgiven if they were used for Qualifying Expenses as described in and in compliance with the CARES Act.

During the 13 weeks ended December 31, 2022 and January 1, 2022, $272,000 and $0 of PPP Loans, respectively (including $6,000 and $0 of accrued interest, respectively) were forgiven.

During the 13 weeks ended December 31, 2022 and January 1, 2022, the Company made payments related to the unforgiven portion of PPP Loans in the aggregate amount of $531,000 and $0, respectively.

As of December 31, 2022, no PPP Loans were outstanding;

however, the Company is appealing a forgiveness denial in the amount of $280,000.

Such loan was repaid as we await the appeal decision,

Cash Flow Outlook

We are not aware of any trends or events that would materially affect our capital requirements or liquidity.

We believe that our existing cash balances, internal cash-generating capabilities, current banking facilities and ability to secure additional financing, if necessary, are sufficient to finance our capital expenditures, debt maturities and other operating activities for at least the next twelve months.

Recent Events

On July 5, 2022, the Company terminated its lease for Lucky Seven at the Foxwoods Resort Casino.

The closure did not result in a material change to the Company's operations.

On July 21, 2022, the Company extended its lease for the Village Eateries at the New York-New York Hotel and Casino in Las Vegas, NV through December 31, 2034.

As part of this extension, the Broadway Burger Bar and Grill and Gonzalez y Gonzalez , were carved out of the Village Eateries footprint and the extended date for those two locations is December 31, 2033.

On August 10, 2022, the Board of Directors (the "Board") of the Company declared a quarterly cash dividend of $0.125 per share which will be paid on September 13, 2022 to the stockholders of record of each share of the Company's common stock at the close of business on August 31, 2022.

On February 8, 2023, the Board of Directors of the Company (the "Board") declared a quarterly cash dividend of $0.125 per share to be paid on March 14, 2023 to the stockholders of record of each share of the Company's common stock at the close of business on February 28, 2023.

Future decisions to pay or to increase or decrease dividends are at the discretion of the Board and will depend upon operating performance and other factors.

Critical Accounting Policies

The preparation of financial statements requires the application of certain accounting policies, which may require the Company to make estimates and assumptions of future events.

Critical Accounting Estimates

The preparation of financial statements requires the Company to make estimates and assumptions of future events.

In the process of preparing its consolidated condensed financial statements, the Company estimates the appropriate carrying value of certain assets and liabilities, which are not readily apparent from other sources.

The primary estimates underlying the Company’s consolidated condensed financial statements include projected cash flows, allowances for potential bad debts on accounts and notes receivable, assumptions regarding discount rates related to lease accounting, the useful lives and recoverability of its assets, such as property and intangibles, fair values of financial instruments, the realizable value of its tax assets and other matters.

The critical accounting estimates underlying the Company’s consolidated condensed financial statements include projected cash flows for fixed asset impairments, allowances for potential bad debts on accounts and notes receivable, assumptions regarding discount rates related to lease accounting, the useful lives and recoverability of its long-lived assets, such as property and intangibles, fair values of financial instruments, the realizable value of its tax assets and other matters.

Management bases its estimates on certain assumptions, which it believes are reasonable in the circumstances, and actual results could differ from those estimates.

Although management does not believe that any change in those assumptions in the near term would have a material effect on the Company’s consolidated condensed financial position or the results of operations, differences in actual results could be material to the consolidated condensed financial statements.

The Company’s critical accounting policies are described in the Company’s Form 10-K for the year ended October 2, 2021.

There have been no significant changes to such policies during fiscal 2022 other than those disclosed in Note 1 to the consolidated condensed financial statements.

The Company’s critical accounting estimates are described in the Company’s MD&A included in Form 10-K for the year ended October 1, 2022.

There have been no significant changes to such critical accounting estimates during the first fiscal quarter 2023.

Recently Adopted and Issued Accounting Standards

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What changed 10-Q

Item 2. Management’s Discussion and Analysis