UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

~~☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES~~

~~EXCHANGE ACT OF 1934~~

~~For the quarterly period ended~~ ~~December 27, 2020.~~
☒
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 26, 2021.

☐ ~~TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES~~

~~EXCHANGE ACT of 1934~~

~~For the transition period from~~ to.

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT of 1934

the transition period from to .

Commission File No. 001-35962

NATHAN'S FAMOUS, INC.

(Exact name of registrant as specified in its charter)

Delaware			~~Delaware~~				11-3166443
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

One Jericho Plaza, Second Floor – Wing A, Jericho, New York 11753

(Address and Zip Code of principal executive offices)

(516) 338-8500

(Registrant's telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $.01 per share		NATH		The NASDAQ Global Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ ~~No ☐~~No☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller reporting company	☒
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

At February ~~5, 2021,~~4, 2022, an aggregate of ~~4,114,934~~4,115,154 shares of the registrant's common stock, par value of $.01, were outstanding.

NATHAN'S FAMOUS, INC. AND SUBSIDIARIES

INDEX

		Page Number

PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements.	3

	Consolidated Financial Statements
	Consolidated Balance Sheets – December ~~27, 2020~~26, 2021 (Unaudited) and March ~~29, 2020~~28, 2021	3

	Consolidated Statements of Earnings (Unaudited) – Thirteen and Thirty-nine Weeks Ended December ~~27, 2020~~26, 2021 and December ~~29, 2019~~27, 2020	4

	Consolidated Statements of Stockholders’ Deficit (Unaudited) – Thirteen Weeks Ended December ~~27, 2020~~26, 2021 and December ~~29, 2019~~27, 2020	5

	Consolidated Statements of Stockholders’ Deficit (Unaudited) – Thirty-nine Weeks Ended December ~~27, 2020~~26, 2021 and December ~~29, 2019~~27, 2020	6

	Consolidated Statements of Cash Flows (Unaudited) – Thirty-nine Weeks Ended December ~~27, 2020~~26, 2021 and December ~~29, 2019~~27, 2020	7

	Notes to Consolidated Financial Statements	8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	2221

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	3231

Item 4.	Controls and Procedures.	3332

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings.	3433

Item 1A.	Risk Factors.	3433

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	3433

Item 3.	Defaults Upon Senior Securities.	3433

Item 4.	Mine Safety Disclosures.	3433

Item 5.	Other Information.	3433

Item 6.	Exhibits.	3534

SIGNATURES			3635

~~Nathan~~’~~s Famous, Inc. and Subsidiaries~~

~~CONSOLIDATED BALANCE SHEETS~~

~~December 27, 2020 and March 29, 2020~~

~~(in thousands, except share and per share amounts)~~

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

Nathan’s Famous, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

December 26, 2021 and March 28, 2021

(in thousands, except share and per share amounts)

							December 26, 2021			March 28, 2021
	December 27, 2020 (Unaudited)			March 29, 2020			(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note F)	$	76,602		$	77,117		$	86,168		$	81,064
Accounts and other receivables, net (Note H)		12,338			11,108			14,175			11,652
Inventories		415			378			371			624
Prepaid expenses and other current assets (Note I)		931			1,181			821			1,325
Total current assets		90,286			89,784			101,535			94,665

Property and equipment, net of accumulated depreciation of $10,283 and $9,468, respectively		4,193			4,610	��
Property and equipment, net of accumulated depreciation of $10,493 and $9,779, respectively								3,833			4,090
Operating lease assets (Note R)		8,471			9,181			7,573			8,337
Goodwill		95			95			95			95
Intangible asset, net		1,184			1,269			1,071			1,156
Deferred income taxes		5			0			148			138
Other assets		329			343			200			328

Total assets	$	104,563		$	105,282		$	114,455		$	108,809

LIABILITIES AND STOCKHOLDERS’ DEFICIT

CURRENT LIABILITIES
Current maturities of long-term debt (Note Q)							$	40,000		$	0
Accounts payable	$	3,785		$	3,509			5,714			4,041
Accrued expenses and other current liabilities (Note L)		5,169			9,297			5,410			8,478
Current portion of operating lease liabilities (Note R)		1,833			1,583			1,848			1,837
Deferred franchise fees		227			230			359			237
Total current liabilities		11,014			14,619			53,331			14,593

Long-term debt, net of unamortized debt issuance costs of $3,342 and $3,860, respectively (Note Q)		146,658			146,140
Long-term debt, net of unamortized debt issuance costs of $2,651 and $3,169, respectively (Note Q)								107,349			146,831
Operating lease liabilities (Note R)		7,722			8,532			6,680			7,553
Other liabilities (Note L)		743			696			733			774
Deferred franchise fees		1,553			1,687			1,663			1,536
Deferred income taxes		0			9

Total liabilities		167,690			171,683			169,756			171,287

COMMITMENTS AND CONTINGENCIES (Note S)

STOCKHOLDERS’ DEFICIT
Common stock, $.01 par value; 30,000,000 shares authorized; 9,369,015 and 9,368,792 shares issued; and 4,114,934 and 4,141,387 shares outstanding at December 27, 2020 and March 29, 2020, respectively		94			94
Common stock, $.01 par value; 30,000,000 shares authorized; 9,369,235 and 9,369,015 shares issued; and 4,115,154 and 4,114,934 shares outstanding at December 26, 2021 and March 28, 2021, respectively								94			94
Additional paid-in capital		62,211			62,130			62,299			62,240
(Accumulated deficit)		(40,662	)		(45,356	)
Accumulated deficit								(32,924	)		(40,042	)
Stockholders’ equity before treasury stock		21,643			16,868			29,469			22,292

Treasury stock, at cost, 5,254,081 and 5,227,405 shares at December 27, 2020 and March 29, 2020		(84,770	)		(83,269	)
Treasury stock, at cost, 5,254,081 shares at December 26, 2021 and March 28, 2021								(84,770	)		(84,770	)
Total stockholders’ deficit		(63,127	)		(66,401	)		(55,301	)		(62,478	)

Total liabilities and stockholders’ deficit	$	104,563		$	105,282		$	114,455		$	108,809

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

Nathan’s Famous, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF EARNINGS

Thirteen and Thirty-nine weeks ended December ~~27, 2020~~26, 2021 and December ~~29, 2019~~27, 2020

(in thousands, except per share amounts)

(Unaudited)

	Thirteen weeks ended						Thirty-nine weeks ended						Thirteen weeks ended						Thirty-nine weeks ended
	December 27, 2020			December 29, 2019			December 27, 2020			December 29, 2019			December 26, 2021			December 27, 2020			December 26, 2021			December 27, 2020

REVENUES
Sales	$	11,322		$	15,356		$	30,697		$	57,699		$	18,637		$	11,322		$	61,462		$	30,697
License royalties		5,898			4,412			24,689			18,559			5,878			5,898			24,218			24,689
Franchise fees and royalties		420			1,035			1,087			3,610			919			420			2,993			1,087
Advertising fund revenue		390			573			1,082			1,752			479			390			1,437			1,082
Total revenues		18,030			21,376			57,555			81,620			25,913			18,030			90,110			57,555

COSTS AND EXPENSES
Cost of sales		8,937			12,262			24,161			43,973			16,040			8,937			51,536			24,161
Restaurant operating expenses		759			764			2,622			2,791			547			759			2,874			2,622
Depreciation and amortization		288			294			900			941			259			288			807			900
General and administrative expenses		3,253			3,620			8,709			11,116			2,975			3,253			9,702			8,709
Advertising fund expense		390			573			1,082			2,122			479			390			1,437			1,082
Total costs and expenses		13,627			17,513			37,474			60,943			20,300			13,627			66,356			37,474

Income from operations		4,403			3,863			20,081			20,677			5,613			4,403			23,754			20,081

Interest expense		(2,650	)		(2,650	)		(7,951	)		(7,951	)		(2,650	)		(2,650	)		(7,951	)		(7,951	)
Interest income		89			338			309			1,074			24			89			88			309
Other income, net		9			22			31			61			3			9			24			31

Income before provision for income taxes		1,851			1,573			12,470			13,861			2,990			1,851			15,915			12,470
Provision for income taxes		492			360			3,456			3,621			860			492			4,477			3,456
Net income	$	1,359		$	1,213		$	9,014		$	10,240		$	2,130		$	1,359		$	11,438		$	9,014

PER SHARE INFORMATION
Weighted average shares used in computing income per share:
Basic		4,115			4,225			4,117			4,219			4,115			4,115			4,115			4,117
Diluted		4,115			4,225			4,117			4,219			4,115			4,115			4,115			4,117

Income per share:
Basic	$	.33		$	.29		$	2.19		$	2.43		$	.52		$	.33		$	2.78		$	2.19
Diluted	$	.33		$	.29		$	2.19		$	2.43		$	.52		$	.33		$	2.78		$	2.19

Dividends declared per share	$	.35		$	.35		$	1.05		$	1.05		$	.35		$	.35		$	1.05		$	1.05

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

Nathan’s Famous, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

Thirteen weeks ended December ~~27, 2020~~26, 2021 and December ~~29, 2019~~27, 2020

(in thousands, except share amounts)

(Unaudited)

					Additional										Total							Additional										Total
	Common		Common		Paid-in		(Accumulated			Treasury Stock, at Cost					Stockholders’			Common		Common		Paid-in		Accumulated			Treasury Stock, at Cost					Stockholders’
	Shares		Stock		Capital		Deficit)			Shares		Amount			Deficit			Shares		Stock		Capital		Deficit			Shares		Amount			Deficit

Balance, September 27, 2020		9,369,015	$	94	$	62,182	$	(40,581	)		5,254,081	$	(84,770	)	$	(63,075	)
Balance, September 26, 2021																			9,369,235	$	94	$	62,291	$	(33,614	)		5,254,081	$	(84,770	)	$	(55,999	)

Repurchase of common stock		0		0		0		0			0		0			0
Dividends on common stock		-		0		0		(1,440	)		-		0			(1,440	)		-		0		0		(1,440	)		-		0			(1,440	)
Share-based compensation		-		0		29		0			-		0			29			-		0		8		0			-		0			8
Net income		-		0		0		1,359			-		0			1,359			-		0		0		2,130			-		0			2,130
Balance, December 27, 2020		9,369,015	$	94	$	62,211	$	(40,662	)		5,254,081	$	(84,770	)	$	(63,127	)
Balance, December 26, 2021																			9,369,235	$	94	$	62,299	$	(32,924	)		5,254,081	$	(84,770	)	$	(55,301	)

					Additional										Total							Additional										Total
	Common		Common		Paid-in		(Accumulated			Treasury Stock, at Cost					Stockholders’			Common		Common		Paid-in		Accumulated			Treasury Stock, at Cost					Stockholders’
	Shares		Stock		Capital		Deficit)			Shares		Amount			Deficit			Shares		Stock		Capital		Deficit			Shares		Amount			Deficit

Balance, September 29, 2019		9,368,792	$	94	$	62,072	$	(46,810	)		5,141,763	$	(78,303	)	$	(62,947	)
Balance, September 27, 2020																			9,369,015	$	94	$	62,182	$	(40,581	)		5,254,081	$	(84,770	)	$	(63,075	)

Repurchase of common stock		0		0		0		0			13,709		(985	)		(985	)
Dividends on common stock		-		0		0		(1,479	)		-		0			(1,479	)		-		0		0		(1,440	)		-		0			(1,440	)
Share-based compensation		-		0		29		0			-		0			29			-		0		29		0			-		0			29
Net income		-		0		0		1,213			-		0			1,213			-		0		0		1,359			-		0			1,359
Balance, December 29, 2019		9,368,792	$	94	$	62,101	$	(47,076	)		5,155,472	$	(79,288	)	$	(64,169	)
Balance, December 27, 2020																			9,369,015	$	94	$	62,211	$	(40,662	)		5,254,081	$	(84,770	)	$	(63,127	)

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

Nathan’s Famous, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

Thirty-nine weeks ended December ~~27, 2020~~26, 2021 and December ~~29, 2019~~27, 2020

(in thousands, except share amounts)

(Unaudited)

					Additional											Total							Additional											Total
	Common		Common		Paid-in			(Accumulated			Treasury Stock, at Cost					Stockholders’			Common		Common		Paid-in			Accumulated			Treasury Stock, at Cost					Stockholders’
	Shares		Stock		Capital			Deficit)			Shares		Amount			Deficit			Shares		Stock		Capital			Deficit			Shares		Amount			Deficit

Balance, March 29, 2020		9,368,792	$	94	$	62,130		$	(45,356	)		5,227,405	$	(83,269	)	$	(66,401	)
Balance, March 28, 2021																				9,369,015	$	94	$	62,240		$	(40,042	)		5,254,081	$	(84,770	)	$	(62,478	)

Shares issued in connection with share-based compensation plans		223		0		0			0			0		0			0			220		0		0			0			0		0			0
Withholding tax on net share settlement of share-based compensation plans		-		0		(6	)		0			-		0			(6	)		-		0		(7	)		0			-		0			(7	)
Repurchase of common stock		0		0		0			0			26,676		(1,501	)		(1,501	)
Dividends on common stock		-		0		0			(4,320	)		-		0			(4,320	)		-		0		0			(4,320	)		-		0			(4,320	)
Share-based compensation		-		0		87			0			-		0			87			-		0		66			0			-		0			66
Net income		-		0		0			9,014			-		0			9,014			-		0		0			11,438			-		0			11,438
Balance, December 27, 2020		9,369,015	$	94	$	62,211		$	(40,662	)		5,254,081	$	(84,770	)	$	(63,127	)
Balance, December 26, 2021																				9,369,235	$	94	$	62,299		$	(32,924	)		5,254,081	$	(84,770	)	$	(55,301	)

					Additional											Total							Additional											Total
	Common		Common		Paid-in			(Accumulated			Treasury Stock, at Cost					Stockholders’			Common		Common		Paid-in			Accumulated			Treasury Stock, at Cost					Stockholders’
	Shares		Stock		Capital			Deficit)			Shares		Amount			Deficit			Shares		Stock		Capital			Deficit			Shares		Amount			Deficit

Balance, March 31, 2019		9,336,338	$	93	$	60,945		$	(52,879	)		5,141,763	$	(78,303	)	$	(70,144	)
Balance, March 29, 2020																				9,368,792	$	94	$	62,130		$	(45,356	)		5,227,405	$	(83,269	)	$	(66,401	)

Shares issued in connection with share-based compensation plans		32,454		1		1,077			0			0		0			1,078			223		0		0			0			0		0			0
Withholding tax on net share settlement of share-based compensation plans		-		0		(8	)		0			-		0			(8	)		-		0		(6	)		0			-		0			(6	)
Repurchase of common stock		0		0		0			0			13,709		(985	)		(985	)		0		0		0			0			26,676		(1,501	)		(1,501	)
Dividends on common stock		-		0		0			(4,437	)		-		0			(4,437	)		-		0		0			(4,320	)		-		0			(4,320	)
Share-based compensation		-		0		87			0			-		0			87			-		0		87			0			-		0			87
Net income		-		0		0			10,240			-		0			10,240			-		0		0			9,014			-		0			9,014
Balance, December 29, 2019		9,368,792	$	94	$	62,101		$	(47,076	)		5,155,472	$	(79,288	)	$	(64,169	)
Balance, December 27, 2020																				9,369,015	$	94	$	62,211		$	(40,662	)		5,254,081	$	(84,770	)	$	(63,127	)

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

Nathan~~��~~’s Famous, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

Thirty-nine weeks ended December ~~27, 2020~~26, 2021 and December ~~29, 2019~~27, 2020

(in thousands)

(Unaudited)

	December 27, 2020			December 29, 2019			December 26, 2021			December 27, 2020
Cash flows from operating activities:
Net income	$	9,014		$	10,240		$	11,438		$	9,014
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		900			941			807			900
Non-cash rental expense		150			100
Amortization of debt issuance costs		518			518			518			518
Share-based compensation expense		87			87			66			87
Income tax benefit on stock option exercises		0			228
Provision for doubtful accounts		70			7			112			70
Deferred income taxes		(14	)		291			(10	)		(14	)
Other non-cash items								(98	)		150
Changes in operating assets and liabilities:
Accounts and other receivables, net		(1,300	)		(270	)		(2,635	)		(1,300	)
Inventories		(37	)		(64	)		253			(37	)
Prepaid expenses and other current assets		250			45			504			250
Other assets		14			10			128			14
Accounts payable, accrued expenses and other current liabilities		(3,852	)		(4,930	)		(1,395	)		(3,852	)
Deferred franchise fees		(137	)		(691	)		249			(137	)
Other liabilities		47			150			(41	)		47

Net cash provided by operating activities		5,710			6,662			9,896			5,710

Cash flows from investing activities:
Purchase of property and equipment		(398	)		(361	)		(465	)		(398	)

Net cash used in investing activities		(398	)		(361	)		(465	)		(398	)

Cash flows from financing activities:
Dividends paid to stockholders		(4,320	)		(4,437	)		(4,320	)		(4,320	)
Proceeds from exercise of stock options		0			1,078
Payments of withholding tax on net share settlement of share-based compensation plans		(6	)		(8	)		(7	)		(6	)
Repurchase of treasury stock		(1,501	)		(985	)		0			(1,501	)

Net cash used in financing activities		(5,827	)		(4,352	)		(4,327	)		(5,827	)

Net (decrease) increase in cash and cash equivalents		(515	)		1,949
Net increase (decrease) in cash and cash equivalents								5,104			(515	)

Cash and cash equivalents, beginning of period		77,117			75,446			81,064			77,117

Cash and cash equivalents, end of period	$	76,602		$	77,395		$	86,168		$	76,602

Cash paid during the period for:
Interest	$	9,938		$	9,938		$	9,938		$	9,938
Income taxes paid	$	3,643		$	3,269		$	3,558		$	3,643

Non-cash financing activity:
Dividends declared per share	$	1.05		$	1.05		$	1.05		$	1.05

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

NATHAN'S FAMOUS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December ~~27, 2020~~26, 2021

(Unaudited)

NOTE A - BASIS OF PRESENTATION

The accompanying consolidated financial statements of Nathan's Famous, Inc. and subsidiaries (collectively “Nathan’s,” the “Company,” “we,” “us” or “our”) as of and for the thirteen and thirty-nine week periods ended December ~~27, 2020~~26, 2021 and December ~~29, 2019~~27, 2020 have been prepared in accordance with accounting principles generally accepted in the United States of America. The unaudited financial statements include all adjustments (consisting of normal recurring adjustments) which, in the opinion of management, are necessary for a fair presentation of financial condition, results of operations and cash flows for the periods presented. However, our results of operations are seasonal in nature, and the results of any interim period are not necessarily indicative of results for any other interim period or the full fiscal year.

Certain information and footnote disclosures normally included in financial statements in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to the requirements of the U.S. Securities and Exchange Commission.

Management believes that the disclosures included in the accompanying consolidated interim financial statements and footnotes are adequate to make the information not misleading, but should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in Nathan’s Annual Report on Form 10-K for the fiscal year ended March ~~29, 2020.~~28, 2021.

Our significant interim accounting policies include the recognition of advertising fund expense in proportion to advertising fund revenue.

A summary of the Company’s significant accounting policies is identified in Note B of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended March ~~29, 2020.~~28, 2021.

Covid-19 Pandemic

In March 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19), a global pandemic. The COVID-19 pandemic has had an impact on the Company’s business, financial condition, cash flows and results of operations for the thirteen and thirty-nine weeks ended December ~~27, 2020~~26, 2021 (“fiscal ~~2021~~2022 period”) and continues into the fourth quarter of fiscal ~~2021.~~2022. Governmental restrictions and public perceptions of the risks associated with COVID-19 have caused consumers to avoid or limit nonessential travel, gatherings in public places and other social interactions, which has adversely affected, and could continue to adversely affect, our business. The COVID-19 pandemic has and may continue to impact customer traffic at our Company-owned restaurants and franchised restaurants, as well as sales to our Branded Product Program customers.

During the fiscal 2022 period, the number of COVID-19 cases continued to stabilize with approved vaccines being more widely distributed and administered and, as a result, more regions continued to loosen restrictions, adhering to state and local guidelines. Although the Company experienced higher revenues during the fiscal 2022 period as compared to the fiscal 2021 period, the COVID-19 pandemic may have a material adverse impact on the Company’s business, results of operations and financial condition. There continues to be uncertainty around the COVID-19 pandemic as the Omicron variant of COVID-19, which appears to be the most transmissible variant to date, has caused a recent increase in COVID-19 cases globally. We cannot predict ~~whether, when~~the ultimate duration, scope and severity of the COVID-19 pandemic or ~~the manner in which the conditions surrounding the pandemic will change and cannot currently estimate the~~its ultimate impact on our business in the short or ~~long-term.~~

~~As of the date of this filing,~~long-term, which ~~three~~may ~~of our Company-owned restaurants continue to operate. Our seasonal location on the Coney Island Boardwalk closed for the season on~~ ~~September 13, 2020.~~ ~~Beginning in the~~ ~~second~~ ~~quarter fiscal~~ ~~2021,~~ the Company re-opened the dining rooms at our Company-owned restaurants located in Oceanside, New York and Yonkers, New York. Although these dining rooms are open, they are operating at reduced capacity, as stipulated under government orders, as well as due to social distancing protocols that are also mandatedbe impacted by the ~~same government orders. Even without governmental restrictions, customers~~Delta variant, Omicron variant, and other variants that may ~~continue to choose to reduce or to eliminate in-restaurant dining because of~~emerge; the ~~rise in the number of COVID-~~19 ~~cases.~~

~~A majority of our franchised locations have closed temporarily during the fiscal~~ ~~2021~~ period due to their locations being in venues that have closed (such as movie theaters) or venues operating at reduced traffic levels (such as airports, highway travel plazas and shopping malls). As a result, franchise system sales have been significantly impacted. Even after these restrictions are lifted, customers ~~may~~ ~~still be reluctant to return to in-restaurant dining. As of the date of this filing, approximately 60% of our franchised locations are open.~~

The sales and profits from our Branded Product Program have been adversely impacted as many of our customers operate in venues that are currently closed (such as movie theaters) or venues operating at significantly reduced traffic, such as professional sports arenas, amusement parks and shopping malls.

~~To help mitigate the impact~~efficacy of the COVID-19 ~~pandemic, we have taken~~vaccines against the ~~following decisive actions which are on-going:~~
●
~~Reduced payroll costs, through salary reductions~~Delta variant, Omicron variant, and other variants that may emerge; and ~~the transition of certain Corporate personnel from a furloughed status to a permanent layoff~~
●
~~Reduced discretionary operating expenses, including marketing and travel~~
●
~~Postponed non-essential capital spending~~
●
~~Launched curbside delivery at~~ ~~three~~ ~~of our~~ ~~four~~ ~~Company-owned restaurants~~
●
~~Introduced “ghost kitchens” whereby well-known restaurants have the ability to market our products for pick-up or in the form of meal-kits for at home preparation~~
●
~~Implemented enhanced health and safety protocols across the Company~~
~~The Company also assessed~~ the ~~impact~~adoption rates of the COVID-19 ~~pandemic on the estimates and assumptions used in preparing these consolidated financial statements, including, but~~ ~~not~~ limited to the carrying values of Goodwill, Intangible Assets, and other Long-lived Assets. See Note J for a further discussion related to Goodwill and Intangible Assets and Note K for a further discussion related to Long-lived Assets.
~~We continue to actively monitor the evolving situation and~~ ~~may~~ ~~take further actions that alter our business operations as~~ ~~may~~ ~~be required by federal, state or local authorities or that we determine are~~vaccines in the ~~best interests of our team members, customers, suppliers and shareholders.~~areas in which the Company operates.

NOTE B – ADOPTION OF NEW ACCOUNTING STANDARD

In ~~January 2017,~~December 2019, the FASB issued ~~an update~~ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which simplifies various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the ~~accounting~~general principles in Topic 740 and, also clarifies and amends existing guidance to ~~simplify the testing for goodwill impairment. The update removes the requirement to determine the implied fair value of goodwill to measure the amount of impairment loss, if any, under the~~ ~~second~~ step of the current goodwill impairment test. A company will perform its annual or interim goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. A goodwill impairment charge will be recognized for the amount by which the reporting unit’s carrying amount exceeds its fair value, ~~not~~ ~~to exceed the carrying amount of the goodwill.~~improve consistent application. The Company adopted this guidance on March ~~30, 2020.~~29, 2021. The adoption of this guidance did not have a material impact on the Company’s ~~consolidated financial statements.~~Consolidated Financial Statements.

8

NOTE C – NEW ACCOUNTING ~~STANDARDS~~STANDARD NOT YET ADOPTED

In June 2016, the FASB issued ~~new guidance~~ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on ~~the measurement of credit losses,~~ Financial Instruments,”which significantly changes the impairment model for most financial instruments. Current guidance requires the recognition of credit losses based on an incurred loss impairment methodology that reflects losses once the losses are probable. Under the new standard, the Company will be required to use a current expected credit loss model (“CECL”) that will immediately recognize an estimate of credit losses that are expected to occur over the life of the financial instruments that are in the scope of this update, including trade receivables. The CECL model uses a broader range of reasonable and supportable information in the development of credit loss estimates. In November 2019, the FASB deferred the effective date for smaller reporting companies for annual reporting periods beginning after December 15, 2022. This standard is required to take effect in Nathan’s first quarter ( June 2023) of our fiscal year ending March 31, 2024. The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements and related disclosures.

In ~~December 2019,~~ ~~the FASB issued ASU~~ ~~2019~~-~~12,~~ “~~Income Taxes (Topic~~ ~~740~~~~): Simplifying the Accounting for Income Taxes,~~~~” which is intended to simplify various aspects related to accounting for income taxes. ASU~~ ~~2019~~-12 ~~removes certain exceptions to the general principles in Topic~~ ~~740~~ ~~and also clarifies and amends existing guidance to improve consistent application. ASU~~ ~~2019~~-12 ~~is effective for fiscal years beginning after~~ ~~December 15, 2020.~~ ~~This standard is required to take effect in Nathan’s~~ ~~first~~ ~~quarter (~~ ~~June 2021)~~ ~~of our fiscal year ending~~ ~~March 27, 2022.~~ ~~The Company is currently evaluating the impact that the adoption of this guidance will have on its consolidated financial statements and related disclosures.~~
The Company does not believe that any other recently issued, but not yet effective accounting standards, when adopted, will have a material effect on the accompanying consolidated financial statements.

9

NOTE D – REVENUES

The Company’s disaggregated revenues for the thirteen and thirty-nine weeks ended December ~~27, 2020~~26, 2021 and December ~~29, 2019~~27, 2020 are as follows (in thousands):

Thirteen weeks ended

Thirty-nine weeks ended

Thirteen weeks ended

Thirty-nine weeks ended

December 27,
2020

December 29,
2019

December 27,
2020

December 29,
2019

December 26,
2021

December 27,
2020

December 26,
2021

December 27,
2020

Branded Products
$ 10,003 $ 13,694 $ 24,450 $ 45,989 $ 16,901 $ 10,003 $ 51,960 $ 24,450
Company-operated restaurants
1,319 1,662 6,247 11,710 1,736 1,319 9,502 6,247
Total sales
11,322 15,356 30,697 57,699 18,637 11,322 61,462 30,697

License royalties
5,898 4,412 24,689 18,559 5,878 5,898 24,218 24,689

Franchise royalties
361 802 880 2,829 744 361 2,581 880
Franchise fees
59 233 207 781 175 59 412 207
Total franchise fees and royalties
420 1,035 1,087 3,610 919 420 2,993 1,087

Advertising fund revenue
390 573 1,082 1,752 479 390 1,437 1,082

Total revenues
$ 18,030 $ 21,376 $ 57,555 $ 81,620 $ 25,913 $ 18,030 $ 90,110 $ 57,555

The following table disaggregates revenues by primary geographical market (in thousands):

Thirteen weeks ended

Thirty-nine weeks ended

Thirteen weeks ended

Thirty-nine weeks ended

December 27,
2020

December 29,
2019

December 27,
2020

December 29,
2019

December 26,
2021

December 27,
2020

December 26,
2021

December 27,
2020

United States
$ 17,810 $ 20,308 $ 56,723 $ 77,930 $ 25,066 $ 17,810 $ 87,545 $ 56,723
International
220 1,068 832 3,690 847 220 2,565 832
Total revenues
$ 18,030 $ 21,376 $ 57,555 $ 81,620 $ 25,913 $ 18,030 $ 90,110 $ 57,555

Contract balances

The following table provides information about contract receivables and liabilities ~~(Deferred~~(deferred franchise fees) from contracts with customers (in thousands):

December 27,
2020

March 29,
2020

Deferred franchise fees (a)
$ 1,780 $ 1,917

December 26,
2021

March 28,
2021

Receivables, which are included in “Accounts and other receivables, net” (a)
$ 250 $ 0
Deferred franchise fees (b)
$ 2,022 $ 1,773

(a)
~~(a)~~Includes receivables related to “franchise fees and royalties”
(b)
Deferred franchise fees of ~~$227,000~~$359 and ~~$1,553,000~~$1,663 as of December ~~27, 2020~~26, 2021 and ~~$230,000~~$237 and ~~$1,687,000~~$1,536 as of March ~~29, 2020~~28, 2021 are included in Deferred franchise fees – current and long term, respectively.

9
Significant changes in ~~Deferred~~deferred franchise fees are as follows (in thousands):

Thirty-nine weeks ended
Thirty-nine weeks ended

December 27,
2020

December 29,
2019

December 26,
2021

December 27,
2020

Deferred franchise fees at beginning of period
$ 1,917 $ 3,005 $ 1,773 $ 1,917
Revenue recognized during the period
(207 ) (781 ) (412 ) (207 )
New deferrals due to cash received and other
70 90 661 70
Deferred franchise fees at end of period
$ 1,780 $ 2,314 $ 2,022 $ 1,780

10

Anticipated ~~Future Recognition~~future recognition of ~~Deferred Franchise Fees~~deferred franchise fees

The following table reflects the estimated franchise fees to be recognized in the future related to performance obligations that are unsatisfied at the end of the period (in thousands):

Estimate for fiscal year

Estimate for fiscal year

2021 (a)
$ 58
2022
223
2022 (a)
$ 95
2023
200 342
2024
188 303
2025
181 286
2026
260
Thereafter
930 736
Total
$ 1,780 $ 2,022

(a)
Represents franchise fees expected to be recognized for the remainder of the ~~2021~~2022 fiscal year, which includes international development fees expected to be recognized over the duration of one year or less. Amount does not include ~~$207,000~~$412 of franchise fee revenue recognized for the thirty-nine weeks ended December ~~27, 2020.~~26, 2021.
~~We have applied the optional exemption, as provided for under Topic~~ ~~606,~~ ~~which allows us~~ ~~not~~ ~~to disclose the transaction price allocated to unsatisfied performance obligations when the transaction price is a sales-based royalty.~~

NOTE E – INCOME PER SHARE

Basic income per common share is calculated by dividing income by the weighted-average number of common shares outstanding and excludes any dilutive effect of stock options. Diluted income per common share gives effect to all potentially dilutive common shares that were outstanding during the period. Dilutive common shares used in the computation of diluted income per common share result from the assumed exercise of stock options and warrants, as determined using the treasury stock method.

The following chart provides a reconciliation of information used in calculating the per-share amounts for the thirteen and thirty-nine week periods ended December ~~27, 2020~~26, 2021 and December ~~29, 2019,~~27, 2020, respectively.

Thirteen weeks

Net Income

Net Income

Number of Shares

Per Share

2020

2019

2020

2019

2020

2019

(in thousands)

(in thousands)

Basic EPS

Basic calculation
$ 1,359 $ 1,213 4,115 4,225 $ 0.33 $ 0.29
Effect of dilutive employee stock options
- - 0 0 0 0
Diluted EPS

Diluted calculation
$ 1,359 $ 1,213 4,115 4,225 $ 0.33 $ 0.29
Thirteen weeks

Net Income

Net Income

Number of Shares

Per Share

2021

2020

2021

2020

2021

2020

(in thousands)

(in thousands)

Basic EPS

Basic calculation
$ 2,130 $ 1,359 4,115 4,115 $ 0.52 $ 0.33
Effect of dilutive employee stock options
- - 0 0 0 0
Diluted EPS

Diluted calculation
$ 2,130 $ 1,359 4,115 4,115 $ 0.52 $ 0.33

Thirty-nine weeks

Net Income

Net Income

Number of Shares

Per Share

2020

2019

2020

2019

2020

2019

(in thousands)

(in thousands)

Basic EPS

Basic calculation
$ 9,014 $ 10,240 4,117 4,219 $ 2.19 $ 2.43
Effect of dilutive employee stock options
- - 0 0 0 0
Diluted EPS

Diluted calculation
$ 9,014 $ 10,240 4,117 4,219 $ 2.19 $ 2.43
10
Thirty-nine weeks

Net Income

Net Income

Number of Shares

Per Share

2021

2020

2021

2020

2021

2020

(in thousands)

(in thousands)

Basic EPS

Basic calculation
$ 11,438 $ 9,014 4,115 4,117 $ 2.78 $ 2.19
Effect of dilutive employee stock options
- - - - - -
Diluted EPS

Diluted calculation
$ 11,438 $ 9,014 4,115 4,117 $ 2.78 $ 2.19

Options to purchase ~~10,000~~20,000 shares of common stock in the thirteen and thirty-nine week periods ended December ~~27, 2020~~ ~~and~~ ~~December 29, 2019~~26, 2021, were not included in the computation of diluted EPS because the exercise price exceeded the average market price of common shares during the period.

Options to purchase 10,000 shares of common stock in the 11thirteen

and thirty-nine week periods ended December 27, 2020, were not included in the computation of diluted EPS because the exercise price exceeded the average market price of common shares during the period.

NOTE F – CASH AND CASH EQUIVALENTS

The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. The Company did not have any cash equivalents at December ~~27, 2020~~26, 2021 and March ~~29, 2020.~~28, 2021.

At December ~~27, 2020~~26, 2021 and March ~~29, 2020,~~28, 2021, substantially all of the Company’s cash balances are in excess of Federal government insurance limits. The Company does not believe that it is exposed to any significant risk on these balances.

NOTE G – FAIR VALUE MEASUREMENTS

Nathan’s follows a three-level fair value hierarchy that prioritizes the inputs to measure fair value. This hierarchy requires entities to maximize the use of “observable inputs” and minimize the use of “unobservable inputs.” The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability on the measurement date. The three levels are defined as follows:

●    Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for an identical asset or liability in an active market

● Level 2 - inputs to the valuation methodology include quoted prices for a similar asset or liability in an active market or model-derived valuations in which all significant inputs are observable for substantially the full term of the asset or liability

●   Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value measurement of the asset or liability

The face value and fair value of long-term debt, including the current portion, as of December ~~27, 2020~~26, 2021 and March ~~29, 2020~~28, 2021 were as follows (in thousands):

December 27, 2020

March 29, 2020

Face value

Fair value

Face Value

Fair value

Long-term debt
$ 150,000 $ 153,909 $ 150,000 $ 138,000

December 26, 2021

March 28, 2021

Face value

Fair value

Face Value

Fair value

Long-term debt
$ 150,000 $ 152,961 $ 150,000 $ 154,420

The Company estimates the fair value of its long-term debt, including the current portion, based upon review of observable pricing in secondary markets as of the last trading day of the fiscal period. Accordingly, the Company classifies its long-term debt, including the current portion, as Level 2.

The carrying amounts of cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term maturity of the instruments.

11
Certain non-financial assets and liabilities are measured at fair value on a non-recurring basis; that is, the assets and liabilities are not measured at fair value on an ongoing basis, but are subject to fair value adjustments in certain circumstances, such as when evidence of impairment exists. At December ~~27, 2020,~~26, 2021, no fair value adjustment or material fair value measurements were required for non-financial assets or liabilities.

NOTE H – ACCOUNTS AND OTHER RECEIVABLES, NET

Accounts and other receivables, net, consist of the following (in thousands):

December 27,

March 29,

December 26,

March 28,

2020

2020

2021

2021

Branded product sales
$ 7,479 $ 6,789 $ 10,185 $ 6,480
Franchise and license royalties
4,727 4,299 2,992 5,224
Other
428 257 1,183 293
12,634 11,345 14,360 11,997

Less: allowance for doubtful accounts
296 237 185 345
Accounts and other receivables, net
$ 12,338 $ 11,108 $ 14,175 $ 11,652

Accounts receivable are due within 30 days and are stated at amounts due from franchisees, including virtual or “ghost” kitchens, retail licensees and Branded Product Program customers, net of an allowance for doubtful accounts. Accounts that are outstanding longer than the contractual payment terms are generally considered past due. The Company does not recognize franchise and license royalties that are not deemed to be realizable.

12

The Company individually reviews each past due account and determines its allowance for doubtful accounts by considering a number of factors, including the length of time accounts receivable are past due, the Company’s previous loss history, the customer’s current and expected future ability to pay its obligation to the Company, the condition of the general economy and the industry as a whole. Based on management’s assessment, the Company provides for estimated uncollectible amounts through a charge to earnings. After the Company has used reasonable collection efforts, it writes off accounts receivable through a charge to the allowance for doubtful accounts.

Changes in the Company’s allowance for doubtful accounts for the thirty-nine week period ended December ~~27, 2020~~26, 2021 and the fiscal year ended March ~~29, 2020~~28, 2021 are as follows (in thousands):

December 27,
2020

March 29,
2020

December 26,
2021

March 28, 2021

Beginning balance
$ 237 $ 585 $ 345 $ 237
Bad debt expense
70 71 112 101
Write-offs and other
(11 ) (419 ) (272 ) 7
Ending balance
$ 296 $ 237 $ 185 $ 345

NOTE I – PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following (in thousands):

December 27,

March 29,

December 26,

March 28,

2020

2020

2021

2021

Income taxes
$ 0 $ 280
Real estate taxes
$ 168 $ 75 140 87
Insurance
350 263 257 388
Marketing
0 369 181 196
Other
413 474 243 374
Total prepaid expenses and other current assets
$ 931 $ 1,181 $ 821 $ 1,325

12

NOTE J – GOODWILL AND INTANGIBLE ASSETS

The Company has continued to monitor the economic uncertainty as a result of COVID-19 and has determined that the impact of COVID-19 was a triggering event that required the Company to perform a quantitative interim goodwill impairment test. ~~The Company’s impairment assessment was performed in accordance with the accounting guidance adopted in the~~ ~~first~~ ~~quarter of fiscal~~ ~~2021~~ ~~that simplifies the testing for goodwill impairment, as discussed in Note B – Adoption of New Accounting Standard.~~ Based on the quantitative ~~assessment~~test performed, management determined that the Company’s goodwill has not been impaired as of December 26, 2021 and December 27, 2020, and as a result, no0 impairment charge was recorded for the thirteen and thirty-nine week periods endedDecember 26, 2021 and December 27, 2020.

The Company’s definite-lived intangible asset consists of trademarks, tradenames and other intellectual property in connection with its Arthur Treacher’s co-branding agreements. The Company reviews its definite-lived intangible asset for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Company determined that the impact of COVID-19 on its business was a sufficient indicator that the carrying value may not be recoverable. The Company tested for recoverability of its definite-lived intangible asset based on the projected undiscounted cash flows to be derived from such co-branding agreements, which has a remaining useful life based upon the term of its agreements. Based on the quantitative test performed, ~~and other qualitative factors,~~ the Company determined that the definite-lived intangible asset was recoverable and 0 impairment charge was recorded for the thirteen and thirty-nine week periods endedDecember 26, 2021 and December 27, 2020.

NOTE K - LONG LIVED ASSETS

Long-lived assets on a restaurant-by-restaurant basis are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

Long-lived assets include property, equipment and right of use assets for operating leases with finite useful lives. Assets are grouped at the individual restaurant level which represents the lowest level for which cash flows can be identified largely independent of the cash flows of other assets and liabilities. The Company generally considers a history of restaurant operating losses to be its primary indicator of potential impairment for individual restaurant locations. As a result of the impact of the COVID-19 pandemic on its business, the Company determined that sufficient indicators existed to trigger the performance of an interim impairment analysis as of December 26, 2021 and December 27, 2020.

13

The Company tests for recoverability based on the projected undiscounted cash flows to be derived from such assets. If the projected undiscounted future cash flows are less than the carrying value of the asset, the Company will record on a restaurant-by-restaurant basis, an impairment loss, if any, based on the difference between the estimated fair value and the carrying value of the asset. The Company generally measures fair value by considering discounted estimated future cash flows from such assets. Cash flow projections and fair value estimates require significant estimates and assumptions by management. Should the estimates and assumptions prove to be incorrect, the Company may be required to record impairments in future periods and such impairments could be material. ~~The Company considers~~As a ~~history~~result of ~~restaurant operating losses to be its primary indicator of potential impairment for individual restaurant locations. NaN~~the Company’s analysis, no long-lived assets were deemed to be ~~permanently~~ impaired ~~during~~as of December 26, 2021 and December 27, 2020, and, as a result, 0 impairment charge was recorded for the thirteen and thirty-nine week periods ended December 26, 2021 and December 27, ~~2020~~ 2020.~~based upon quantitative analysis.~~

NOTE L – ACCRUED EXPENSES, OTHER CURRENT LIABILITIES AND OTHER LIABILITIES

Accrued expenses and other current liabilities consist of the following (in thousands):

December 27,

March 29,

December 26,

March 28,

2020

2020

2021

2021

Payroll and other benefits
$ 2,246 $ 3,075 $ 2,207 $ 2,793
Accrued rebates
281 514 288 132
Rent and occupancy costs
230 84 91 73
Deferred revenue
97 797 0 841
Construction costs
58 105 58 60
Interest
1,579 4,084 1,552 4,057
Professional fees
168 194 150 200
Sales, use and other taxes
46 17 71 60
Corporate income taxes
0 176 571 0
Other
464 251 422 262
Total accrued expenses and other current liabilities
$ 5,169 $ 9,297 $ 5,410 $ 8,478

13
Other liabilities consist of the following (in thousands):

December 27,

March 29,

December 26,

March 28,

2020

2020

2021

2021

Reserve for uncertain tax positions
$ 614 $ 567 $ 733 $ 653
Other
129 129 0 121
Total other liabilities
$ 743 $ 696 $ 733 $ 774

NOTE M – INCOME TAXES

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) was enacted into law which among other provisions increases the limitation on the allowed business interest expense deduction from 30 percent to 50 percent of adjusted taxable income for tax years beginning January 1, 2019 and 2020. Additionally, the CARES Act allows businesses to immediately expense the full cost of Qualified Improvement Property, retroactive to tax years beginning on or after January 1, 2018.

The income tax provisions for the thirty-nine week periods ended December ~~27, 2020~~26, 2021 and December ~~29, 2019~~27, 2020 reflect effective tax rates of ~~27.7%~~28.1% and ~~26.1%~~27.7%, respectively.
~~Nathan’s effective tax rate for the~~ ~~thirty-nine~~ ~~week period ended~~ ~~December 29, 2019~~ ~~was reduced by 1.6% as a result of the tax benefits associated with stock compensation. For the~~ ~~thirty-nine~~ ~~week period ended~~ ~~December 29, 2019~~ excess tax benefits of $228,000 were reflected in the Consolidated Statements of Earnings as a reduction in determining the provision for income taxes. Nathan’s effective tax rate without this adjustment would have been 27.8% for the fiscal ~~2020~~ ~~period.~~

The amount of unrecognized tax benefits at December ~~27, 2020~~26, 2021 was ~~$336,000~~$445,000 all of which would impact Nathan’s effective tax rate, if recognized. As of December ~~27, 2020,~~26, 2021, Nathan’s had ~~$292,000~~$307,000 of accrued interest and penalties in connection with unrecognized tax benefits.

In ~~November 2019,~~ ~~the State of New Jersey notified Nathan’s that our tax returns for the fiscal years ended~~ ~~March 27, 2016,~~ ~~March 26, 2017~~ ~~and~~ ~~March 25, 2018~~ ~~will be audited. In~~ ~~November 2020,~~ ~~the audit was completed and~~ no ~~adjustments were noted.~~
14

NOTE N – SEGMENT INFORMATION

Nathan’s considers itself to be a brand marketer of the Nathan’s Famous signature products to the foodservice industry pursuant to its various business structures. Nathan’s sells its products directly to consumers through its restaurant operations segment consisting of Company-operated and franchised restaurants, including virtual or “ghost” kitchens, to distributors that resell our products to the foodservice industry through the Branded Product Program (“BPP”) and by third party manufacturers pursuant to license agreements that sell our products to club stores and grocery stores nationwide. The Company’s Chief Executive Officer has been identified as the Chief Operating Decision Maker (“CODM”) who evaluates performance and allocates resources for the Branded Product Program, Product Licensing and Restaurant Operations segments based upon a number of factors, the primary profit measure being income from operations. Certain administrative expenses are not allocated to the segments and are reported within the Corporate segment.

Branded Product Program –This segment derives revenue principally from the sale of hot dog products either directly to foodservice operators or to various foodservice distributors who resell the products to foodservice operators.

Product licensing–This segment derives revenue, primarily in the form of royalties, from licensing a broad variety of Nathan’s Famous branded products, including our hot dogs, sausage and corned beef products, frozen ~~French~~french fries and additional products through retail grocery channels and club stores throughout the United States.

Restaurant operations –This segment derives revenue from the sale of our products at Company-owned restaurants and earns fees and royalties from its franchised ~~restaurants.~~ restaurants, including its virtual or “ghost” kitchens.

Revenues from operating segments are from transactions with unaffiliated third parties and do not include any intersegment revenues.

Income from operations attributable to Corporate consists principally of administrative expenses not allocated to the operating segments such as executive management, finance, information technology, legal, insurance, corporate office costs, corporate incentive compensation and compliance costs and expenses of the advertising fund.

Interest expense, interest income, and other income, net, are managed centrally at the corporate level, and, accordingly, such items are not presented by segment since they are excluded from the measure of profitability reviewed by the CODM.

14
Operating segment information is as follows (in thousands):

Thirteen weeks ended Thirty-nine weeks ended
Thirteen weeks ended
Thirty-nine weeks ended

December 27,
2020

December 29,
2019

December 27,
2020

December 29,
2019

December 26,
2021

December 27,
2020

December 26,
2021

December 27,
2020

Revenues

Branded Product Program
$ 10,003 $ 13,694 $ 24,450 $ 45,989 $ 16,901 $ 10,003 $ 51,960 $ 24,450
Product licensing
5,898 4,412 24,689 18,559 5,878 5,898 24,218 24,689
Restaurant operations
1,739 2,697 7,334 15,320 2,655 1,739 12,495 7,334
Corporate (1)
390 573 1,082 1,752 479 390 1,437 1,082
Total revenues
$ 18,030 $ 21,376 $ 57,555 $ 81,620 $ 25,913 $ 18,030 $ 90,110 $ 57,555

Income from operations

Branded Product Program
$ 1,550 $ 1,917 $ 3,074 $ 6,244 $ 1,681 $ 1,550 $ 5,096 $ 3,074
Product licensing
5,852 4,367 24,552 18,423 5,832 5,852 24,081 24,552
Restaurant operations
(1,162 ) (599 ) (2,193 ) 2,254 (69 ) (1,162 ) 623 (2,193 )
Corporate
(1,837 ) (1,822 ) (5,352 ) (6,244 ) (1,831 ) (1,837 ) (6,046 ) (5,352 )
Income from operations
$ 4,403 $ 3,863 $ 20,081 $ 20,677 $ 5,613 $ 4,403 $ 23,754 $ 20,081

Interest expense
(2,650 ) (2,650 ) (7,951 ) (7,951 ) (2,650 ) (2,650 ) (7,951 ) (7,951 )
Interest income
89 338 309 1,074 24 89 88 309
Other income, net
9 22 31 61 3 9 24 31
Income before provision for income taxes
$ 1,851 $ 1,573 $ 12,470 $ 13,861 $ 2,990 $ 1,851 $ 15,915 $ 12,470

(1)
Represents advertising fund revenue

15

NOTE O – SHARE-BASED COMPENSATION

Total share-based compensation ~~for~~during each of the thirteen-week periods ended December ~~27, 2020~~26, 2021 and December ~~29, 2019~~27, 2020 was ~~$29,000.~~$8,000 and $29,000, respectively. Total share-based compensation ~~for~~during each of the thirty-nine week periods ended December ~~27, 2020~~26, 2021 and~~December 29, 2019~~ ~~was $87,000. Total share-based compensation is included in general and administrative expenses in our accompanying Consolidated Statements of Earnings. As of~~ December 27, 2020 was $66,000 and $87,000, respectively. As of December 26, 2021, there was ~~$83,000~~$122,000 of unamortized compensation expense related to share-based incentive awards. ~~The Company expects~~We expect to recognize this expense over approximately ~~eight~~twenty-two months, which represents the weighted average remaining requisite service periods for such awards.

The Company recognizes compensation cost for unvested stock-based incentive awards on a straight-line basis over the requisite service period. Compensation cost charged to expense under all stock-based incentive awards is as follows (in thousands):

Thirteen weeks ended Thirty-nine weeks ended

December 27, 2020

December 29, 2019

December 27, 2020

December 29, 2019

Stock options
$ 21 $ 21 $ 64 $ 64
Restricted stock
8 8 23 23
Total compensation cost
$ 29 $ 29 $ 87 $ 87
Thirteen weeks ended Thirty-nine weeks ended

December 26,
2021

December 27,
2020

December 26,
2021

December 27,
2020

Stock options
$ 8 $ 21 $ 52 $ 64
Restricted stock
0 8 14 23
Total compensation cost
$ 8 $ 29 $ 66 $ 87

Stock options:

~~There were 0 new share-based awards granted during~~During the thirty-nine week period ended December ~~27, 2020.~~
~~During the fiscal year ended~~ ~~March 31, 2019,~~26, 2021, the Company granted options to purchase 10,000 shares at an exercise price of ~~$89.90~~$68.50 per share, all of which expire five years from the date of grant. All such ~~stock~~ options vest ratably over a ~~three~~four-year period commencing ~~September 12, 2019.~~August 10, 2021.
The weighted-average option fair values, as determined using the Black-Scholes option valuation model, and the assumptions used to estimate these values for stock options granted during the thirty-nine week period ended December 26, 2021 are as follows:
Weighted-average option fair values
$ 13.04
Expected life (years)
4.4
Interest rate
0.82 %
Volatility
27.69 %
Dividend yield
2.04 %
15
The expected dividend yield is based on historical and projected dividend yields. The Company estimates volatility based primarily on historical monthly price changes of the Company’s stock equal to the expected life of the option. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant. The expected option term is the number of years the Company estimates the options will be outstanding prior to exercise based on expected historical exercise patterns and employment termination behavior.

Transactions with respect to stock options for the thirty-nine weeks ended December ~~27, 2020~~26, 2021 are as follows:

Shares
Weighted-
Average
Exercise
Price

Weighted-
Average
Remaining
Contractual Life

Aggregate
Intrinsic
Value
(in thousands)

Options outstanding at March 29, 2020
10,000 $ 89.90 3.45 -
Granted
0 0 - -
Exercised
0 0 - 0
Options outstanding at December 27, 2020
10,000 $ 89.90 2.71 0

Options exercisable at December 27, 2020
6,667 $ 89.90 2.71 0

Weighted-

Weighted-

Aggregate

Average

Average

Intrinsic

Exercise

Remaining

Value

Shares

Price

Contractual Life

(in thousands)

Options outstanding at March 28, 2021
10,000 $ 89.90 2.46 -
Granted
10,000 $ 68.50 4.62 -
Exercised
- 0 - 0
Options outstanding at December 26, 2021
20,000 $ 79.20 3.17 0

Options exercisable at December 26, 2021
10,000 $ 89.90 1.71 0

Restricted stock:

Transactions with respect to restricted stock for the thirty-nine weeks ended December ~~27, 2020~~26, 2021 are as follows:

Shares

Weighted-
Average
Grant-date
Fair value
Per share

Weighted-
Average
Grant-date
Fair value

Unvested restricted stock at March 29, 2020
667 $ 89.90

Shares

Per share

Unvested restricted stock at March 28, 2021
333 $ 89.90
Granted
0 0 0 0
Vested
(334 ) $ 89.90 (333 ) $ 89.90
Unvested restricted stock at December 27, 2020
333 $ 89.90
Unvested restricted stock at December 26, 2021
0 0

NOTE P – STOCKHOLDERS’ EQUITY

1. Dividends

Effective June ~~12, 2020,~~11, 2021, the Board of Directors (the “Board”) declared its first quarterly cash dividend of $0.35 per share for fiscal year ~~2021,~~2022, aggregating $1,440,000, which was paid on June ~~26, 2020~~25, 2021 to stockholders of record as of the close of business on June ~~22, 2020.~~21, 2021.

16

Effective August ~~7, 2020,~~6, 2021, the Board declared its second quarterly cash dividend of $0.35 per share for fiscal year ~~2021,~~2022, aggregating $1,440,000, which was paid on September ~~4, 2020~~3, 2021 to stockholders of record as of the close of business on August ~~24, 2020.~~23, 2021.

Effective November ~~6, 2020~~5, 2021, the Board declared its third quarterly cash dividend of $0.35 per share for fiscal year ~~2021,~~2022, aggregating $1,440,000, which was paid on December ~~4, 2020~~3, 2021 to stockholders of record as of the close of business on November ~~23, 2020.~~22, 2021.

Effective February ~~5, 2021~~4, 2022, the Board authorized the increase of its regular dividend from $0.35 to $0.45 per quarter and declared its fourth quarterly cash dividend of ~~$0.35~~$0.45 per share payable on March ~~5, 2021~~4, 2022 to stockholders of record as of the close of business on February ~~22, 2021.~~21, 2022.

Our ability to pay future dividends is limited by the terms of the Indenture with U.S. Bank National Association, as trustee and collateral trustee (see Note Q). In addition to the terms of the Indenture, the declaration and payment of any cash dividends in the future are subject to final determination of the Board and will be dependent upon our earnings and financial requirements.

2. Stock Incentive Plans

On September ~~13, 2012,~~ ~~the Company amended the Nathan’s Famous, Inc.~~ ~~2010~~ ~~Stock Incentive Plan (the~~ ~~“2010~~ ~~Plan”) increasing the number of shares available for issuance by 250,000 shares. Shares to be issued under the~~ ~~2010~~ ~~Plan~~ ~~may~~ be made available from authorized but unissued stock, common stock held by the Company in its treasury, or common stock purchased by the Company on the open market or otherwise. The number of shares issuable and the grant, purchase or exercise price of outstanding awards are subject to adjustment in the amount that the Company’s Compensation Committee considers appropriate upon the occurrence of certain events, including stock dividends, stock splits, mergers, consolidations, reorganizations, recapitalizations, or other capital adjustments.
On ~~September~~ 18, 2019, the Company’s shareholders approved the Nathan’s Famous, Inc. 2019 Stock Incentive Plan (the “2019 Plan”). The 2019 Plan became effective as of July 1, 2020 (the "Effective Date"). Following the Effective Date, (i) no additional stock awards were granted under the 2010 Plan and (ii) all outstanding stock awards previously granted under the 2010 Plan remained subject to the terms of the 2010 Plan. All awards granted on or after the Effective Date ~~of the~~ ~~2019~~ ~~Plan shall be~~are subject to the terms of the 2019 Plan.

16
As of the Effective Date, we were able to issue up to: (a) 369,584 shares of common stock under the 2019 Plan which includes: (i) shares that had been authorized but not issued pursuant to the 2010 Plan as of the Effective Date up to a maximum of an additional 208,584 shares and (ii) any shares subject to any outstanding options or restricted stock grants under any plan of the Company that were outstanding as of the Effective Date and that subsequently ~~expire~~expired unexercised, or ~~are~~were otherwise forfeited, up to a maximum of an additional 11,000 shares. As of December ~~27, 2020,~~26, 2021, there were up to ~~208,584~~198,584 shares available to be issued for future option grants or up to ~~184,808~~181,683 shares of restricted stock to be granted under the 2019 Plan.

3. Stock Repurchase Program

During the period from October 2001 through December ~~27, 2020,~~26, 2021, Nathan’s purchased 5,254,081 shares of common stock at a cost of $84,770,000 pursuant to various stock repurchase plans previously authorized by the ~~Board of Directors.~~Board. During the thirty-nine week period ended December ~~27, 2020,~~26, 2021, we ~~repurchased 26,676~~did not repurchase any shares of common ~~stock at a cost of $1,501,000.~~stock.

In 2016, the ~~Company’s~~ Board ~~of Directors~~ authorized increases to the sixth stock repurchase plan for the purchase of up to 1,200,000 shares of its common stock on behalf of the Company. As of December ~~27, 2020,~~26, 2021, Nathan’s had repurchased 1,066,450 shares at a cost of $37,108,000 under the sixth stock repurchase plan. At December ~~27, 2020~~26, 2021 there were 133,550 shares remaining to be repurchased pursuant to the sixth stock repurchase plan. The plan does not have a set expiration date. Purchases under the Company’s stock repurchase program may be made from time to time, depending on market conditions, in open market or ~~privately-negotiated~~privately negotiated transactions, at prices deemed appropriate by management. There is no set time limit on the repurchases.

On March 13, 2020, the ~~Company’s~~ Board ~~of Directors~~ approved a 10b5-1 stock plan (the “10b5-1 Plan”) which expired on August 12, 2020. During the fiscal 2021 period, the Company repurchased in open market transactions 26,676 shares of the Company’s common stock at an average share price of $56.26 for a total cost of $1,501,000 under the 10b5-1 Plan.

17

NOTE Q – LONG-TERM DEBT

Long-term debt consists of the following (in thousands):

December 27,

March 29,

December 26,

March 28,

2020

2020

2021

2021

6.625% Senior Secured Notes due 2025
$ 150,000 $ 150,000 $ 150,000 $ 150,000
Less: unamortized debt issuance costs
(3,342 ) (3,860 ) (2,651 ) (3,169 )
$ 147,349 $ 146,831

Less: Current maturities of long-term debt
(40,000 ) 0
Long-term debt, net
$ 146,658 $ 146,140 $ 107,349 $ 146,831

On November 1, 2017, the Company issued $150,000,000 of 6.625% Senior Secured Notes due 2025 (the "2025 Notes") in a private offering in accordance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). The 2025 Notes were issued pursuant to an indenture dated as of November 1, 2017 by and among the Company, certain of its wholly-owned subsidiaries and U.S. Bank National Association (the “Indenture”). The Company used the net proceeds of the 2025 Notes offering to satisfy and discharge the Indenture relating to the $135,000,000 of 10.000% Senior Secured Notes due 2020 and ~~redeem~~redeemed such notes (the "Redemption"), paid a portion of a special $5.00 per share cash dividend to Nathan's stockholders of record, ~~with~~and used the remaining net proceeds for general corporate purposes, including working capital. The Company also funded the majority of the special dividend of $5.00 per share through its existing cash. The Redemption occurred on November 16, 2017.

The 2025 Notes bear interest at 6.625% per annum, payable semi-annually on May 1^st and November 1^st of each year. The Company made its required semi-annual interest payments of ~~$4,968,750~~$4,968,750 on May 1, ~~2020~~2021 and November 1, ~~2020.~~2021.

The 2025 Notes have no scheduled principal amortization payments prior to its final maturity on November 1, 2025.

~~A summary of certain~~The terms and conditions of the 2025 Notes isare as follows (terms not defined shall have the meanings set forth in the Indenture):

There are no financial maintenance covenants associated with the 2025 Notes. As of December ~~27, 2020,~~26, 2021, Nathan’s was in compliance with all covenants associated with the 2025 Notes.

17
The Indenture contains certain covenants limiting the Company’s ability and the ability of its restricted subsidiaries (as defined in the Indenture) to, subject to certain exceptions and qualifications: (i) incur additional indebtedness; (ii) pay dividends or make other distributions on, redeem or repurchase, capital stock; (iii) make investments or other restricted payments; (iv) create or incur certain liens; (v) incur restrictions on the payment of dividends or other distributions from its restricted subsidiaries; (vi) enter into certain transactions with affiliates; (vii) sell assets; or (viii) effect a consolidation or merger. Certain Restricted Payments which may be made or indebtedness incurred by Nathan’s or its Restricted Subsidiaries may require compliance with the following financial ratios:

Fixed Charge Coverage Ratio: the ratio of the Consolidated Cash Flow to the Fixed Charges for the relevant period, currently set at 2.0 to 1.0 in the Indenture. The Fixed Charge Coverage Ratio applies to determining whether additional Restricted Payments may be made, certain additional debt may be incurred and acquisitions may be made.

Priority Secured Leverage Ratio: the ratio of (a) Consolidated Net Debt outstanding as of such date that is secured by a Priority Lien to (b) Consolidated Cash Flow of Nathan’s for the Test Period then most recently ended, in each case with such pro forma adjustments as are appropriate; currently set at 0.40 to 1.00 in the Indenture.

Secured Leverage Ratio: the ratio of (a) Consolidated Net Debt outstanding as of such date that is secured by a Lien on any property of Nathan’s or any Guarantor to (b) Consolidated Cash Flow of Nathan’s for the Test Period then most recently ended, in each case with such pro forma adjustments as are appropriate. The Secured Leverage Ratio under the Indenture is 3.75 to 1.00 and applies if Nathan’s wants to incur additional debt on the same terms as the 2025 Notes.

The Indenture also contains customary events of default, including, among other things, failure to pay interest, failure to comply with agreements related to the Indenture, failure to pay at maturity or acceleration of other indebtedness, failure to pay certain judgments, and certain events of insolvency or bankruptcy. Generally, if any event of default occurs, the Trustee or the holders of at least 25% in principal amount of the 2025 Notes may declare the 2025 Notes due and payable by providing notice to the Company. In case of default arising from certain events of bankruptcy or insolvency, the 2025 Notes will become immediately due and payable.

The 2025 Notes are general senior secured obligations, are fully and unconditionally guaranteed by substantially all of the Company’s wholly-owned subsidiaries and rank pari passu in right of payment with all of the Company’s existing and future indebtedness that is not subordinated, are senior in right of payment to any of the Company’s existing and future subordinated indebtedness, are structurally subordinated to any existing and future indebtedness and other liabilities of the Company’s subsidiaries that do not guarantee the 2025 Notes, and are effectively junior to all existing and future indebtedness that is secured by assets other than the collateral securing the 2025 Notes.

18

Pursuant to the terms of a collateral trust agreement, the liens securing the 2025 Notes and the guarantees will be contractually subordinated to the liens securing any future credit facility.

The 2025 Notes and the guarantees are the Company and the guarantors’ senior secured obligations and will rank:

●
senior in right of payment to all of the Company and the guarantors’ future subordinated indebtedness;

●
effectively senior to all unsecured senior indebtedness to the extent of the value of the collateral securing the 2025 Notes and the guarantees;

●
pari passu with all of the Company and the guarantors’ other senior indebtedness;

●
effectively junior to any future credit facility to the extent of the value of the collateral securing any future credit facility and the 2025 Notes and the guarantees and certain other assets;

●
effectively junior to any of the Company and the guarantors’ existing and future indebtedness that is secured by assets other than the collateral securing the 2025 Notes and the guarantees to the extent of the value of any such assets; and

●
structurally subordinated to the indebtedness of any of the Company’s current and future subsidiaries that do not guarantee the 2025 Notes.

~~The Company~~ ~~may~~ ~~redeem the~~ ~~2025~~ ~~Notes in whole or in part prior to~~ ~~November 1, 2020,~~ ~~at a redemption price of 100% of the principal amount of the~~ ~~2025~~ ~~Notes redeemed plus the Applicable Premium, plus accrued and unpaid interest. An Applicable Premium is the greater of 1% of the principal amount of the~~ ~~2025~~ ~~Notes; or the excess of the present value at such redemption date of (i) the redemption price of the~~ ~~2025~~ ~~Notes at~~ ~~November 1, 2020~~ ~~plus (ii) all required interest payments due on the~~ ~~2025~~ ~~Notes through~~ ~~November 1, 2020 (~~excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points; over the then outstanding principal amount of the ~~2025~~ ~~Notes.~~
~~Prior to~~ ~~November 1, 2020,~~ ~~if using the net cash proceeds of certain equity offerings, the Company had the option to redeem up to 35% of the aggregate principal amount of the~~ ~~2025~~ ~~Notes at a redemption price equal to~~ ~~106.625%~~ ~~of the principal amount of the~~ ~~2025~~ ~~Notes redeemed, plus accrued and unpaid interest and any additional interest.~~
On or after November 1, 2020, the Company may redeem some or all of the 2025 Notes at a decreasing premium over time, plus accrued and unpaid interest as follows:

YEAR

PERCENTAGE

On or after November 1, 2020 and prior to November 1, 2021
103.313 %
On or after November 1, 2021 and prior to November 1, 2022
101.656 %
On or after November 1, 2022
100.000 %
18
On December 15, 2021, the Company announced its intent to complete the partial redemption, in the principal amount of $40,000,000, of the 2025 Notes, in accordance with the terms and conditions of the Indenture. The redemption price of the redeemed notes was 101.656% of the principal amount, plus accrued and unpaid interest from, and including November 1, 2021 to, but excluding, the redemption date of January 26, 2022. On January 26, 2022, the Company redeemed $40,000,000 of the 2025 Notes by paying cash of $41,288,094, inclusive of the redemption premium and accrued interest, and recognized a loss on early extinguishment of approximately $1,400,000 that primarily reflected the redemption premium and the write-off of a portion of previously recorded debt issuance costs.

In certain circumstances involving a change of control, the Company will be required to make an offer to repurchase all or, at the holder’s option, any part, of each holder’s 2025 Notes pursuant to the offer described below (the “Change of Control Offer”). In the Change of Control Offer, the Company will be required to offer payment in cash equal to 101% of the aggregate principal amount of 2025 Notes repurchased plus accrued and unpaid interest, to the date of purchase.

If the Company sells certain assets and does not use the net proceeds as required, the Company will be required to use such net proceeds to repurchase the 2025 Notes at 100% of the principal amount thereof, plus accrued and unpaid interest and additional interest penalty, if any, to the date of repurchase.

The 2025 Notes may be traded between qualified institutional buyers pursuant to Rule 144A of the Securities Act. We have recorded the 2025 Notes at cost.

~~Effective~~ ~~June 1, 2020,~~ ~~Nathan’s Board of Directors authorized the repurchase of up to $10,000,000 of the~~ ~~2025~~ ~~Notes by the Company (at a price equal to or less than par) from time to time. There is~~ no ~~set time limit on the repurchases.~~
19

NOTE R – LEASES

The Company is party as lessee to various leases for its Company-operated restaurants and lessee/sublessor to one franchised location property, including land and buildings, as well as leases for its corporate office and certain office equipment.

Company as lessee

The components of the net lease cost for the thirteen and thirty-nine week periods ended December ~~27, 2020~~26, 2021 and December ~~29, 2019~~27, 2020 were as follows (in thousands):

Thirteen weeks ended

Thirty-nine weeks ended

Thirteen weeks ended

Thirty-nine weeks ended

December 27,
2020

December 29,
2019

December 27,
2020

December 29,
2019

December 26,
2021

December 27,
2020

December 26,
2021

December 27,
2020

Statement of Earnings

Operating lease cost
$ 370 $ 339 $ 1,181 $ 899 $ 378 $ 370 $ 1,223 $ 1,181
Short term lease cost
0 4 0 14
Variable lease cost
292 280 1,007 1,240 57 292 1,023 1,007
Less: Sublease income, net
(9 ) (22 ) (31 ) (63 ) (41 ) (9 ) (62 ) (31 )

Total net lease cost (a)
$ 653 $ 601 $ 2,157 $ 2,090 $ 394 $ 653 $ 2,184 $ 2,157

(a)
~~The~~Includes $243, net and $502, net for the thirteen week periods ended December 26, 2021 andDecember 27, 2020, respectively, and $1,713, net and $1,696, net for the thirty-nine week periods ended December ~~27, 2020~~26, 2021 and December ~~29, 2019~~27, 2020, ~~include $502,000, net and $1,696,000, net and $470,000, net and $1,679,000, net,~~ respectively, recorded to “Restaurant Operating Expenses” for leases for ~~Company-operated restaurants; $160,000~~Company-owned restaurants.
Includes $192 and ~~$492,000,~~ $160 for the thirteen week periods ended December 26, 2021 and ~~$153,000~~December 27, 2020, respectively, and ~~$474,000,~~ $533 and $492 for the thirty-nine week periods ended December 26, 2021 and December 27, 2020, respectively, recorded to “General and administrative expenses” for leases for corporate offices and ~~equipment;~~equipment.
Also includes $41 and ~~$9,000~~ $9 for the thirteen week periods ended December 26, 2021 and ~~$31,000,~~December 27, 2020, respectively, and ~~$22,000~~$62 and ~~$63,000,~~ $31 for the thirty-nine week periods ended December 26, 2021 and December 27, 2020, respectively, recorded to “Other income, net” for leased properties that are leased to franchisees.

Cash paid for amounts included in the measurement of lease liabilities were as follows (in thousands):

Thirteen weeks ended

Thirty-nine weeks ended

December 27, 2020

December 29, 2019

December 27, 2020

December 29, 2019

Operating cash flows from operating leases
$ 153 $ 60 $ 560 $ 351

Thirteen weeks ended

Thirty-nine weeks ended

December 26,
2021

December 27,
2020

December 26,
2021

December 27,
2020

Operating cash flows from operating leases
$ 187 $ 153 $ 544 $ 560

19
The weighted average remaining lease term and ~~weighted-average~~weighted average discount rate for operating leases as of December ~~27, 2020~~26, 2021 were as follows:

Weighted average remaining lease term (years):

Operating leases
~~7.4~~6.5

Weighted average discount rate:

Operating leases
~~8.877~~8.875 %

Future lease commitments to be paid and received by the Company as of December ~~27, 2020~~26, 2021 were as follows (in thousands):

Payments

Receipts

Payments

Receipts

Operating Leases

Subleases

Net Leases

Operating Leases

Subleases

Net Leases

Fiscal year:

2021 (a)
$ 377 $ 38 $ 339
2022
1,837 247 1,590
2022 (a)
$ 381 $ 38 $ 343
2023
1,849 168 1,681 1,849 168 1,681
2024
1,774 169 1,605 1,774 169 1,605
2025
1,678 169 1,509 1,678 169 1,509
2026
1,712 169 1,543
Thereafter
5,474 352 5,122 3,762 183 3,579
Total lease commitments
$ 12,989 $ 1,143 $ 11,846 $ 11,156 $ 896 $ 10,260
Less: Amount representing interest
3,434 2,628
Present value of lease liabilities (b)
$ 9,555 $ 8,528

(a)
Represents future lease commitments to be paid and received by the Company for the remainder of the ~~2021~~2022 fiscal year. Amount does not include ~~$956,000~~$1,222 of lease commitments paid and received by the Company for the thirty-nine week period ended December ~~27, 2020.~~26, 2021.

(b)
The present value of minimum operating lease payments of ~~$1,833,000~~$1,848 and ~~$7,722,000~~$6,680 are included in “Current portion of operating lease liabilities” and “Long-term operating lease liabilities,” ~~respectively.~~respectively on the Consolidated Balance Sheet.

20

Company as lessor

The components of lease income for the thirteen and thirty-nine week periods ended December ~~27, 2020~~26, 2021 and December ~~29, 2019~~27, 2020 were as follows (in thousands):

Thirteen weeks ended

Thirty-nine weeks ended

December 27, 2020

December 29, 2019

December 27, 2020

December 29, 2019

Operating lease income, net
$ 9 $ 22 $ 31 $ 63

Thirteen weeks ended

Thirty-nine weeks ended

December 26, 2021

December 27, 2020

December 26, 2021

December 27, 2020

Operating lease income, net
$ 41 $ 9 $ 62 $ 31

NOTE S – COMMITMENTS AND CONTINGENCIES

1. Commitments

On February 27, 2017, a wholly-owned subsidiary of the Company executed a Guaranty of Lease (the “Brooklyn Guaranty”) in connection with its re-franchising of a restaurant located in Brooklyn, New York. The Company iswas obligated to make payments under the Brooklyn Guaranty in the event of a default by the tenant/franchisee. The Brooklyn Guaranty ~~has~~had an initial term of 10 years and one 5-year option and iswas limited to 24 months of rent for the first three years of the term. For the remainder of the term, the Brooklyn Guaranty iswas limited to 12 months of rent plus reasonable costs of collection and attorney’s fees.
The Company entered into a termination of lease agreement effective January 15, 2022 (the “Termination Date”). As of ~~December 27, 2020,~~ ~~Nathan’s has recorded a liability of $110,000 in connection with~~consideration for all outstanding amounts due and payable under the Brooklyn Guaranty, the Company agreed to pay a termination fee in the amount of $75,000, of which ~~does~~the Company agreed to pay 50% or $37,500 and the tenant/franchisee agreed to pay 50% or $37,500. The Company paid its share of the termination fee in ~~not~~January 2022. ~~include potential percentage rent, real estate tax increases, attorney’s fees and other costs as these amounts are~~ ~~not~~ ~~reasonably determinable at this time. Nathan’s has received a personal guaranty from the franchisee for all obligations under the Brooklyn Guaranty.~~

2. Contingencies

The Company and its subsidiaries are from time to time involved in ordinary and routine litigation. Management presently believes that the ultimate outcome of these proceedings, individually or in the aggregate, will not have a material adverse effect on the Company’s financial position, cash flows or results of operations. Nevertheless, litigation is subject to inherent uncertainties and unfavorable rulings could occur. An unfavorable ruling could include money damages and, in such event, could result in a material adverse impact on the Company’s results of operations for the period in which the ruling occurs.

NOTE T – SUBSEQUENT EVENTS
The Company evaluated subsequent events through the date the consolidated interim financial statements were issued and filed with the U.S. Securities and Exchange Commission. There were 21no other subsequent events that require recognition or disclosure.
20

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

This Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1933, as amended, that involve risks and uncertainties. You can identify forward-looking statements because they contain words such as “believes”, “expects”, “projects”, “may”, “would”, “should”, “seeks”, “intends”, “plans”, “estimates”, “anticipates” or similar expressions that relate to our strategy, plans or intentions. All statements we make relating to our estimated and projected earnings, margins, costs, expenditures, cash flows, growth rates and financial results or to our expectations regarding future industry trends are forward-looking statements. In addition, we, through our senior management, from time to time make forward-looking public statements concerning our expected future operations and performance and other developments. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may change at any time, and, therefore, our actual results may differ materially from those that we expected. We derive many of our forward-looking statements from our operating budgets and forecasts, which are based upon many detailed assumptions. While we believe that our assumptions are reasonable, we caution that it is very difficult to predict the impact of known factors, and, of course, it is impossible for us to anticipate all factors that could affect our actual results. All forward-looking statements contained in this Form 10-Q are based upon information available to us on the date of this Form 10-Q.

Statements in this Form 10-Q quarterly report may be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. These risks and uncertainties, many of which are not within our control, include but are not limited to: the impact of the COVID-19 pandemic; the status of our licensing and supply agreements, including our licensing revenue and overall profitability being substantially dependent on our agreement with John Morrell & Co., the impact of our debt service and repayment obligations under the 2025 Notes, including the effect on our ability to fund working capital, operations and make new investments; economic, weather (including the affects on the supply of cattle and the impact of weather on sales at our restaurants, particularly during the ~~Summer~~summer months), and change in the price of beef trimmings; our ability to pass on the cost of any price increases in beef and beef trimmings, or labor costs; legislative, business conditions or tariffs; the collectibility of receivables; changes in consumer tastes; the status of our licensing and supply agreements, including our licensing revenue and overall profitability being substantially dependent on our agreement with John Morrell & Co., the impact of our debt service and repayment obligations under the 2025 Notes (as defined herein); the impact of the Tax Cuts and Jobs Act; the continued viability of Coney Island as a destination location for visitors; the ability to continue to attract franchisees; the impact of the ~~new~~ minimum wage legislation in New York State or other changes in labor laws, including court decisions which could render a franchisor as a “joint employee” or the impact of our ~~new~~ union contracts; our ability to attract competent restaurant and managerial personnel; the enforceability of international franchising agreements and the future effects of any food borne illness; such as bovine spongiform encephalopathy, BSE or e-coli; as well as those risks discussed from time to time in this Form 10-Q and our Form 10-K annual report for the year ended March ~~29, 2020,~~28, 2021, and in other documents we file with the U.S. Securities and Exchange Commission. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in the forward-looking statements. We generally identify forward-looking statements with the words “believe,” “intend,” “plan,” “expect,” “anticipate,” “estimate,” “will,” “should” and similar expressions. Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this Form 10-Q.

Introduction

As used in this Report, the terms “we”, “us”, “our”, “Nathan’s” or the “Company” mean Nathan’s Famous, Inc. and its subsidiaries (unless the context indicates a different meaning).

We are engaged primarily in the marketing of the “Nathan’s Famous” brand and the sale of products bearing the “Nathan’s Famous” trademarks through several different channels of distribution. Historically, our business has been the operation and franchising of quick-service restaurants featuring Nathan’s World Famous Beef Hot Dogs, crinkle-cut French-fried potatoes, and a variety of other menu offerings. Our Company-owned and franchised units operate under the name “Nathan’s Famous,” the name first used at our original Coney Island restaurant opened in 1916. Nathan’s product licensing program sells packaged hot dogs and other meat products to retail customers through supermarkets or grocery-type retailers for off-site consumption. Our Branded Product Program enables foodservice retailers and others to sell some of Nathan’s proprietary products outside of the realm of a traditional franchise relationship. In conjunction with this program, purchasers of Nathan’s products are granted a limited use of the Nathan’s Famous trademark with respect to the sale of the purchased products, including Nathan’s World Famous Beef Hot Dogs, certain other proprietary food items and paper goods. Our Branded Menu Program is a limited franchise program, under which foodservice operators may sell a greater variety of Nathan’s Famous menu items than under the Branded Product Program.

2221

Our revenues are generated primarily from selling products under Nathan’s Branded Product Program, operating Company-owned restaurants, licensing agreements for the sale of Nathan’s products within supermarkets and club stores, the sale of Nathan’s products directly to other foodservice operators and the manufacture of certain proprietary spices by third parties and the royalties, fees and other sums we can earn from franchising the Nathan’s restaurant concept (including the Branded Menu ~~Program)~~Program and virtual or “ghost” kitchens).

At December 26, 2021, our restaurant system, excluding virtual or “ghost” kitchens, consisted of 242 Nathan’s franchised units, including 120 Branded Menu Program units, and four Company-owned units (including one seasonal unit), located in 18states, and 14 foreign countries. At December 27, 2020, our restaurant system, excluding virtual or “ghost” kitchens, consisted of 215 Nathan’s franchised units, including 93 Branded Menu Program units, and four Company-owned units (including one seasonal unit), located in 19 states, and 9 foreign countries. At December 29, 2019, our restaurant system consisted of 226 Nathan’s franchised units, including 96 Branded Menu units, and four Company-owned units (including one seasonal unit), located in 22 states, and 10 foreign countries.

~~Over the past several years, our~~Our strategic emphasis ~~has been to increase~~is focused on increasing the number of distribution points for our products across all of our business platforms, including our Licensing Program for distribution of Nathan’s Famous branded consumer packaged goods, our Branded Products Program for distribution of Nathan’s Famous branded bulk products to the foodservice industry, and our namesake restaurant system comprised of both Company-owned and franchised ~~units.~~units, including virtual or “ghost” kitchens. The primary drivers of our ~~recent~~ growth have been our Licensing and Branded Product Programs which ~~are now~~have been the largest contributors to the Company’s ~~revenues and~~ profits.

We ~~remain committed to these parts of our business and we~~ continue to reinvigorate our restaurant system. The operating plan we have adopted in this regard is focused on surrounding our core items, Nathan’s World Famous ~~beef hot dogs~~Beef Hot Dogs and crinkle-cut French fried potatoes, with other much higher quality menu items, including fresh angus hamburgers and hand-dipped chicken sandwiches, developed to deliver best-in-class customer experience and greater customer frequency. Menu development activities have been combined with concept positioning efforts, operational improvements and more effective digital and social marketing campaigns. The goal is to improve the performance of the existing restaurant system and to grow it through franchising efforts. Additionally, we have introduced ghost kitchens whereby well-known restaurants have the ability to market and to sell our products. At December 27, 2020, we have expanded into 75 ghost kitchens,efforts, including ~~37 domestically and 38 internationally.~~virtual or “ghost” kitchens. While we do not expect to significantly increase the number of Company-owned ~~units,~~restaurants, we may opportunistically and strategically invest in a small number of new units as showcase locations for prospective franchisees and master developers as we seek to grow our franchise system. We continue to seek opportunities to drive sales in a variety of ways as we ~~adopt~~adapt to the ever-changing consumer and environment. Our virtual or “ghost” kitchens should position us to further expand our delivery options and should allow us to reach even more of our customers.

As described in our Annual Report on Form 10-K for the year ended March ~~29, 2020,~~28, 2021, our future results could be materially impacted by many developments including the impact of the COVID-19 pandemic on our business, our dependence on John Morrell & Co. as our principal supplier and the dependence of our licensing revenue and overall profitability on our agreement with John Morrell & Co. In addition, our future operating results could be impacted by supply constraints on beef or by increased costs of beef, beef trimmings and other commodities compared to earlier periods in addition to the potential impact that any future tariffs may have on the business.

On November 1, 2017, the Company issued $150,000,000 of 6.625% Senior Secured Notes due 2025 (the “2025 Notes”) and used the majority of the proceeds of this offering to redeem ~~(the “Redemption”)~~ the Company’s 10.000% Senior Secured Notes due 2020, ~~(the “2020 Notes”),~~ paid a portion of the special $5.00 cash dividend and used any remaining proceeds for general corporate purposes, including working capital. ~~Our future results could also be impacted by our obligations under~~On January 26, 2022, the Company redeemed $40,000,000 in aggregate principal amount of its 2025 Notes. As a result of the ~~issuance of~~partial redemption, the ~~2025 Notes, Nathan’s incurs interest expense of $9,937,500 per annum, which reduced our~~Company expects to reduce its future cash interest ~~expense~~exposure by ~~$3,562,500~~$2,650,000 per ~~annum as compared to our annual interest requirements under the 2020 Notes. Nathan’s expects to incur annual amortization of debt issuance costs of approximately $691,000 through November 1, 2025.~~annum.

As described below, we are also including information relating to EBITDA and Adjusted EBITDA, which are non-GAAP financial measures, in ~~this~~the Form 10-Q quarterly report. See “Reconciliation of GAAP and Non-GAAP Measures.”

Impact of COVID-19 pandemic on our business

~~The~~In March 2020, the World Health Organization declared the novel strain of coronavirus (“COVID-19”) a global pandemic. During the first half of the fiscal 2022 period, the number of COVID-19 cases continued to stabilize with approved vaccines being more widely distributed and administered and, as a result, more regions continued to loosen restrictions, adhering to state and local guidelines.
Although the Company experienced higher revenue in the first nine months of fiscal 2022 compared to the first nine months of fiscal 2021, there continues to be uncertainty around the COVID-19 pandemic as the Omicron variant of COVID-19, which appears to be the most transmissible variant to date, has ~~had an impact on the Company’s business, financial condition, cash flows~~caused a recent increase in COVID-19 cases globally and ~~results of operations for the thirty-nine weeks ended December 27, 2020 (“fiscal 2021 period”)~~has also led to evolving recommendations and ~~continues into the fourth quarter of fiscal 2021. Governmental~~ restrictions by federal, state and ~~public perceptions of the risks associated with COVID-19 have caused consumers~~local government officials. Our ability to ~~avoid or limit nonessential travel, gatherings in public places~~attract and ~~other social interactions, which has adversely affected, and could continue to adversely affect, our business. The COVID-19 pandemic, has and may continue to impact customer traffic~~retain employees at our Company-owned restaurants ~~and franchised restaurants,~~remains challenged, as ~~well as sales to our Branded Product Program customers.~~
~~Three of our four Company-owned restaurants remained open throughout~~ the ~~fiscal 2021 period and continued to offer food primarily through take-out and delivery. Our location on the Coney Island Boardwalk opened on May 15, 2020~~job market for ~~the summer months and closed for the season on September 13, 2020. Beginning~~these employees has become more competitive. The challenges in the ~~second quarter fiscal 2021,~~labor market have also affected some suppliers, resulting in some intermittent product shortages. The Company cannot predict if new variants of COVID-19, in addition to the ~~Company re-opened~~Delta variant and the Omicron variant, will be discovered or if there will be another surge, what additional restrictions may be enacted, to what extent it can maintain off-premises sales volumes, whether it can maintain sufficient staffing levels, or if individuals will be comfortable returning to its dining rooms ~~at our Company-owned restaurants located in Oceanside, New York and Yonkers, New York, which currently remain open. Although, these dining rooms are open, they are operating at reduced capacity,~~or venues such as ~~stipulated under government orders, as well as due to~~professional sports arenas, amusement parks, shopping malls or movie theaters during or following social distancing protocols, ~~that are also mandated by~~and what long-lasting effects the ~~same government orders. Even without government restrictions, customers~~COVID-19 pandemic may ~~continue to choose to reduce or to eliminate in-restaurant dining because of~~have on the ~~rise in the number of COVID-19 cases.~~Company as a whole.

2322

~~A majority~~The full impact of ~~our franchised locations closed temporarily during~~ the ~~fiscal 2021 period due~~COVID-19 pandemic continues to their locations being in venues that were closed (such as movie theaters) or venues operating at reduced traffic levels (such as airports, highway travel plazas and shopping malls). Such closures and disruptions have materially impacted franchise fees and royalties during the fiscal 2021 period, as compared to the same period last year. We are principally focused on the well-being and safety of our guests, franchisees, restaurant associates and all other employees. Approximately 60% of our franchised locations have reopenedevolve as of the date of this report.
The ~~sales~~duration of the disruption on global, national, and ~~profits from our Branded Product Program have been adversely impacted as many~~local economies cannot be reasonably estimated at this time due to the ongoing effects of our customers operate in venues that are currently closed (such as movie theaters) or venues operating at reduced traffic levels, such as professional sports arenas, amusement parks and shopping malls.
~~To help mitigate~~this situation. Management is continually evaluating the impact of ~~the COVID-19 pandemic, we have taken the following decisive actions during the fiscal 2021 period which continue into the fourth quarter of fiscal 2021:~~
●
~~Reduced payroll costs, through salary reductions and the transition of certain Corporate personnel from a furloughed status to a permanent layoff~~
●
~~Reduced discretionary operating expenses, including marketing and travel~~
●
~~Postponed non-essential capital spending~~
●
~~Launched curbside delivery at three of our four Company-owned restaurants~~
●
~~Introduced “ghost kitchens” whereby well-known restaurants have the ability to market our products for pick-up or in the form of meal-kits for at home preparation~~
●
~~Implemented enhanced health and safety protocols across the Company~~
~~While there is significant uncertainty as to the duration and extent of the impact of the COVID-19 pandemic, we expect the pandemic will continue to have a negative impact~~this global crisis on our revenue and net income for the remainder of fiscal 2021. Even as government restrictions are lifted and vaccines begin to be distributed, the ongoing economic impacts and health concerns associated with the pandemic may continue to affect consumer behavior, spending levels, and could result in reduced restaurant traffic and consumer spending trends that may adversely impact ourits financial condition, liquidity, operations, and ~~results of operations.~~workforce and will take additional actions as necessary.

Critical Accounting Policies and Estimates

As discussed in our Form 10-K for the fiscal year ended March ~~29, 2020,~~28, 2021, the discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in those consolidated financial statements. These judgments can be subjective and complex, and consequently, actual results could differ from those estimates. Our most critical accounting policies and estimates relate to revenue recognition; leases; impairment of goodwill and other intangible assets; impairment of long-lived assets; share-based compensation and income taxes (including uncertain tax positions). Except for the adoption in Note B – ~~simplifying~~ASU 2019-12, “Income Taxes (Topic 740):Simplifying the ~~testing~~Accounting for ~~goodwill impairment,~~Income Taxes,” there have been no other significant changes to the Company’s accounting policies subsequent to March ~~29, 2020.~~28, 2021.

Adoption of New Accounting Standard

Please refer to Note B of the preceding consolidated interim financial statements for our discussion of the Adoption of the New Accounting Standard.

New Accounting Standards Not Yet Adopted

Please refer to Note C of the preceding consolidated interim financial statements for our discussion of New Accounting ~~Standards~~Standard Not Yet Adopted.

EBITDA and Adjusted EBITDA

The Company believes that EBITDA and Adjusted EBITDA, which are non-GAAP financial measures, are useful to investors to assist in assessing and understanding the Company's operating performance and underlying trends in the Company's business because EBITDA and Adjusted EBITDA are (i) among the measures used by management in evaluating performance and (ii) are frequently used by securities analysts, investors and other interested parties as a common performance measure.
24

Reconciliation of GAAP and Non-GAAP Measures

The following is provided to supplement certain Non-GAAP financial measures.

In addition to disclosing results that are determined in accordance with Generally Accepted Accounting Principles in the United States of America ("US GAAP"), the Company has provided EBITDA, a non-GAAP financial measure, which is defined as net income excluding (i) interest expense; (ii) provision for income taxes and (iii) depreciation and amortization expense. The Company has also provided Adjusted EBITDA, a non-GAAP financial measure, which is defined as EBITDA, excluding share-based compensation that the Company believes will impact the comparability of its results of operations.

EBITDA and Adjusted EBITDA are not recognized terms under US GAAP and should not be viewed as alternatives to net income or other measures of financial performance or liquidity in conformity with US GAAP. Additionally, our definitions of EBITDA and Adjusted EBITDA may differ from other companies. Analysis of results and outlook on a non-US GAAP basis should be used as a complement to, and in conjunction with, data presented in accordance with US GAAP.

The following is a reconciliation of net income to EBITDA and Adjusted EBITDA (in thousands):

Thirteen weeks ended Thirty-nine weeks ended Thirteen weeks ended Thirty-nine weeks ended

December 27, 2020

December 29, 2019

December 27, 2020

December 29, 2019

December 26,
2021

December 27,
2020

December 26,
2021

December 27,
2020

(unaudited)

(unaudited)

(unaudited)

(unaudited)

Net income
$ 1,359 $ 1,213 $ 9,014 $ 10,240 $ 2,130 $ 1,359 $ 11,438 $ 9,014
Interest expense
2,650 2,650 7,951 7,951 2,650 2,650 7,951 7,951
Provision for income taxes
492 360 3,456 3,621 860 492 4,477 3,456
Depreciation and amortization
288 294 900 941 259 288 807 900
EBITDA
4,789 4,517 21,321 22,753 5,899 4,789 24,673 21,321

Share-based compensation
29 29 87 87 8 29 66 87
Adjusted EBITDA
$ 4,818 $ 4,546 $ 21,408 $ 22,840 $ 5,907 $ 4,818 $ 24,739 $ 21,408

Results of Operations

Thirteen weeks ended December ~~27, 2020~~26, 2021 compared to thirteen weeks ended December ~~29, 2019~~27, 2020

Revenues

Total ~~sales decreased~~revenues increased by ~~26%~~44% to ~~$11,322,000~~ $25,913,000 for the thirteen weeks ended December 26, 2021 (“third quarter fiscal 2022”) as compared to $18,030,000for the thirteen weeks ended December 27, 2020 (“third quarter fiscal 2021”) as ~~compared~~we continued to ~~$15,356,000~~lap the significant impact of COVID-19 on our results beginning in March 2020.
Total sales increased by 65% to $18,637,000 for the ~~thirteen weeks ended December 29, 2019 (“~~third quarter fiscal ~~2020”).~~2022 as compared to $11,322,000 for the third quarter fiscal 2021. Foodservice sales from the Branded Product Program ~~decreased~~increased by ~~27%~~69% to $16,901,000 for the third quarter fiscal 2022 as compared to sales of $10,003,000 for the third quarter fiscal ~~2021 as compared to sales of $13,694,000 in the third quarter fiscal 2020.~~2021. The sales from our Branded Product Program have ~~been negatively impacted by~~increased as certain government mandated restrictions associated with the COVID-19 pandemic ~~as many~~have eased with approved vaccines being more widely distributed and administered. Most of our Branded Product Program customers ~~operate in venues that are currently closed, such as movie theaters, or venues operating at reduced capacity,~~have reopened adhering to state and local guidelines, such as professional sports arenas, amusement parks, shopping malls and ~~shopping malls. Our average selling prices decreased~~movie theaters. During the third quarter fiscal 2022, the total pounds of hot dogs sold in the Branded Product Program increased by approximately ~~2.5%~~40% as compared to the third quarter fiscal ~~2020. During the third quarter fiscal 2021, the volume of business decreased~~2021. Our average selling prices increased by approximately ~~26%~~19% as compared to the third quarter fiscal ~~2020.~~2021.

Total Company-owned restaurant sales ~~decreased~~increased by ~~21%~~32% to $1,736,000 during the third quarter fiscal 2022 as compared to $1,319,000 during the third quarter fiscal ~~2021~~2021. The increase was primarily due to an increase in our average check and an increase in traffic at our Coney Island locations due to the easing of certain government mandated restrictions as a result of the public health measures taken to reduce exposure to the COVID-19 virus compared to ~~$1,662,000 during~~ the third quarter fiscal ~~2020.~~2021. The ~~decrease~~higher average check was ~~primarily due to a decline~~driven by an increase in ~~customer traffic related to~~menu prices and the ~~impact~~mix of the COVID-19 pandemic. Additionally, as stipulated under government orders, the dining rooms at our Company-owned restaurants are operating at reduced capacity and maintaining social distancing protocols under these same government orders.items sold.

License royalties ~~increased~~decreased by ~~34%~~0.3% to $5,878,000 in the third quarter fiscal 2022 as compared to $5,898,000 in the third quarter fiscal ~~2021 as compared to $4,412,000 in the third quarter fiscal 2020.~~2021. Total royalties earned on sales of hot dogs from our license agreement with John Morrell & Co. at retail and foodservice, substantially from sales of hot dogs to ~~Sam’s Club and~~ WalMart, ~~increased 33%~~decreased 0.8% to ~~$5,284,000~~$5,239,000 for the third quarter fiscal ~~2021~~2022 as compared to ~~$3,979,000~~$5,284,000 in the third quarter fiscal ~~2020. As consumers shelter at home, our licensing business continues to show strong consumer demand.~~2021. The ~~increase~~decrease is due to ~~a 40% increase~~an 11% decrease in retail volume during the third quarter fiscal ~~2021~~2022 period ~~and~~which was offset by a 3%14% increasein average net selling price as compared to the third quarter fiscal ~~2020 period. Additionally, the~~2021. The foodservice business earned lower royalties of ~~$52,000~~$8,000 as compared to the third quarter fiscal ~~2020 due to a shift in the Sam’s Club business.~~2021. Royalties earned from all other licensing agreements for the manufacture and sale of Nathan’s products increased by ~~$181,000~~$24,000 during the third quarter fiscal ~~2021~~2022 as compared to the third quarter fiscal ~~2020~~2021 primarily due to additional royalties earned on sales of ~~French fries,~~proprietary spices, cocktail franks and mozzarella ~~sticks.~~sticks, offset in part, by lower royalties earned on french fries.

Franchise fees and royalties were $919,000 in the third quarter fiscal 2022 as compared to $420,000 in the third quarter fiscal ~~2021 as compared~~2021. The increase was primarily due to ~~$1,035,000~~the continued momentum associated with the recovery from the COVID-19 pandemic. Total royalties were $744,000 in the third quarter fiscal ~~2020. Total royalties were~~2022 as compared to $361,000 in the third quarter fiscal ~~2021 as compared to $802,000 in the third quarter fiscal 2020.~~2021. Royalties earned under the Branded Menu program were $101,000 in the third quarter fiscal 2022 as compared to $65,000 in the third quarter fiscal ~~2021 as compared to $148,000 in the third quarter fiscal 2020.~~2021. Royalties earned under the Branded Menu Program are not based upon a percentage of restaurant sales but are based upon product purchases. Ghost kitchen royalties were $88,000 in the third quarter fiscal 2022. Traditional franchise royalties were $555,000 in the third quarter fiscal 2022 as compared to $296,000 in the third quarter fiscal ~~2021 as compared~~ 2021. Franchise restaurant sales increasedto ~~$654,000~~$12,280,000 in the third quarter fiscal ~~2020. Franchise restaurant sales declined~~2022 as compared to $6,178,000 in the third quarter fiscal 2021 ~~as compared~~primarily due to ~~$14,587,000 in~~the reopening of a majority of our franchised locations. Approximately 88% of our franchise system was open at the end of the third quarter fiscal ~~2020 primarily due~~2022 as compared to ~~temporary closings, as well as venues operating~~62% at ~~significantly reduced traffic as a result~~the end of the ~~COVID-19 pandemic.~~third quarter fiscal 2021. Comparable domestic franchise sales (consisting of 5148 Nathan’s outlets, excluding sales under the Branded Menu Program) were ~~$4,778,000~~$8,884,000 in the third quarter fiscal ~~2021~~2022 as compared to ~~$9,144,000~~$4,912,000 in the third quarter fiscal ~~2020.~~2021.
24

At December ~~27, 2020, 215~~26, 2021, 242 franchised outlets, including domestic, international and Branded Menu Program outlets were operating as compared to ~~226~~215 domestic and international franchised or Branded Menu Program franchise outlets at December ~~29, 2019.~~27, 2020. Total franchise fee income was $175,000 in the third quarter fiscal 2022 as compared to $59,000 in the third quarter fiscal ~~2021 compared to $233,000~~2021. Domestic franchise fee income was $36,000 in the third quarter fiscal ~~2020. Domestic franchise fee income was~~2022 as compared to $34,000 in the third quarter fiscal ~~2021 compared to $35,000~~2021. International franchise fee income was $63,000 in the third quarter fiscal ~~2020. International franchise fee income was~~2022 as compared to $25,000 during the third quarter fiscal 2021.
We recognized $76,000 in forfeited fees in the third quarter fiscal ~~2021 compared to $38,000 during the third quarter fiscal 2020.~~
2022. We did not recognize any forfeited fees in the third quarter fiscal 2021. We recognized $160,000 of forfeited fees in the third quarter fiscal 2020 primarily from the termination of our Master Franchise Agreement for Turkey and the closing of various domestic and international franchise locations. During the third quarter fiscal ~~2021, one new~~ 2022, twelvefranchised ~~outlet opened.~~outlets opened, as well as fourteen Branded Menu Program outlets. Additionally, ~~40 new~~39 ghost kitchens opened. During the third quarter fiscal ~~2020, three~~2021, one franchised ~~outlets~~outlet opened.

Advertising fund revenue, after eliminating Company contributions, was $479,000 during the third quarter fiscal 2022 and $390,000 during the third quarter fiscal 2021 ~~and $573,000 during the third quarter fiscal 2020~~ period.

Costs and Expenses

Overall, our cost of sales ~~decreased~~increased by ~~27%~~79% to $16,040,000 in the third quarter fiscal 2022 as compared to $8,937,000 in the third quarter fiscal ~~2021 as compared to $12,262,000 in the third quarter fiscal 2020.~~2021. Our gross profit (representing the difference between sales and cost of sales) ~~decreased~~increased to $2,597,000 or 14% of sales during the third quarter fiscal 2022 as compared to $2,385,000 or 21% of sales during the third quarter fiscal 2021 as compared to $3,094,000 or 20% of sales during the third quarter fiscal 2020. The increase in margin was primarily due to the lower cost of beef in the Branded Product Program, partially offset by higher labor costs associated with higher minimum hourly rates of pay at two of our Company-owned restaurants.2021.

Cost of sales in the Branded Product Program ~~decreased~~increased by ~~approximately $3,173,000 during~~85% to $14,724,000 in the third quarter fiscal 2022 as compared to $7,948,000 in the third quarter fiscal 2021, ~~as compared to the third quarter fiscal 2020,~~ primarily due to the ~~4.6% decrease~~40% increase in the volume of product sold as discussed above, as well as a 31% increase in the average cost per pound of our hot dogs. Beginning in July 2021, the cost of hot dogs has increased significantly due to higher costs for beef and beef trimmings, labor, packaging and transportation, as well as supply chain challenges associated with increased consumer demand as a result of the ~~26% decreasein the volume of product sold due to~~continued recovery from the COVID-19 ~~pandemic as discussed above.~~pandemic. We did not make any purchase commitments of beef during the third quarter fiscal ~~2021~~2022 or the third quarter fiscal ~~2020.~~2021. If the cost of beef and beef trimmings increases and we are unable to pass on these higher costs through price increases or otherwise reduce any increase in our costs through the use of purchase commitments, our margins will be adversely impacted.

~~Beginning in May 2020, the cost of hot dogs increased significantly due primarily to the effects of the COVID-19 pandemic on the meat processing industry.~~
With respect to Company-owned restaurants, our cost of sales during the third quarter fiscal ~~2021~~2022 was ~~$989,000~~$1,316,000 or ~~75%~~76% of restaurant sales, as compared to ~~$1,141,000~~$989,000 or ~~69%~~75% of restaurant sales in the third quarter fiscal ~~2020. We experienced~~2021. The increase in cost of sales, during the third quarter of fiscal 2022 was primarily due to the 32% increase in sales as discussed above, in addition to higher commodity costs and restaurant labor costs. The availability of labor remains a challenge at our Company-owned restaurants and it has required us to remain flexible as it relates to staffing levels and costs. Our labor costs ~~associated with higher minimum hourly rates of pay at two of our Company-owned restaurants.We expect that our future labor costs will continue to be~~were also impacted by the ~~remaining multi-year~~additional increase in minimum wage requirements in New York State ~~as well as other new labor regulations and our~~which commenced on July 1, 2021. Our food costs may be impacted by increases in commodity ~~costs.~~costs, as well as the mix of products that we sell.

Restaurant operating expenses were $547,000 in the third quarter fiscal 2022 as compared to $759,000 in the third quarter fiscal ~~2021 as compared to $764,000 in the third quarter fiscal 2020.~~2021. We incurred lower ~~marketing~~occupancy expenses of ~~$17,000, lower utility expenses of $11,000, and lower repairs and maintenance expenses of $16,000~~$286,000, which were offset, in part, by higher utility expenses of $22,000, higher insurance expenses of $26,000 and higher delivery charges associated with offsite consumption.

Depreciation and amortization, ~~were~~which primarily consists of the depreciation of fixed assets, including leasehold improvements and equipment, was $259,000 in the third quarter fiscal 2022 as compared to $288,000 in the third quarter fiscal ~~2021 as compared to $294,000 in the third quarter fiscal 2020.~~2021.

General and administrative expenses decreased by ~~$367,000~~$278,000 or ~~10%~~8% to $2,975,000 in the third quarter fiscal 2022 as compared to $3,253,000 in the third quarter fiscal ~~2021 as compared to $3,620,000 in the third quarter fiscal 2020.~~2021. The Company continued to reduce expenses in response to the impact of the COVID-19 pandemic. These activities included transitioning certain Corporate personnel from a furloughed status to a permanent layoff. The Company incurred severance charges of approximately $343,000 which are reflecteddecrease in general and administrative expenses was primarily attributable to lower corporate payroll expenses of $428,000, which were offset, in ~~our Consolidated Statements~~part, by higher insurance costs of ~~Earnings for the third quarter fiscal 2021. This was offset by a lower incentive compensation accrual, reduced tradeshow expenses in light of the COVID-19 pandemic~~$76,000 and ~~reductions in other discretionary expenses including~~higher marketing and ~~travel.~~trade show related expenses of $108,000.
26

Advertising fund expense, after eliminating Company contributions, was ~~$390,000~~$479,000 during the third quarter fiscal ~~2021,~~2022, as compared to ~~$573,000~~$390,000 in the third quarter fiscal ~~2020.~~2021.

Other Items

Interest expense of $2,650,000 in both the third quarter fiscal ~~2021~~2022 and the third quarter fiscal ~~2020~~2021 represented accrued interest of $2,477,000 on the 2025 Notes and amortization of debt issuance costs of $173,000.

Interest income was ~~$89,000~~$24,000 for the third quarter fiscal ~~2021~~2022 as compared to $~~338,000~~89,000 in the third quarter fiscal ~~2020.~~2021.

Other income, ~~which~~ primarily relates to a sublease of a franchised restaurant ~~was $9,000~~offset, in part, by a termination fee associated with the ~~third quarter fiscal 2021, as compared to $22,000 in the third quarter fiscal 2020.~~Brooklyn Guaranty.
25

Provision for Income Taxes

The income tax provision for the third quarter fiscal ~~2021~~2022 and third quarter fiscal ~~2020~~2021 reflect effective tax rates of ~~26.6%~~28.8% and ~~22.9%~~26.6%, respectively.
During the third quarter fiscal 2022, the Company’s effective tax rate was unfavorably affected by 0.2% due to its return to provision adjustment in connection with the filing of its March 2021 tax returns. During the third quarter fiscal 2021, the Company’s effective tax rate was favorably affected by 1.0% due to its return to provision adjustment ~~of approximately $18,000~~ in connection with the filing of its March 2020 tax returns. During the third quarter fiscal 2020, the Company’s effective tax rate was favorably affected by 3.3% due to its return to provision adjustment of approximately $52,000 in connection with the filing of its March 2019 tax returns. Nathan’s effective tax rates without these adjustments would have been 27.6% for the third quarter fiscal 2021 and 26.2% for the third quarter fiscal 2020.

The amount of unrecognized tax benefits at December ~~27, 2020~~26, 2021 was ~~$336,000~~$445,000 all of which would impact Nathan’s effective tax rate, if recognized. As of December ~~27, 2020,~~26, 2021, Nathan’s had ~~$292,000~~$307,000 of accrued interest and penalties in connection with unrecognized tax benefits.

Nathan’s estimates that its unrecognized tax ~~benefit~~benefits excluding accrued interest and penalties could be further reduced by up to ~~$16,000~~$19,000 during the fiscal year ending March ~~28, 2021.~~27, 2022.

Results of Operations

Thirty-nine weeks ended December ~~27, 2020~~26, 2021 compared to thirty-nine weeks ended December ~~29, 2019~~27, 2020

Revenues

Total ~~sales decreased~~revenues increased by ~~47% or $27,002,000~~57% to ~~$30,697,000~~$90,110,000 for the thirty-nine weeks ended December 26, 2021 (“fiscal 2022 period”) as compared to $57,555,000 for the thirty-nine weeks ended December 27, 2020 (“fiscal 2021 period”) as we continued to lap the significant impact of COVID-19 on our results beginning in March 2020.
Total sales increased by 100% to $61,462,000 for the fiscal 2022 period as compared to ~~$57,699,000~~$30,697,000 for the ~~thirty-nine weeks ended December 29, 2019 (“~~fiscal ~~2020 period”).~~2021 period. Foodservice sales from the Branded Product Program ~~decreased~~increased by ~~47%~~113% to ~~$24,450,000~~$51,960,000 for the fiscal ~~2021~~2022 period as compared to sales of ~~$45,989,000~~$24,450,000 for the fiscal ~~2020~~2021 period. The sales from our Branded Product Program have ~~been negatively impacted by~~increased as certain government mandated restrictions associated with the COVID-19 pandemic ~~as many~~have eased with approved vaccines being more widely distributed and administered. Most of our Branded Product Program customers ~~operate in venues that are currently closed, such as movie theaters, or venues operating at reduced capacity,~~have reopened adhering to state and local guidelines, such as professional sports arenas, amusement parks, shopping malls and ~~shopping malls.~~movie theaters. During the fiscal 2022 period, the total pounds of hot dogs sold in the Branded Product Program increased by approximately 98% as compared to the fiscal 2021 period. Our average selling prices increased by approximately ~~2.9%~~7% as compared to the fiscal ~~2020 period. During the fiscal~~ 2021 ~~period, the volume of business decreased by approximately 48% as compared to the fiscal 2020~~ period.

Total Company-owned restaurant sales ~~decreased~~increased by ~~47%~~52% to $9,502,000 during the fiscal 2022 period as compared to $6,247,000 during the fiscal 2021 ~~period as compared to $11,710,000 during the fiscal 2020~~ period. The ~~decrease~~increase was primarily due to ~~a decline~~an increase in ~~customer~~our average check and an increase in traffic ~~related~~at our Coney Island locations due to the ~~impact~~easing of certain government mandated restrictions as a result of the public health measures taken to reduce exposure to the COVID-19 ~~pandemic during~~virus compared to the fiscal 2021 period. ~~Additionally, as stipulated under government orders,~~The higher average check was driven by an increase in menu prices and the ~~dining rooms at our Company-owned restaurants are operating at reduced capacity and maintaining social distancing protocols under these same government orders.~~mix of items sold.

License royalties ~~increased~~decreased by ~~33%~~2% to $24,218,000 in the fiscal 2022 period as compared to $24,689,000 in the fiscal 2021 ~~period as compared to $18,559,000 in the fiscal 2020~~ period. Total royalties earned on sales of hot dogs from our license agreement with John Morrell & Co. at retail and foodservice, substantially from sales of hot dogs to ~~Sam’s Club and~~ WalMart, ~~increased 33%~~decreased 3% to ~~$22,743,000~~$22,161,000 for the ~~2021~~2022 fiscal period as compared to ~~$17,071,000~~$22,743,000 in the fiscal ~~2020~~2021 period. ~~As consumers shelter at home, our licensing business continues to show strong consumer demand.~~ The ~~increase~~decrease is due to a ~~21% increase~~1.4% decrease in retail volume during the fiscal ~~2021~~2022 period and a ~~15% increase~~0.6% decrease in average net selling price as compared to the fiscal ~~2020~~2021 period. ~~Additionally, the~~The foodservice business earned ~~lower~~higher royalties of ~~$401,000~~$84,000 as compared to the fiscal ~~2020 period due to a shift in the Sam’s Club business.~~2021 period. Royalties earned from all other licensing agreements for the manufacture and sale of Nathan’s products increased by ~~$457,000~~$111,000 during the fiscal ~~2021~~2022 period as compared to the fiscal ~~2020~~2021 period primarily due to additional royalties earned on sales of ~~French fries, pickles,~~proprietary spices, cocktail franks and mozzarella ~~sticks.~~sticks, offset, in part, by lower royalties earned on french fries.

Franchise fees and royalties were $2,993,000 in the fiscal 2022 period as compared to $1,087,000 in the fiscal 2021 period. The increase was primarily due to the continued momentum associated with the recovery from the COVID-19 pandemic. Total royalties were $2,581,000 in the fiscal 2022 period as compared to ~~$3,610,000 in the fiscal 2020 period. Total royalties were~~ $880,000 in the fiscal 2021 ~~period as compared to $2,829,000 in the fiscal 2020~~ period. Royalties earned under the Branded Menu program were $430,000 in the fiscal 2022 period as compared to $152,000 in the fiscal 2021 ~~period as compared to $577,000 in the fiscal 2020~~ period. Royalties earned under the Branded Menu Program are not based upon a percentage of restaurant sales but are based upon product purchases. Ghost kitchen royalties were $258,000 in the fiscal 2022 period. Traditional franchise royalties were $1,893,000 in the fiscal 2022 period as compared to $728,000 in the fiscal 2021 ~~period as compared to $2,252,000 in the fiscal 2020~~ period. Franchise restaurant sales ~~declined~~increased to $40,910,000 in the fiscal 2022 period as compared to $15,366,000 in the fiscal 2021 period ~~as compared to $50,425,000 in the fiscal 2020 period~~ primarily due to ~~temporary closures, as well as venues operating at significantly reduced traffic as~~the reopening of a ~~result~~majority of ~~the COVID-19 pandemic.~~our franchised locations. Comparable domestic franchise sales (consisting of 5352 Nathan’s outlets, excluding sales under the Branded Menu Program) were ~~$12,003,000~~$30,780,000 in the fiscal 2022 period as compared to $12,213,000 in the fiscal 2021 ~~period as compared to $31,917,000 in the fiscal 2020~~ period.

At December ~~27, 2020, 215~~26, 2021, 242 franchised outlets, including domestic, international and Branded Menu Program outlets were operating as compared to ~~226~~215 domestic and international franchised or Branded Menu Program franchise outlets at December ~~29, 2019.~~27, 2020. Total franchise fee income was $412,000 in the fiscal 2022 period as compared to $207,000 in the fiscal 2021 ~~period compared to $781,000 in the fiscal 2020~~ period. Domestic franchise fee income was $109,000 in the fiscal 2022 period as compared to $98,000 in the fiscal 2021 ~~period compared to $108,000 in the fiscal 2020~~ period. International franchise fee income was ~~$76,000~~$173,000 in the fiscal ~~2021~~2022 period as compared to ~~$120,000~~$76,000 during the fiscal ~~2020~~2021 period.

We recognized ~~$33,000~~$130,000 and ~~$553,000~~$33,000 of forfeited fees in the fiscal ~~2021~~2022 and fiscal ~~2020~~2021 periods, respectively. ~~The forfeited fees in~~During the ~~2020~~ fiscal 2022 period, ~~were primarily from the termination of our Master Franchise Agreements for Russia, Kyrgyzstan and Turkey.~~fifteen franchised outlets opened, as well as thirty-two Branded Menu Program outlets. Additionally, 164 ghost kitchens opened. During the fiscal 2021 period, five franchised outlets opened, including one ~~new~~ Branded Menu Program outlet. Additionally, 75~~new~~ ghost kitchens ~~opened. During~~opened during the fiscal ~~2020 period, 15 franchised outlets opened, including five international units and three Branded Menu Program outlets.~~2021 period.

Advertising fund revenue, after eliminating Company contributions, was ~~$1,082,000~~$1,437,000 in the fiscal ~~2021~~2022 period, as compared to ~~$1,752,000~~$1,082,000 during the fiscal ~~2020~~2021 period.

Costs and Expenses

Overall, our cost of sales ~~decreased~~increased by ~~45%~~113% to $51,536,000 in the fiscal 2022 period as compared to $24,161,000 in the fiscal 2021 ~~period as compared to $43,973,000 in the fiscal 2020~~ period. Our gross profit (representing the difference between sales and cost of sales) ~~decreased~~increased to $9,926,000 or 16% of sales during the fiscal 2022 period as compared to $6,536,000 or 21% of sales during the fiscal 2021 ~~period as compared to $13,726,000 or 24% of sales during the fiscal 2020~~ period. The reduction in margin was primarily due to the higher cost of beef in the Branded Product Program, higher prime restaurant costs associated with new menu offerings, and higher labor costs associated with higher minimum hourly rates of pay at two of our Company-owned restaurants.

Cost of sales in the Branded Product Program ~~decreased~~increased by ~~approximately $17,612,000~~127% to $45,343,000 during the fiscal 2022 period as compared to $19,988,000 during the fiscal 2021 period, ~~as compared to the fiscal 2020 period,~~ primarily due to the ~~2.7%~~98% increase in the volume of product sold as discussed above, as well as a 14% increase in the average cost per pound of our hot dogs. Beginning in July 2021, the cost of hot dogs ~~offset by the 48% decrease in the volume of product sold~~has increased significantly due to higher costs for beef and beef trimmings, labor, packaging and transportation, as well as supply chain challenges associated with increased consumer demand as a result of the continued recovery from the COVID-19 ~~pandemic as discussed above.~~pandemic. We did not make any purchase commitments for beef during the fiscal ~~2021~~2022 and ~~2020~~2021 periods. If the cost of beef and beef trimmings increases and we are unable to pass on these higher costs through price increases or otherwise reduce any increase in our costs through the use of purchase commitments, our margins will be adversely impacted.

~~Beginning in May 2020, the cost of hot dogs increased significantly due primarily to the effects of the COVID-19 pandemic on the meat processing industry.~~
With respect to Company-owned restaurants, our cost of sales during the fiscal ~~2021~~2022 period was $6,193,000 or 65% of restaurant sales, as compared to $4,173,000 or 67% of restaurant sales ~~as compared to $6,373,000 or 54% of restaurant sales~~ in the fiscal ~~2020~~2021 period. ~~We experienced higher food costs driven by~~The increase in cost of sales during the fiscal 2022 period was primarily due to the 52% increase in sales discussed above, in addition to higher commodity costs and restaurant labor costs. The availability of ~~beef, higher prime costs associated with new menu offerings,~~labor remains a challenge at our Company-owned restaurants and ~~higher~~it has required us to remain flexible as it relates to staffing levels and costs. Our labor costs ~~associated with higher minimum hourly rates of pay at two of our Company-owned restaurants.We expect that our future labor costs will continue to be~~were also impacted by the ~~remaining multi-year~~additional increase in minimum wage requirements in New York State ~~as well as other new labor regulations and our~~which commenced on July 1, 2021. Our food costs may be impacted by increases in commodity ~~costs.~~costs, as well as the mix of products that we sell.

Restaurant operating expenses were $2,874,000 in the fiscal 2022 period as compared to $2,622,000 in the fiscal 2021 ~~period as compared to $2,791,000 in the fiscal 2020~~ period. We incurred lower occupancy expenses of ~~$61,000, lower~~$74,000, which were offset by higher utility expenses of ~~$48,000, lower marketing expenses of $69,000 and lower~~$52,000, higher repairs and maintenance expenses of ~~$38,000 which were offset, in part, by~~$50,000, higher insurance expenses of $90,000 and higher delivery charges associated with offsite consumption.

Depreciation and amortization, which primarily consists of the depreciation of fixed assets, including leasehold improvements and equipment, were $807,000 in the fiscal 2022 period as compared to $900,000 in the fiscal 2021 ~~period as compared to $941,000 in the fiscal 2020~~ period.

General and administrative expenses ~~decreased~~increased by ~~$2,407,000~~$993,000 or ~~22%~~11% to $9,702,000 in the fiscal 2022 period as compared to $8,709,000 in the fiscal 2021 ~~period as compared to $11,116,000 in the fiscal 2020~~ period. The Company continued to reduce expenses in response to the impact of the COVID-19 pandemic. These activities included transitioning certain Corporate personnel from a furloughed status to a permanent layoff. The Company incurred severance charges of approximately $343,000 which are reflectedincrease in general and administrative expenses ~~in our Consolidated Statements of Earnings for the fiscal 2021 period. This~~ was ~~offset by~~primarily attributable to a ~~lower~~higher incentive compensation accrual ~~reduced tradeshow expenses in light~~ of ~~the COVID-19 pandemic,~~$324,000, higher insurance costs of $159,000 and ~~reductions in other discretionary expenses including~~higher marketing and ~~travel.~~trade show related expenses of $360,000.
28

Advertising fund expense, after eliminating Company contributions, was $1,437,000 in the fiscal 2022 period, as compared to $1,082,000 in the fiscal 2021 ~~period, as compared to $2,122,000 in the fiscal 2020~~ period.

Other Items

Interest expense of $7,951,000 in both the fiscal ~~2021~~2022 period and the fiscal ~~2020~~2021 period represented accrued interest of $7,433,000 on the 2025 Notes and amortization of debt issuance costs of $518,000.

Interest income was ~~$309,000~~$88,000 for the fiscal ~~2021~~2022 period as compared to ~~$1,074,000~~$309,000 in the fiscal ~~2020~~2021 period.

Other income, ~~which~~ primarily relates to a sublease of a franchised restaurant ~~was $31,000 and $61,000~~offset, in part, by a termination fee associated with the ~~fiscal 2021 and fiscal 2020 periods, respectively.~~Brooklyn Guaranty.

Provision for Income Taxes

The income tax provision for the fiscal ~~2021~~2022 period and fiscal ~~2020~~2021 period reflect effective tax rates of ~~27.7%~~28.1% and ~~26.1%~~27.7%, respectively. During the third quarter fiscal 2021, the Company’s effective tax rate was favorably affected by 0.1% due to its return to provision adjustment of approximately $18,000 in connection with the filing of its March 2020 tax returns. Nathan’s effective tax rate without this adjustment would have been 27.8% for the fiscal 2021 period. Nathan’s effective tax rate for the fiscal 2020 period was reduced by 1.6% as a result of the tax benefits associated with stock compensation. For the fiscal 2020 period, excess tax benefits of $228,000 were reflected in the Consolidated Statements of Earnings as a reduction in determining the provision for income taxes. Nathan’s effective rate for the fiscal 2020 period was favorably affected by 0.4% due to its return to provision adjustment of approximately $52,000 in connection with the filing of its March 2019 tax returns. Nathan’s effective tax rate without these adjustments would have been 28.1% for the fiscal 2020 period.

The amount of unrecognized tax benefits at December ~~27, 2020~~26, 2021 was ~~$336,000~~$445,000 all of which would impact Nathan’s effective tax rate, if recognized. As of December ~~27, 2020,~~26, 2021, Nathan’s had ~~$292,000~~$307,000 of accrued interest and penalties in connection with unrecognized tax benefits.

Nathan’s estimates that its unrecognized tax ~~benefit~~benefits excluding accrued interest and penalties could be further reduced by up to ~~$16,000~~$19,000 during the fiscal year ending March ~~28, 2021.~~27, 2022.

Off-Balance Sheet Arrangements

At December ~~27, 2020~~26, 2021 and December ~~29, 2019,~~27, 2020, Nathan’s did not have any open purchase commitments for hot dogs. Nathan’s may enter into purchase commitments in the future as favorable market conditions become available.

Liquidity and Capital Resources

Cash and cash equivalents at December ~~27, 2020~~26, 2021 aggregated ~~$76,602,000,~~$86,168,000, a ~~$515,000 decrease~~$5,104,000 increase during the fiscal ~~2021~~2022 period as compared to cash and cash equivalents of ~~$77,117,000~~$81,064,000 at March ~~29, 2020.~~28, 2021. Net working capital ~~increased~~decreased to ~~$79,272,000~~$48,204,000 from ~~$75,165,000~~$80,072,000 at March ~~29, 2020.~~ 28, 2021 due to the irrevocable notice of redemption of $40,000,000 of the Company’s 2025 Notes and the designation of such 2025 Notes to be redeemed as a current liability.
We paid our semi-annual interest payments for fiscal ~~2021~~2022 of $4,968,750 on May 1, ~~2020~~2021 and November 1, ~~2020,~~2021, respectively. ~~For the~~We paid our first, second and third quarter fiscal 2022 dividend payments of $1,440,000 on June 25, 2021, ~~period, we have paid three quarterly dividends totaling $4,320,000.~~September 3, 2021 and December 3, 2021, respectively. We expect to pay our fourth quarter dividend on March 4, 2022.

In November 2017, the Company refinanced its then-outstanding 2020 Notes totaling $135.0 million at 10.000% per annum by issuing $150.0 million 2025 Notes at 6.625% per annum. On December 15, 2021, the Company announced its intent to complete the partial redemption, in the principal amount of $40,000,000, of the 2025 Notes. On January 26, 2022, the Company completed the redemption by paying cash of $41,288,094, inclusive of the redemption premium and accrued interest, and recognized a loss on early extinguishment of approximately $1,400,000 that primarily reflected the redemption premium and the write-off of a portion of previously recorded debt issuance costs. Please refer to Note Q – ~~Long Term~~Long-Term Debt in the accompanying ~~Consolidated Financial Statements,~~consolidated interim financial statements for a further discussion ofregarding the ~~Redemption.~~Company’s indebtedness.

The 2025 Notes bear interest at 6.625% per annum, payable semi-annually on May 1^st and November 1^st of each year, beginning on May 1, 2018. The 2025 Notes have no scheduled principal amortization payments prior to its final maturity on November 1, 2025.

Cash provided by operations of ~~$5,710,000~~$9,896,000 in the fiscal ~~2021~~2022 period is primarily attributable to net income of ~~$9,014,000~~$11,438,000 in addition to other non-cash operating items of ~~$1,711,000,~~$1,395,000, offset by changes in other operating assets and liabilities of ~~$5,015,000.~~$2,937,000. Non-cash operating expenses consist principally of depreciation and amortization of ~~$900,000,~~$807,000, amortization of debt issuance costs of $518,000, share-based compensation expense of ~~$87,000, non-cash rental expense of $150,000,~~$66,000, and bad debts of ~~$70,000.~~$112,000. In the fiscal ~~2021~~2022 period, accounts and other receivables increased by ~~$1,300,000~~$2,635,000 due primarily to higher Branded Product Program receivables of ~~$690,000 and~~$3,705,000, higher receivables due to the Advertising Fund of $890,000 which were offset, in part, by lower franchise and license ~~royalty receivables~~royalties receivable of ~~$428,000.~~$2,232,000. Prepaid expenses and other current assets decreased by $504,000 due primarily to the reduction of prepaid income taxes and insurance of $280,000 and $131,000, respectively. In the fiscal ~~2021~~2022 period, accounts payable, accrued expenses and other current liabilities decreased by ~~$3,852,000~~$1,395,000 due to lower accrued interest of $2,505,000 as a result of timing of our interest payments on our 2025 Notes, deferred revenue of ~~$700,000~~$841,000 that was earned during the fiscal ~~2021~~2022 period and the reduction in accrued payroll and other benefits of ~~$829,000 resulting~~$586,000 primarily from the payment of year-end fiscal 2021 incentive compensation. Rebates due under the Branded Product Program were ~~lower~~higher by ~~$233,000~~$156,000 due primarily to ~~reduced~~increased sales as a result of the recovery from the COVID-19 pandemic. ~~This was offset by higher accrued rent and occupancy costs of $146,000.~~ Accounts payable increased by ~~$276,000~~$1,673,000 due principally to ~~the timing of~~higher product purchases ~~made~~ for the Branded Product Program.
29

Cash used in investing activities was ~~$398,000~~$465,000 in the fiscal ~~2021~~2022 period primarily in connection with capital expenditures incurred for our Branded Product Program and ~~the installation of a new point-of sale system at~~ our ~~Company-owned~~Coney Island restaurants.

Cash used in financing activities of ~~$5,827,000~~$4,327,000 in the fiscal ~~2021~~2022 period relates primarily to the payments of the Company’s quarterly $0.35 per share cash ~~dividend~~dividends on June 25, 2021, September 3, 2021 and December 3, 2021 totaling $4,320,000. ~~Additionally, during the fiscal 2021 period, Nathan’s repurchased 26,676 shares of common stock for $1,501,000.~~

During the period from October 2001 through December ~~27, 2020,~~26, 2021, Nathan’s purchased 5,254,081 shares of its common stock at a cost of approximately $84,770,000 pursuant to its stock repurchase plans previously authorized by the Board of ~~Directors.~~Directors (the “Board”). During the fiscal 2022 period, we did not repurchase any shares of common stock. Since March 26, 2007, we have repurchased 3,362,981 shares at a total cost of approximately $77,612,000, reducing the number of shares then-outstanding by 55.9%.

28
In 2016, the ~~Company’s~~ Board ~~of Directors~~ authorized increases to the sixth stock repurchase plan for the purchase of up to 1,200,000 shares of its common stock on behalf of the Company. As of December ~~27, 2020,~~26, 2021, Nathan’s has repurchased 1,066,450 shares at a cost of $37,108,000 under the sixth stock repurchase plan. At December ~~27, 2020,~~26, 2021, there were 133,550 shares remaining to be repurchased pursuant to the sixth stock repurchase plan. The plan does not have a set expiration date. Purchases under the Company’s stock repurchase program may be made from time to time, depending on market conditions, in open market or ~~privately-negotiated~~privately negotiated transactions, at prices deemed appropriate by management. There is no set time limit on the repurchases.

On March 13, 2020, the ~~Company’s~~ Board ~~of Directors~~ approved a 10b5-1 stock plan (the “10b5-1 Plan”) which expired on August 12, 2020. During the fiscal 2021 period, the Company repurchased in open market transactions 26,676 shares of the Company’s common stock at an average share price of $56.26 for a total cost of $1,501,000 under the 10b5-1 Plan.

Effective June 1, 2020, Nathan’s Board of Directors authorized the repurchase of up to $10,000,000 of the 2025 Notes by the Company (at a price equal to or less than par) from time to time. There is no set time limit on the repurchases.
As discussed above, we had cash and cash equivalents at December ~~27, 2020~~26, 2021 aggregating ~~$76,602,000.~~ $86,168,000.Our Board routinely monitors and assesses its cash position and our current and potential capital requirements. In November 2017, we refinanced our 2020 Notes through the issuance of the 2025 Notes and, our Board ~~of Directors~~ announced the payment of a $5.00 per share special dividend to the shareholders of record as of the close of business on December 22, 2017. On May 31, 2018, ~~Nathan’s~~the Board ~~of Directors~~ authorized the commencement of a regular dividend of $1.00 per share per annum, payable at the rate of $0.25 per share per quarter. On June 14, 2019, ~~Nathan’s~~the Board ~~of Directors~~ authorized the increase of its regular quarterly dividend to $0.35 from $0.25. Effective February 4, 2022, the Board authorized the increase of its regular quarterly dividend to $0.45 from $0.35. The Company paid its first quarter fiscal ~~2021~~2022 dividend of $1,440,000 on June ~~26, 2020,~~25, 2021, its second quarter fiscal ~~2021~~2022 dividend of $1,440,000 on September ~~4, 2020~~3, 2021 and its third quarter fiscal ~~2021~~2022 dividend of $1,440,000 on December ~~4, 2020.~~3, 2021.

Effective February ~~5, 2021,~~4, 2022, the Company declared its fourth quarter dividend of ~~$0.35~~$0.45 per common share to stockholders of record as of the close of business on February ~~22, 2021,~~21, 2022, which is payable on March ~~5, 2021.~~4, 2022.

We expect that in the future we will make investments in certain existing restaurants, support the growth of the Branded Product and Branded Menu Programs, service the outstanding debt, fund our dividend program and may continue our stock repurchase programs, funding those investments from our operating cash flow. We may also incur capital and other expenditures or engage in investing activities in connection with opportunistic situations that may arise on a case-by-case basis. During the fiscal year ending March ~~28, 2021,~~27, 2022, we will be required to make interest payments of ~~$9,937,500,~~$10,563,194 which include its required semi-annual interest payments of ~~which all have been made as of~~$4,968,750 on May 1, 2021 and November 1, ~~2020.~~2021, and $625,694 on January 25, 2022 in connection with the partial redemption discussed above.

Management believes that available cash, cash equivalents and cash generated from operations should provide sufficient capital to finance our operations, satisfy our debt service requirements, fund dividend distributions and stock repurchases for at least the next 12 months.

At December ~~27, 2020,~~26, 2021, we sublet one property to a franchisee that we lease from a third party. We remain contingently liable for all costs associated with this property including: rent, property taxes and insurance. We may incur future cash payments with respect to such property, consisting primarily of future lease payments, including costs and expenses associated with terminating such lease.

Our contractual obligations primarily consist of the 2025 Notes and the related interest payments, operating leases, and employment agreements with certain executive officers. These contractual obligations impact our short-term and long-term liquidity and capital resource needs. There have been no material changes in our contractual obligations since March ~~29, 2020.~~28, 2021 other than as described in connection with the partial redemption of the 2025 Notes discussed above.

On February 27, 2017, a wholly-owned subsidiary of the Company executed a Guaranty of Lease (the “Brooklyn Guaranty”) in connection with its re-franchising of a restaurant located in Brooklyn, New York. The Company iswas obligated to make payments under the Brooklyn Guaranty in the event of a default by the tenant/franchisee. The Brooklyn Guaranty ~~has~~had an initial term of 10 years and one 5-year option and iswas limited to 24 months of rent for the first three years of the term. For the remainder of the term, the Brooklyn Guaranty iswas limited to 12 months of rent plus reasonable costs of collection and attorney’s fees. The Company entered into a termination of lease agreement effective January 15, 2022 (the “Termination Date”). As ~~of December 27, 2020, Nathan’s has recorded a liability of $110,000 in connection with~~consideration for all outstanding amounts due and payable under the Brooklyn Guaranty, the Company agreed to pay a termination fee in the amount of $75,000, of which ~~does not include potential percentage rent, real estate tax increases, attorney’s fees~~the Company agreed to pay 50% or $37,500 and ~~other costs as these amounts are not reasonably determinable at this time. Nathan’s has received a personal guaranty from~~ the tenant/franchisee ~~for all obligations under~~agreed to pay 50% or $37,500. The Company paid its share of the ~~Brooklyn Guaranty.~~termination fee in January 2022.

Inflationary Impact

WeHistorically, we do not believe that general inflation has materially impacted ~~earnings since 2006.~~earnings. However, we have experienced significant volatility in our costs for our hot dogs and certain food products, distribution costs and utilities. Between April 2018 and March 2020, beef prices traded within a range of + or - 10%. Prices were at the lowest levels between October 2018 and March 2019 as compared to higher levels between October 2019 and March 2020. Our average cost of hot dogs between October 2019 and March 2020 was approximately 11.2% higher than between October 2018 and March 2019. Our average cost of hot dogs between April ~~2020~~2021 and December ~~2020~~2021 was approximately ~~2.7%~~14% higher than between April ~~2019~~2020 and December ~~2019.~~2020.

Beginning in ~~May 2020,~~July 2021, the cost of hot dogs has increased significantly due ~~primarily~~ to ~~the effects~~higher costs for beef and beef trimmings, labor, packaging and transportation, as well as supply chain challenges associated with increased consumer demand as a result of the continued recovery from the COVID-19 ~~pandemic on the meat processing industry.~~pandemic.
29

We are unable to predict the future cost of our hot dogs and expect to experience price volatility for our beef products during the remainder of fiscal ~~2021.~~2022. To the extent that beef prices increase as compared to earlier periods, it could impact our results of operations. In the past, we entered into purchase commitments for a portion of our hot dogs to reduce the impact of increasing market prices. Our most recent purchase commitment was completed in 2016 for approximately 2,600,000 pounds of hot dogs. We may attempt to enter into similar purchase arrangements for hot dogs and other products in the future. Additionally, we expect to continue experiencing volatility in oil and gas prices on our distribution costs for our food products and utility costs in the Company-owned restaurants and volatile insurance costs resulting from the uncertainty of the insurance markets.

New York State passed legislation increasing the minimum hourly wage for fast food workers of restaurant chains with 30 or more locations nationwide. The increase ~~is being~~was phased in differently between New York City and the rest of New York State. Effective December 31, 2019, the minimum wage was $15.00 in New York City and increased to $13.75 per hour for the remainder of New York State.
The minimum hourly rate of pay for the remainder of New York State increased to $14.50 on December 31, ~~2020;~~2020 and ~~will increase~~increased to $15.00 on July 1, 2021.
All of Nathan’s ~~Company-operated~~Company-owned restaurants are within New York State ~~two of which operate within New York City. All of these locations have been significantly affected by this new legislation.~~
~~The Company is continually studying the impact on the Company’s operations~~ and is developing strategies and tactics, including pricing and potential operating efficiencies, to minimize the effects of these increases and future increases. We have recently increased certain selling prices to pass on recent cost of sales increases. However, if we are unable to fully offset these and future increases through pricing and operating efficiencies, our margins and profits will be negatively affected.
Effective April 1, 2014, the City of New York, passed legislation requiring employers to offer paid sick leave to all employees, including part-time employees, who work more than 80 hours for the employer. Nathan’s operates two restaurants that have been affected by this ~~legislation.~~
Effective November 27, 2017, the City of New York Fair Work Week Legislation package of bills took effect that covers approximately 65,000 fast food workers by giving them more predictable work schedules. A key component of the package is a requirement that fast food restaurants schedule their workers at least two weeks in advance or pay employees between $10 to $75 per scheduling change, depending on the situation. Due to Nathan’s dependency on weather conditions at our two Coney Island beach locations during the summer season, we are unable to determine the potential impact on our results of operations, which could be material. We believe that we have been able to implement tools to minimize the financial impact of thisnew legislation.

Continued increases in labor, food and other operating expenses, including health care, could adversely affect our operations and those of the restaurant industry and we might have to further reconsider our pricing strategy as a means to offset reduced operating margins.

We believe that these increases in the minimum wage and other changes in employment law have had a significant financial impact on our financial results and the results of our franchisees that operate in New York State. Our business could be negatively impacted if the decrease in margins for our franchisees results in the potential loss of new franchisees or the closing of a significant number of franchised restaurants.

The Company’s business, financial condition, operating results and cash flows can be impacted by a number of factors, including but not limited to those set forth above in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” any one of which could cause our actual results to vary materially from recent results or from our anticipated future results. For a discussion identifying additional risk factors and important factors that could cause actual results to differ materially from those anticipated, also see the discussions in “Forward-Looking Statements” and “Notes to Consolidated Financial Statements” in this Form 10-Q and “Risk Factors” in our Form 10-K for our fiscal year ended March ~~29, 2020.~~28, 2021.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Cash

We have historically invested our cash and cash equivalents in money market funds or short-term, fixed rate, highly rated and highly liquid instruments which are generally reinvested when they mature. Although these existing investments are not considered at risk with respect to changes in interest rates or markets for these instruments, our rate of return on short-term investments could be affected at the time of reinvestment as a result of intervening events. As of December ~~27, 2020,~~26, 2021, Nathan’s cash and cash equivalents aggregated ~~$76,602,000.~~$86,168,000. Earnings on this cash would increase or decrease by approximately ~~$192,000~~$215,000 per annum for each 0.25% change in interest rates.

Borrowings

At December ~~27, 2020,~~26, 2021, we had $150,000,000 of 2025 Notes outstanding, ~~which are due in November 2025.~~including the current portion. Interest expense on these borrowings would increase or decrease by approximately $375,000 per annum for each 0.25% change in interest rates. We currently do not anticipate entering into interest rate swaps or other financial instruments to hedge our borrowings.

Commodity Costs

WeHistorically, we do not believe that general inflation has materially impacted ~~earnings since 2006.~~earnings. However, we have experienced significant volatility in our costs for our hot dogs and certain food products, distribution costs and utilities. Between April 2018 and March 2020, beef prices traded within a range of + or - 10%. Prices were at the lowest levels between October 2018 and March 2019 as compared to higher levels between October 2019 and March 2020. Our average cost of hot dogs between October 2019 and March 2020 was approximately 11.2% higher than between October 2018 and March 2019. Our average cost of hot dogs between April ~~2020~~2021 and December ~~2020~~2021 was approximately ~~2.7%~~14% higher than between April ~~2019~~2020 and December ~~2019.~~2020.

Beginning in ~~May 2020,~~July 2021, the cost of hot dogs has increased significantly due ~~primarily~~ to ~~the effects~~higher costs for beef and beef trimmings, labor, packaging and transportation, as well as supply chain challenges associated with increased consumer demand as a result of the continued recovery from the COVID-19 ~~pandemic on the meat processing industry.~~pandemic.

We are unable to predict the future cost of our hot dogs and expect to experience price volatility for our beef products during the remainder of fiscal ~~2021.~~2022. To the extent that beef prices increase as compared to earlier periods, it could impact our results of operations. In the past, we entered into purchase commitments for a portion of our hot dogs to reduce the impact of increasing market prices. Our most recent purchase commitment was completed in 2016 for approximately 2,600,000 pounds of hot dogs. We may attempt to enter into similar purchase arrangements for hot dogs and other products in the future. Additionally, we expect to continue experiencing volatility in oil and gas prices on our distribution costs for our food products and utility costs in the Company-owned restaurants and volatile insurance costs resulting from the uncertainty of the insurance markets.

With the exception of purchase commitments, we have not attempted to hedge against fluctuations in the prices of the commodities we purchase using future, forward, option or other instruments. As a result, we expect that the majority of our future commodity purchases will be subject to market changes in the prices of such commodities. We have attempted to enter sales agreements with our customers that are correlated to our cost of beef, thus reducing our market volatility, or have passed through permanent increases in our commodity prices to our customers that are not on formula pricing, thereby reducing the impact of long-term increases on our financial results. A short-term increase or decrease of 10.0% in the cost of our food and paper products for the thirty-nine week period ended December ~~27, 2020~~26, 2021 would have increased or decreased our cost of sales by approximately ~~$2,124,000.~~$4,714,000.

Foreign Currencies

Foreign franchisees generally conduct business with us and make payments in United States dollars, reducing the risks inherent with changes in the values of foreign currencies. As a result, we have not purchased future contracts, options or other instruments to hedge against changes in values of foreign currencies and we do not believe fluctuations in the value of foreign currencies would have a material impact on our financial results.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as required by Exchange Act Rule 13a-15(e) and Exchange Act Rule 15d-15(e). Based on that evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective to ensure that the information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls

There were no changes in our internal controls over financial reporting that occurred during the quarter ended December ~~27, 2020~~26, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Our administrative employees and employees of our other service providers started working remotely beginning in March 2020 in response to the COVID-19 pandemic. Although we have re-opened the Corporate office, our employees may continue to work remotely on a part-time basis. Despite the hybrid working environment, there were no material changes in our internal control over financial reporting during the quarter ended December 26, 2021. We are continually monitoring and assessing the impact of the COVID-19 pandemic on our internal controls and hybrid working environment to minimize the impact on its design and operating effectiveness.

Limitations on the Effectiveness of Controls

We believe that a control system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and our Chief Executive Officer and Chief Financial Officer have concluded that such controls and procedures are effective at the reasonable assurance level.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

None

Item 1A. Risk Factors.

In addition to the other information set forth in this report, you should carefully consider the risk factors discussed in Part I, “Item 1A. Risk Factors” in the Annual Report on Form 10-K for the fiscal year ended March ~~29, 2020,~~28, 2021, which could materially affect our business, financial condition or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing Nathan's. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

Effective February ~~5, 2021,~~4, 2022, the Board declared its quarterly cash dividend of ~~$0.35~~$0.45 per share which is payable on March ~~5, 2021~~4, 2022 to shareholders of record as of the close of business on February ~~22, 2021.~~21, 2022.

Item 6. Exhibits

31.1
~~31.1~~
*Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2
~~31.2~~
*Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1
~~32.1~~
*Certification by Eric Gatoff, CEO, Nathan’s Famous, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2
~~32.2~~
*Certification by Robert Steinberg, CFO, Nathan’s Famous, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.1
~~101.1~~
*The following materials from the Nathan’s Famous, Inc., Quarterly Report on Form 10-Q for the quarter ended December ~~27, 2020~~26, 2021 formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Earnings, (iii) the Consolidated Statements of Stockholders’ Deficit, (iv) the Consolidated Statements of Cash Flows and (v) related notes.
104
~~104~~
Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*Filed herewith.

3534

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

NATHAN'S FAMOUS, INC.
Date: February ~~5, 2021~~
4, 2022
By:
/s/ Eric Gatoff
Eric Gatoff
Chief Executive Officer
(Principal Executive Officer)

Date: February ~~5, 2021~~
4, 2022
By:
/s/ Robert Steinberg
Robert Steinberg
Vice President - Finance
and Chief Financial Officer
(Principal Financial and Accounting Officer)

A signed original of this written statement required by Section 906 has been provided to Nathan’s Famous, Inc. and will be retained by Nathan’s Famous, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.
3635

	Estimate for fiscal year		Estimate for fiscal year
2021 (a)	$	58
2022		223
2022 (a)			$	95
2023		200		342
2024		188		303
2025		181		286
2026				260
Thereafter		930		736
Total	$	1,780	$	2,022

Thirteen weeks
									Net Income
	Net Income				Number of Shares				Per Share
	2020		2019		2020		2019		2020		2019
	(in thousands)				(in thousands)
Basic EPS
Basic calculation	$	1,359	$	1,213		4,115		4,225	$	0.33	$	0.29
Effect of dilutive employee stock options		-		-		0		0		0		0
Diluted EPS
Diluted calculation	$	1,359	$	1,213		4,115		4,225	$	0.33	$	0.29

Thirty-nine weeks
									Net Income
	Net Income				Number of Shares				Per Share
	2020		2019		2020		2019		2020		2019
	(in thousands)				(in thousands)
Basic EPS
Basic calculation	$	9,014	$	10,240		4,117		4,219	$	2.19	$	2.43
Effect of dilutive employee stock options		-		-		0		0		0		0
Diluted EPS
Diluted calculation	$	9,014	$	10,240		4,117		4,219	$	2.19	$	2.43

	December 27, 2020				March 29, 2020
	Face value		Fair value		Face Value		Fair value

Long-term debt	$	150,000	$	153,909	$	150,000	$	138,000

	December 27,		March 29,		December 26,		March 28,
	2020		2020		2021		2021

Branded product sales	$	7,479	$	6,789	$	10,185	$	6,480
Franchise and license royalties		4,727		4,299		2,992		5,224
Other		428		257		1,183		293
		12,634		11,345		14,360		11,997

Less: allowance for doubtful accounts		296		237		185		345
Accounts and other receivables, net	$	12,338	$	11,108	$	14,175	$	11,652

Weighted-average option fair values	$	13.04
Expected life (years)		4.4
Interest rate		0.82	%
Volatility		27.69	%
Dividend yield		2.04	%

	Shares	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life		Aggregate Intrinsic Value (in thousands)


Options outstanding at March 29, 2020	10,000	$	89.90		3.45		-
Granted	0		0		-		-
Exercised	0		0		-		0
Options outstanding at December 27, 2020	10,000	$	89.90		2.71		0

Options exercisable at December 27, 2020	6,667	$	89.90		2.71		0

			Weighted-		Weighted-		Aggregate
			Average		Average		Intrinsic
			Exercise		Remaining		Value
	Shares		Price		Contractual Life		(in thousands)


Options outstanding at March 28, 2021		10,000	$	89.90		2.46		-
Granted		10,000	$	68.50		4.62		-
Exercised		-		0		-		0
Options outstanding at December 26, 2021		20,000	$	79.20		3.17		0

Options exercisable at December 26, 2021		10,000	$	89.90		1.71		0

	Shares			Weighted- Average Grant-date Fair value Per share					Weighted- Average Grant-date Fair value
Unvested restricted stock at March 29, 2020		667		$	89.90
						Shares			Per share
Unvested restricted stock at March 28, 2021							333		$	89.90
Granted		0			0		0			0
Vested		(334	)	$	89.90		(333	)	$	89.90
Unvested restricted stock at December 27, 2020		333		$	89.90
Unvested restricted stock at December 26, 2021							0			0

	●	senior in right of payment to all of the Company and the guarantors’ future subordinated indebtedness;

	●	effectively senior to all unsecured senior indebtedness to the extent of the value of the collateral securing the 2025 Notes and the guarantees;

	●	pari passu with all of the Company and the guarantors’ other senior indebtedness;

	●	effectively junior to any future credit facility to the extent of the value of the collateral securing any future credit facility and the 2025 Notes and the guarantees and certain other assets;

	●	effectively junior to any of the Company and the guarantors’ existing and future indebtedness that is secured by assets other than the collateral securing the 2025 Notes and the guarantees to the extent of the value of any such assets; and

	●	structurally subordinated to the indebtedness of any of the Company’s current and future subsidiaries that do not guarantee the 2025 Notes.

YEAR	PERCENTAGE
On or after November 1, 2020 and prior to November 1, 2021		103.313	%
On or after November 1, 2021 and prior to November 1, 2022		101.656	%
On or after November 1, 2022		100.000	%

Weighted average remaining lease term (years):
Operating leases	~~7.4~~6.5

Weighted average discount rate:
Operating leases	~~8.877~~8.875	%

	Payments		Receipts				Payments		Receipts
	Operating Leases		Subleases		Net Leases		Operating Leases		Subleases		Net Leases

Fiscal year:
2021 (a)	$	377	$	38	$	339
2022		1,837		247		1,590
2022 (a)							$	381	$	38	$	343
2023		1,849		168		1,681		1,849		168		1,681
2024		1,774		169		1,605		1,774		169		1,605
2025		1,678		169		1,509		1,678		169		1,509
2026								1,712		169		1,543
Thereafter		5,474		352		5,122		3,762		183		3,579
Total lease commitments	$	12,989	$	1,143	$	11,846	$	11,156	$	896	$	10,260
Less: Amount representing interest		3,434						2,628
Present value of lease liabilities (b)	$	9,555					$	8,528

31.2
	~~31.2~~	*Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1
	~~32.1~~	*Certification by Eric Gatoff, CEO, Nathan’s Famous, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2
	~~32.2~~	*Certification by Robert Steinberg, CFO, Nathan’s Famous, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.1
	~~101.1~~	*The following materials from the Nathan’s Famous, Inc., Quarterly Report on Form 10-Q for the quarter ended December ~~27, 2020~~26, 2021 formatted in Inline Extensible Business Reporting Language (iXBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Earnings, (iii) the Consolidated Statements of Stockholders’ Deficit, (iv) the Consolidated Statements of Cash Flows and (v) related notes.

104
	~~104~~	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

	NATHAN'S FAMOUS, INC.

Date: February ~~5, 2021~~ 4, 2022	By:	/s/ Eric Gatoff
		Eric Gatoff
		Chief Executive Officer
		(Principal Executive Officer)

Date: February ~~5, 2021~~ 4, 2022	By:	/s/ Robert Steinberg
		Robert Steinberg
		Vice President - Finance
		and Chief Financial Officer
		(Principal Financial and Accounting Officer)