ARK RESTAURANTS CORP.
This section and other parts of this Quarterly Report on Form 10-Q ("Form 10-Q")
contain forward-looking statements, within the meaning of the Private Securities
Litigation Reform Act of 1995 ("PSLRA"), which are subject to known and unknown
risks, uncertainties and other important factors that may cause actual results
to be materially different from the statements made herein. All statements other
than statements of historical fact are forward-looking statements.
Forward-looking statements discuss our current expectations and projections
relating to our financial position, results of operations, plans, objectives,
future performance and business. You can identify forward-looking statements by
the fact that they do not relate strictly to any historical or current facts.
These statements may include words such as "aim," "anticipate," "believe,"
"estimate," "expect," "forecast," "future," "intend," "outlook," "potential,"
"project," "projection," "plan," "seek," "may," "could," "would," "will,"
"should," "can," "can have," "likely," the negatives thereof and other similar
expressions. All forward-looking statements are expressly qualified in their
entirety by these cautionary statements.
The following discussion and analysis should be read in conjunction with our
Annual Report on Form 10-K for the year ended October 2, 2021 and the
consolidated condensed financial statements and notes thereto included in Part
I, Item 1 of this Form 10-Q. All information presented herein is based on our
fiscal calendar. 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 inMarch 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.
Overview
As ofJuly 2, 2022 , the Company owned and operated 17 restaurants and bars, 17 fast food concepts and catering operations, exclusively inthe 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.
Accounting Period
Our fiscal year ends on the Saturday nearestSeptember 30 . We report fiscal years under a 52/53-week format. This reporting method is used by many companies in the hospitality industry and is meant to improve year-to-year comparisons of operating results. Under this method certain years will contain 53 weeks. The periods endedJuly 2, 2022 andJuly 3, 2021 each included 13 and 39 weeks.
Seasonality
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 inNew York andWashington, D.C. (January, February and March), is the poorest performing quarter; however, in recent years this has been partially offset by our locations inFlorida 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 atBryant Park inNew York and Sequoia inWashington, 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 inLas Vegas are indoor and generally operate on a more consistent basis throughout the year. - 23 - --------------------------------------------------------------------------------
Results of Operations
The Company's operating income for the 13 weeks endedJuly 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 endedJuly 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 endedJuly 2, 2022 andJuly 3, 2021 : 13 Weeks Ended Variance 39 Weeks Ended Variance July 2, July 3, July 2, July 3, 2022 2021 $ % 2022 2021 $ % (in thousands) (in thousands) REVENUES:
Food and beverage sales
23.6 %$ 134,127 $ 87,207 $ 46,920 53.8 % Other revenue 1,149 828 321 38.8 % 2,662 1,824 838 45.9 % Total revenues 53,218 42,965 10,253 23.9 % 136,789 89,031 47,758 53.6 % COSTS AND EXPENSES: Food and beverage cost of sales 14,740 12,676 2,064 16.3 % 39,536 26,382 13,154 49.9 % Payroll expenses 16,205 12,304 3,901 31.7 % 43,926 29,345 14,581 49.7 % Occupancy expenses 5,966 4,251 1,715 40.3 % 15,814 11,248 4,566 40.6 % Other operating costs and expenses 5,996 4,737 1,259 26.6 % 15,974 11,077 4,897 44.2 % General and administrative expenses 3,872 2,802 1,070 38.2 % 9,854 7,625 2,229 29.2 % Depreciation and amortization 1,018 1,082 (64) -5.9 % 3,245 3,045 200 6.6 % Total costs and expenses 47,797 37,852 9,945
26.3 % 128,349 88,722 39,627 44.7 %
OPERATING INCOME $ 5,421 $ 5,113 $ 308 6.0 % $ 8,440 $ 309 $ 8,131 2631.4 %
Revenues
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.
- 24 ---------------------------------------------------------------------------------
Food and Beverage Same-Store Sales
On a Company-wide basis, same-store sales increased 21.7% during the 13 weeks
ended
13 Weeks Ended Variance
July 2, July 3,
2022 2021 $ %
(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
39 Weeks Ended Variance
July 2, July 3,
2022 2021 $ %
(in thousands)
Las Vegas $ 40,838 $ 24,700 $ 16,138 65.3 %
New York 23,581 8,311 15,270 183.7 %
Washington, D.C. 7,555 4,850 2,705 55.8 %
Atlantic City, NJ 2,525 982 1,543 157.1 %
Connecticut 206 294 (88) -29.9 %
Alabama 11,646 9,763 1,883 19.3 %
Florida 45,460 38,097 7,363 19.3 %
Same-store sales 131,811 86,997 $ 44,814 51.5 %
Other 2,316 210
Food and beverage sales $ 134,127 $ 87,207
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.
- 25 -
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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.
Costs and Expenses
Costs and expenses for the 13 and 39 weeks ended
13 Weeks 13 Weeks 39 Weeks 39 Weeks
Ended % Ended % Increase Ended % Ended % Increase
July 2 , to Total July 3 , to Total (Decrease) July 2 , to Total July 3 , to Total (Decrease)
2022 Revenues 2021 Revenues $ % 2022 Revenues 2021 Revenues $ %
Food and beverage cost of
sales $ 14,740 27.7 % $ 12,676 29.5 % 2,064 16.3 % $ 39,536 28.9 % $ 26,382 29.6 % 13,154 49.9 %
Payroll expenses 16,205 30.5 % 12,304 28.6 % 3,901 31.7 % 43,926 32.1 % 29,345 33.0 % 14,581 49.7 %
Occupancy expenses 5,966 11.2 % 4,251 9.9 % 1,715 40.3 % 15,814 11.6 % 11,248 12.6 % 4,566 40.6 %
Other operating costs and
expenses 5,996 11.3 % 4,737 11.0 % 1,259 26.6 % 15,974 11.7 % 11,077 12.4 % 4,897 44.2 %
General and administrative
expenses 3,872 7.3 % 2,802 6.5 % 1,070 38.2 % 9,854 7.2 % 7,625 8.6 % 2,229 29.2 %
Depreciation and
amortization 1,018 1.9 % 1,082 2.5 % (64) -5.9 % 3,245 2.4 % 3,045 3.4 % 200 6.6 %Total costs and expenses$ 47,797 $ 37,852 $ 9,945 $ 128,349 $ 88,722 $ 39,627 Food and beverage costs as a percentage of total revenues for the 13 and 39 weeks endedJuly 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 inWashington, D.C. andNew 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 endedJuly 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 endedJuly 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 endedJuly 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 endedJuly 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 endedJuly 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 endedJuly 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 inNew York City ) for the 13 weeks endedJuly 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 endedJuly 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. - 26 - -------------------------------------------------------------------------------- Depreciation and amortization expense for the 13 weeks endedJuly 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 endedJuly 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.
Liquidity and Capital Resources
Our primary source of capital has been cash provided by operations and, in recent years, bank and other borrowings to finance specific transactions, acquisitions and large remodeling projects. We utilize cash generated from operations to fund the cost of developing and opening new restaurants and smaller remodeling projects of existing restaurants we own. Consistent with many other restaurant operators, we typically use operating lease arrangements for our restaurants. In recent years we have been able to acquire the underlying real estate at several locations along with the restaurant operation. We believe that our operating lease arrangements provide appropriate leverage of our capital structure in a financially efficient manner. As ofJuly 2, 2022 , we had a cash and cash equivalents balance of$26,602,000 . The Company had working capital of$5,489,000 atJuly 2, 2022 as compared with working capital of$2,572,000 atOctober 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. OnMay 11, 2022 , the Board of Directors (the "Board") of the Company declared a quarterly cash dividend of$0.125 per share which was paid onJune 13, 2022 to the stockholders of record of each share of the Company's common stock at the close of business onMay 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. The country is currently experiencing multi-decade high inflation. Our profitability is dependent on, among other things, our ability to anticipate and react to changes in the cost of food and other raw materials, labor, energy and other supplies and services. 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. 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. From time to time, competitive conditions will limit our menu pricing flexibility. In addition, macroeconomic conditions that impact consumer discretionary spending for food away from home could make additional menu price increases imprudent. 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
Net cash provided by operating activities for the 39 weeks endedJuly 2, 2022 increased to$15,836,000 as compared to$6,648,000 provided by operating activities in the same period of last year. This increase was attributable to an increase in operating income as a result of the continued recovery from the COVID-19 pandemic and changes in net working capital primarily related to accounts receivable, inventory and accounts payable and accrued expenses. - 27 - -------------------------------------------------------------------------------- Net cash used in investing activities for the 39 weeks endedJuly 2, 2022 andJuly 3, 2021 was$(1,774,000) and$(3,455,000) , respectively, and resulted primarily from purchases of fixed assets at existing restaurants and, in the prior period, the cash portion of the purchase price of theBlue Moon Fish Company acquisition. Net cash used in financing activities for the 39 weeks endedJuly 2, 2022 of$(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 endedJuly 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.
Recent Restaurant Expansions and Other Developments
OnDecember 1, 2020 , the Company, through a newly formed, wholly-owned subsidiary, acquired the assets ofBear Ice, Inc. andFile Gumbo Inc. , which collectively operated a restaurant and bar namedBlue Moon Fish Company located inLauderdale-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. OnJanuary 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 onMarch 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. OnApril 8, 2022 , the Company extended its lease forGallagher's Steakhouse at theNew York-New York Hotel and Casino inLas Vegas, NV throughDecember 31, 2032 . In connection with the extension, the Company has agreed to spend a minimum of$1,500,000 to materially refresh the premises bySeptember 30, 2022 , subject to various extensions as set out in the agreement. OnJune 24, 2022 , the Company extended its lease for America at theNew York-New York Hotel and Casino inLas Vegas, NV throughDecember 31, 2033 . In connection with the extension, the Company has agreed to spend a minimum of$4,000,000 to materially refresh the premises byDecember 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. We will continue to pay all rent as required by the leases without abatement during construction. Note that our substantial completion of work set forth in plans approved by the Landlord shall constitute our compliance with the requirements of the completion deadlines, regardless of whether or not the amount actually expended in connection therewith is less than the minimum. Our restaurants generally do not achieve substantial increases in revenue from year to year, which we consider to be typical of the restaurant industry. To achieve significant increases in revenue or to replace revenue of restaurants that lose customer favor or which close because of lease expirations or other reasons, we would have to open additional restaurant facilities or expand existing restaurants. There can be no assurance that a restaurant will be successful after it is opened, particularly since in many instances we do not operate our new restaurants under a trade name currently used by us, thereby requiring new restaurants to establish their own identity.
We may take advantage of other opportunities we consider to be favorable, when they occur, depending upon the availability of financing and other factors.
Recent Restaurant Dispositions
OnNovember 13, 2020 , the Company was advised by the landlord that it would have to vacateGallagher's Steakhouse andGallagher's Burger Bar at theResorts Casino Hotel located inAtlantic City, NJ which were on a month-to-month, no rent lease. The closure of these properties occurred onJanuary 2, 2021 and did not result in a material charge to the Company's operations. As ofJanuary 2, 2021 , the Company determined that, given the then-current situation regarding the COVID-19 pandemic, it will not reopenThunder Grill inWashington, D.C. which has been closed sinceMarch 20, 2020 . This closure did not result in a material charge to the Company's operations. OnSeptember 1, 2021 , the Company advised the landlord ofClyde 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 - 28 - -------------------------------------------------------------------------------- during the year endedOctober 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 . Notes Payable - Bank OnJune 1, 2018 , the Company refinanced (the "Refinancing") its then existing indebtedness with its current lender, Bank Hapoalim B.M. ("BHBM"), by entering into an amended and restated credit agreement (the "Revolving Facility"), which was to mature onMay 19, 2022 (as extended). 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. OnJuly 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 onSeptember 1, 2021 , with a balloon payment of$2,166,000 onJune 1, 2025 . 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 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. 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. The Revolving Facility contains customary representations, warranties and affirmative covenants as well as customary negative covenants, subject to negotiated exceptions on liens, relating to other indebtedness, capital expenditures, liens, affiliate transactions, disposal of assets and certain changes in ownership.
Paycheck Protection Program Loans
During the year endedOctober 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 enactedMarch 27, 2020 . In addition, during the 13 weeks endedApril 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 toFebruary 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 atJuly 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 endedJuly 2, 2022 andJuly 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 endedJuly 2, 2022 andJuly 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 withSEC interpretative guidance and the remaining - 29 - -------------------------------------------------------------------------------- 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 ofJuly 2, 2022 andOctober 2, 2021 , respectively. During the 39 weeks endedJuly 2, 2022 , the Company made payments related to the unforgiven portion of PPP Loans in the aggregate amount of$1,571,000 .
Recent Events
On
OnJuly 21, 2022 , the Company extended its lease for the Village Eateries at theNew York-New York Hotel and Casino inLas Vegas, NV throughDecember 31, 2034 . As part of this extension, theBroadway Burger Bar and Grill andGonzalez y Gonzalez , were carved out of the Village Eateries footprint and the extended date for those two locations isDecember 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 byJune 30, 2023 , subject to various extensions as set out in the agreement. OnAugust 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 onSeptember 13, 2022 to the stockholders of record of each share of the Company's common stock at the close of business onAugust 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.
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. 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. 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 endedOctober 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.
Recently Adopted and Issued Accounting Standards
See Note 1 to the consolidated condensed financial statements for a description of recent accounting pronouncements, including those adopted in fiscal 2022 and the expected dates of adoption of new accounting standards and the anticipated impact on the consolidated condensed financial statements.
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