| Notes Payable | On February 7, 2020, the Company entered into a Senior Secured Promissory
Note and Warrant Purchase Agreement (the “Agreement”) with Corbel Capital Partners SBIC, L.P. (the “Purchaser”).
Pursuant to the Agreement, the Company issued to the Purchaser a senior secured promissory note (the “Senior Note”)
in the initial principal amount of $8.0 million. The Company has used the net proceeds of the Agreement as follows: (i) $4.2 million
to repay the Company’s then-existing bank debt which was in the original amount of $6.1 million; (ii) $1,275,000 to repay
the portion of the Company’s existing subordinated convertible debt the maturity date of which most had not previously been
extended; (iii) debt issuance costs; and (iv) the remaining net proceeds for working capital and other general corporate purposes,
including development of new Company-owned Craft Pizza & Pub locations. The Senior Note bears cash interest of LIBOR, as defined in the Agreement,
plus 7.75%. In addition, the Senior Note requires payment-in-kind interest (“PIK Interest”) of 3% per annum, which
will be added to the principal amount of the Senior Note. Interest is payable in arrears on the last calendar day of each month.
The Senior Note matures on February 7, 2025. The Senior Note does not require any fixed principal payments until February 28, 2023,
at which time required monthly payments of principal in the amount of $33,333 begin and continue until maturity. The Senior Note
requires the Company to make additional payments on the principal balance of the Senior Note based on its consolidated excess cash
flow, as defined in the Agreement. In conjunction with the borrowing under the Senior Note, the Company
issued to the Purchaser a warrant (the “Corbel Warrant”) to purchase up to 2,250,000 shares of Common Stock. The Corbel
Warrant entitles the Purchaser to purchase from the Company, at any time or from time to time: (i) 1,200,000 shares of Common Stock
at an exercise price of $0.57 per share (“Tranche 1”), (ii) 900,000 shares of Common Stock at an exercise price of
$0.72 per share (“Tranche 2”); and (iii) 150,000 shares of Common Stock at an exercise price of $0.97 per share (“Tranche
3”). The Purchaser is required to exercise the Corbel Warrant with respect to Tranche 1 if the Common Stock is trading at
$1.40 per share or higher for a specified period, and is further required to exercise the Corbel Warrant with respect to Tranche
2 if the Common Stock is trading at $1.50 per share or higher for a specified period. Cashless exercise of the Corbel Warrant is
only permitted with respect to Tranche 3. The Purchaser has the right, within six months after the issuance of any shares under
the Corbel Warrant, to require the Company to repurchase such shares for cash or for Put Notes, at the Company's discretion. The
Corbel Warrant expires on the sixth anniversary of the date of its issuance. Impact of COVID-19 Pandemic In the first quarter of 2020, a novel strain of coronavirus (COVID-19)
emerged and spread throughout the United States. The World Health Organization recognized COVID-19 as a pandemic in March 2020.
In response to the pandemic, the U.S. federal government and various state and local governments, among other things, imposed travel
and business restrictions, including stay-at-home orders and other guidelines that required restaurants and bars to close or restrict
inside dining. The pandemic resulted in significant, economic volatility, uncertainty and disruption, reduced commercial activity
and weakened economic conditions in the regions in which the Company and its franchisees operate. The pandemic and the governmental response had a significant adverse
impact on the Company, due to, among other things, governmental restrictions, reduced customer traffic, staffing challenges and
supply difficulties. All Company-owned Craft Pizza & Pub restaurants are located in the State of Indiana. On March 16, 2020,
by order of the Governor of the State of Indiana (the "Governor"), all restaurants within Indiana were ordered to close
for inside dining. Due to the order, all Craft Pizza & Pub restaurants were open for carry-out only through April 30, 2020,
primarily through the Company's Pizza Valet system and third-party delivery providers. On May 1, 2020, the Governor issued another
order allowing restaurants to be open for inside dining for up to 50% of capacity as of May 11, 2020, and on June 14, 2020 up to
75% of capacity, plus bars were allowed to open up to 50% of capacity, and on July 4, 2020 restaurants and bars were allowed to
resume at 100% capacity. The Governor delayed the increase in capacity for a portion of the third quarter of 2020. Ultimately the
Governor issued another order to allow 100% capacity for restaurants and bars but required certain social distancing rules which
effectively limit capacity to much less than 100%. As the duration and scope of the pandemic is uncertain these orders are subject
to further modification, which could adversely affect the Company. Further, the Company can provide no assurance the phase out
of restrictions will have a positive effect on the Company's business. Many other states and municipalities in the United States also temporarily
restricted travel and suspended the operation of dine-in restaurants and other businesses in light of COVID-19, which negatively
affected our franchised operations. Host facilities for our non-traditional franchises were also adversely impacted by these developments.
The uncertainty and disruption in the U.S. economy caused by the pandemic are likely to continue to adversely impact the volume
and resources of potential franchisees for both the Company's Craft Pizza & Pub and non-traditional venues. In 2020, in light of the additional uncertainty created as a result
of the COVID-19 pandemic, the Company decided to create a reserve for uncollectability on all long-term franchisee receivables.
The Company will continue to pursue collection where circumstances are appropriate and all collections of these receivables in
the future will result in additional royalty income at the time received. On April 25, 2020, the Company received a loan of $715,000 under
the PPP. In accordance with the applicable accounting policy adopted, the Company accounted for the loan as a government grant
and presented it in the Condensed Consolidated Statement of Operations as a reduction of certain qualifying expenses incurred during
the three-month period ended June 30, 2020. The expenses included payroll costs and benefits, interest on mortgage obligations,
rent under lease agreements and utilities and other qualifying expenses pursuant to the CARES ACT. On February 19, 2021, the Company
received formal notice from the Small Business Administration ("SBA") that the entire $715,000 loan was forgiven in accordance
with the provisions of the CARES ACT. On February 5, 2021, the Company received an additional loan of $940,734 under the PPP. In
accordance with the applicable accounting policy adopted, the Company accounted for the loan as a government grant and presented
it in the Condensed Consolidated Statement of Operations as a reduction of certain qualifying expenses incurred during the three-month
period ended March 31, 2021. The expenses included payroll costs and benefits, interest on mortgage obligations, rent under lease
agreements and utilities and other qualifying expenses pursuant to the CARES ACT. |
