~~FORM 10-Q~~

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

[ ~~X ]~~	☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
		EXCHANGE ACT OF 1934
		For the quarterly period ended ~~December~~ September 26, 2021.24~~, 201~~7.

~~[ ]~~	☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
		EXCHANGE ACT of 1934
		For the transition period from to .

Commission File ~~file number 0~~No. 01001-35962-35962

NATHAN'S FAMOUS, INC.

(Exact name of registrant as specified in its charter)

	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 of principal executive offices)~~ ~~(Zip Code)~~

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

(Address and Zip Code of principal executive offices)

(516) 338-8500

~~(Registrant's~~(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~~: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 X☒ No __☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ 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 ~~and post~~ such files). Yes X☒ No __☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or 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. ~~(Check One):~~

Large accelerated filer ~~___~~☐	Accelerated filer X☒
Non-accelerated filer ~~___ (do not check if a smaller reporting company)~~
~~Emerging growth company ___~~☐	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 X☒

At ~~February 2, 2018~~November 5, 2021 an aggregate of ~~4,184,549~~4,115,154 shares of the registrant's common stock, par value of $.01, were outstanding.

~~-1-~~

NATHAN'S FAMOUS, INC. AND SUBSIDIARIES

~~INDE~~XINDEX

		Page Number

PART I.	FINANCIAL INFORMATION	3

Item 1.	Financial Statements.	3

	Consolidated Financial Statements
	Consolidated Balance Sheets – ~~December 24, 2017~~September 26, 2021 (Unaudited) and March ~~26, 2017~~28, 2021	3

	Consolidated Statements of Earnings (Unaudited) -– Thirteen and ~~Thirty-nine~~Twenty-six Weeks Ended ~~December 24, 2017~~September 26, 2021 and ~~December 25, 2016~~September 27, 2020	4

	Consolidated ~~Statement~~Statements of ~~Stockholders’ (Deficit)~~Stockholders’ Deficit (Unaudited) – ~~Thirty-nine~~Thirteen Weeks Ended ~~December 24, 2017~~September 26, 2021 and September 27, 2020	5

	Consolidated Statements of Stockholders’ Deficit (Unaudited) – Twenty-six Weeks Ended September 26, 2021 and September 27, 2020		6

	Consolidated Statements of Cash Flows (Unaudited) – ~~Thirty-nine~~Twenty-six Weeks Ended ~~December 24, 2017~~September 26, 2021 and ~~December 25, 2016~~September 27, 2020	6 7

	Notes to Consolidated Financial Statements	7 8

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations.	18 21

Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	28 31

Item 4.	Controls and Procedures.	29 32

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings.	30 33

Item 1A.	Risk Factors.	30 33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	30 33

Item 3.	Defaults Upon Senior Securities.	30 33

Item 4.	Mine Safety Disclosures.	30 33

Item 5.	Other Information.	30 33

Item 6.	Exhibits.	31 34

SIGNATURES	32	35

~~Exhibit Index~~		33

~~-2-~~

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

~~CONSOLIDATED BALANCE SHEETS~~

~~December 24, 2017 and March 26, 2017~~

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

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

December 24, 2017

March 26, 2017

(Unaudited)

ASSETS

CURRENT ASSETS

Cash
$ 67,288 $ 56,915
Accounts and other receivables, net
11,873 8,948
Inventories
406 579
Prepaid expenses and other current assets (Note G)
3,352 1,093
Total current assets
82,919 67,535

Property and equipment, net of accumulated depreciation of $8,525 and $7,522, respectively
8,276 8,844
Goodwill
95 95
Intangible asset
1,353 1,353
Other assets
293 298
Total assets
$ 92,936 $ 78,125

LIABILITIES AND STOCKHOLDERS’ (DEFICIT)

CURRENT LIABILITIES

Accounts payable
$ 4,268 $ 4,809
Accrued expenses and other current liabilities (Note H)
26,644 5,865
Deferred franchise fees
198 98
Total current liabilities
31,110 10,772

Long-term debt, net of unamortized debt issuance costs of $5,374 and $3,525, respectively (Note N)
144,626 131,475
Other liabilities
1,484 1,555
Deferred income taxes
751 814

Total liabilities
177,971 144,616

COMMITMENTS AND CONTINGENCIES (Note O)

STOCKHOLDERS’ (DEFICIT)

Common stock, $.01 par value; 30,000,000 shares authorized; 9,311,922 and 9,303,870 shares issued; and 4,184,549 and 4,176,497 shares outstanding at December 24, 2017 and March 26, 2017, respectively
93 93
Additional paid-in capital
60,723 60,582
(Accumulated deficit)
(68,548 ) (49,863 )
Stockholders’ (deficit) equity before treasury stock
(7,732 ) 10,812
Treasury stock, at cost, 5,127,373 shares at December 24, 2017 and March 26, 2017, respectively
(77,303 ) (77,303 )
Total stockholders’ (deficit)
(85,035 ) (66,491 )

Total liabilities and stockholders’ (deficit)
$ 92,936 $ 78,125

Nathan’s Famous, Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS

September 26, 2021 and March 28, 2021

(in thousands, except share and per share amounts)

	September 26, 2021			March 28, 2021
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note F)	$	86,756		$	81,064
Accounts and other receivables, net (Note H)		14,817			11,652
Inventories		948			624
Prepaid expenses and other current assets (Note I)		612			1,325
Total current assets		103,133			94,665

Property and equipment, net of accumulated depreciation of $10,270 and $9,779, respectively		3,942			4,090
Operating lease assets (Note R)		7,772			8,337
Goodwill		95			95
Intangible asset, net		1,099			1,156
Deferred income taxes		154			138
Other assets		318			328

Total assets	$	116,513		$	108,809

LIABILITIES AND STOCKHOLDERS’ DEFICIT

CURRENT LIABILITIES
Accounts payable	$	5,084		$	4,041
Accrued expenses and other current liabilities (Note L)		8,585			8,478
Current portion of operating lease liabilities (Note R)		1,846			1,837
Deferred franchise fees		351			237
Total current liabilities		15,866			14,593

Long-term debt, net of unamortized debt issuance costs of $2,823 and $3,169, respectively (Note Q)		147,177			146,831
Operating lease liabilities (Note R)		6,867			7,553
Other liabilities (Note L)		834			774
Deferred franchise fees		1,768			1,536

Total liabilities		172,512			171,287

COMMITMENTS AND CONTINGENCIES (Note S)

STOCKHOLDERS’ DEFICIT
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 September 26, 2021 and March 28, 2021, respectively		94			94
Additional paid-in capital		62,291			62,240
Accumulated deficit		(33,614	)		(40,042	)
Stockholders’ equity before treasury stock		28,771			22,292

Treasury stock, at cost, 5,254,081 shares at September 26, 2021 and March 28, 2021		(84,770	)		(84,770	)
Total stockholders’ deficit		(55,999	)		(62,478	)

Total liabilities and stockholders’ deficit	$	116,513		$	108,809

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

~~-3-~~

Nathan’s’s Famous, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF EARNINGS

Thirteen and ~~thirty-nine~~Twenty-six weeks ended ~~December 24, 2017~~September 26, 2021 and ~~December 25, 2016~~September 27, 2020

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

(Unaudited)

	Thirteen weeks ended						Thirty-nine weeks ended						Thirteen weeks ended						Twenty-six weeks ended
	December 24, 2017			December 25, 2016			December 24, 2017			December 25, 2016			September 26, 2021			September 27, 2020			September 26, 2021			September 27, 2020

REVENUES
Sales	$	16,767		$	14,859		$	63,639		$	58,012		$	23,500		$	12,692		$	42,825		$	19,375
License royalties		4,228			3,990			17,393			15,602			7,658			8,268			18,340			18,791
Franchise fees and royalties		1,088			1,088			3,575			3,752			1,167			476			2,074			667
Advertising fund revenue														553			403			958			692
Total revenues		22,083			19,937			84,607			77,366			32,878			21,839			64,197			39,525

COSTS AND EXPENSES
Cost of sales		12,599			10,785			48,165			41,732			20,131			9,927			35,496			15,224
Restaurant operating expenses		760			695			2,769			2,711			1,216			1,011			2,327			1,863
Depreciation and amortization		320			309			1,055			1,005			270			302			548			612
General and administrative expenses		3,034			3,394			10,064			10,309			3,269			2,612			6,727			5,456
Advertising fund expense														553			403			958			692
Total costs and expenses		16,713			15,183			62,053			55,757			25,439			14,255			46,056			23,847

Income from operations		5,370			4,754			22,554			21,609			7,439			7,584			18,141			15,678

Loss on debt extinguishment		(8,872	)		-			(8,872	)		-
Interest expense		(3,650	)		(3,663	)		(10,976	)		(11,002	)		(2,651	)		(2,651	)		(5,301	)		(5,301	)
Interest income		44			35			114			71			28			103			64			220
Other income, net		22			21			64			64			5			22			21			22

(Loss) income before provision for income taxes		(7,086	)		1,147			2,884			10,742
(Benefit) provision for income taxes		(3,307	)		448			621			3,986
Net (loss) income	$	(3,779	)	$	699		$	2,263		$	6,756
Income before provision for income taxes														4,821			5,058			12,925			10,619
Provision for income taxes														1,276			1,403			3,617			2,964
Net income													$	3,545		$	3,655		$	9,308		$	7,655

PER SHARE INFORMATION
(Loss) income per share:
Weighted average shares used in computing income per share:
Basic	$	( 0.90	)	$	. 17		$	.54		$	1.62			4,115			4,115			4,115			4,118
Diluted	$	(0.90	)	$	. 17		$	.54		$	1.61			4,115			4,115			4,115			4,118

Weighted average shares used in computing (loss) income per share:
Income per share:
Basic		4,185,000			4,175,000			4,180,000			4,171,000		$	.86		$	.89		$	2.26		$	1.86
Diluted		4,185,000			4,209,000			4,219,000			4,202,000		$	.86		$	.89		$	2.26		$	1.86

Dividends declared per share													$	.35		$	.35		$	.70		$	.70

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

~~-4-~~

Nathan’s’s Famous, Inc. and Subsidiaries

CONSOLIDATED ~~STATEMENT~~STATEMENTS OF STOCKHOLDERS’(DEFICIT)

T~~hirty-nine~~Thirteen weeks ended ~~December 24, 2017~~September 26, 2021 and September 27, 2020

(in thousands, except share amounts)

(Unaudited)

Additional

Total

Common

Common

Paid-in

(Accumulated

Treasury Stock, at Cost

Stockholders’

Shares

Stock

Capital

Deficit)

Shares

Amount

(Deficit)

Balance, March 26, 2017
9,303,870 $ 93 $ 60,582 $ (49,863 ) 5,127,373 $ (77,303 ) $ (66,491 )

Shares issued in connection with share-based compensation plans
8,052 - - - - - -

Withholding tax on net share settlement of share-based compensation plans
- - (157 ) - - - (157 )

Share-based compensation
- - 298 - - - 298

Cash dividends declared on common stock and restricted stock
- - - (20,948 ) - - (20,948 )

Net income
- - - 2,263 - - 2,263

Balance, December 24, 2017
9,311,922 $ 93 $ 60,723 $ (68,548 ) 5,127,373 $ (77,303 ) $ (85,035 )

~~The accompanying not~~~~es are an integral part of these financial~~ ~~statement~~s.

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

Balance, June 27, 2021		9,369,015	$	94	$	62,269		$	(35,719	)		5,254,081	$	(84,770	)	$	(58,126	)

Shares issued in connection with share-based compensation plans		220		0		0			0			0		0			0
Withholding tax on net share settlement of share-based compensation plans		-		0		(7	)		0			-		0			(7	)
Dividends on common stock		-		0		0			(1,440	)		-		0			(1,440	)
Share-based compensation		-		0		29			0			-		0			29
Net income		-		0		0			3,545			-		0			3,545
Balance, September 26, 2021		9,369,235	$	94	$	62,291		$	(33,614	)		5,254,081	$	(84,770	)	$	(55,999	)

~~-5-~~

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

Balance, June 28, 2020		9,368,792	$	94	$	62,159		$	(42,796	)		5,254,081	$	(84,770	)	$	(65,313	)

Shares issued in connection with share-based compensation plans		223		0		0			0			0		0			0
Withholding tax on net share settlement of share-based compensation plans		-		0		(6	)		0			-		0			(6	)
Dividends on common stock		-		0		0			(1,440	)		-		0			(1,440	)
Share-based compensation		-		0		29			0			-		0			29
Net income		-		0		0			3,655			-		0			3,655
Balance, September 27, 2020		9,369,015	$	94	$	62,182		$	(40,581	)		5,254,081	$	(84,770	)	$	(63,075	)

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

~~CONSOLIDATED STATEMENTS OF CASH FLOWS~~

T~~hirty-nine weeks ended December 24, 2017 and December 25, 2016~~

~~(in thousands)~~

~~(Unaudited)~~

December 24,
2017

December 25,
2016

Cash flows from operating activities:

Net income
$ 2,263 $ 6,756
Adjustments to reconcile net income to net cash provided by operating activities

Loss on debt extinguishment 8,872 -
Depreciation and amortization
1,055 1,005
Amortization of debt issuance costs
932 910
Share-based compensation expense
298 482
Income tax benefit on stock option exercises
194 659
Provision for doubtful accounts
42 34
Deferred income taxes
(63 ) 92
Changes in operating assets and liabilities:

Accounts and other receivables, net
(2,967 ) (1,523 )
Inventories
173 293
Prepaid expenses and other current assets
(2,259 ) 643
Other assets
5 15
Accounts payable, accrued expenses and other current liabilities
(779 ) 545
Deferred franchise fees
100 4
Other liabilities
(71 ) (142 )

Net cash provided by operating activities
7,795 9,773

Cash flows from investing activities:

Purchase of property and equipment
(488 ) (1,001 )

Net cash (used in) investing activities
(488 ) (1,001 )

Cash flows from financing activities:

Proceeds from issuance of long-term debt
150,000 -
Cash payments for extinguishment of debt
(135,000 ) -
Premium paid on extinguishment of debt
(6,750 ) -
Debt issuance costs
(4,902 ) -
Proceeds from exercise of stock options
- 44
Dividends paid upon vesting of restricted stock
(125 ) (375 )
Payments of withholding tax on net share settlement of share-based compensation plans
(157 ) (994 )
Repurchase of treasury stock
- (1,272 )

Net cash provided by (used in) financing activities
3,066 (2,597 )

Net increase in cash
10,373 6,175

Cash, beginning of period
56,915 50,228

Cash, end of period
$ 67,288 $ 56,403

Cash paid during the period for:

Interest
$ 9,038 $ 6,750
Income taxes paid
$ 3,447 $ 2,976

Noncash financing activity:

Dividends declared
$ 20,948 $ -

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

~~-6-~~

Nathan’s Famous, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT

Twenty-six weeks ended September 26, 2021 and September 27, 2020

(in thousands, except share amounts)

(Unaudited)

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

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		220		0		0			0			0		0			0
Withholding tax on net share settlement of share-based compensation plans		-		0		(7	)		0			-		0			(7	)
Dividends on common stock		-		0		0			(2,880	)		-		0			(2,880	)
Share-based compensation		-		0		58			0			-		0			58
Net income		-		0		0			9,308			-		0			9,308
Balance, September 26, 2021		9,369,235	$	94	$	62,291		$	(33,614	)		5,254,081	$	(84,770	)	$	(55,999	)

					Additional											Total
	Common		Common		Paid-in			Accumulated			Treasury Stock, at Cost					Stockholders’
	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	)

Shares issued in connection with share-based compensation plans		223		0		0			0			0		0			0
Withholding tax on net share settlement of share-based compensation plans		-		0		(6	)		0			-		0			(6	)
Repurchase of common stock		0		0		0			0			26,676		(1,501	)		(1,501	)
Dividends on common stock		-		0		0			(2,880	)		-		0			(2,880	)
Share-based compensation		-		0		58			0			-		0			58
Net income		-		0		0			7,655			-		0			7,655
Balance, September 27, 2020		9,369,015	$	94	$	62,182		$	(40,581	)		5,254,081	$	(84,770	)	$	(63,075	)

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

Nathan’s Famous, Inc. and Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

Twenty-six weeks ended September 26, 2021 and September 27, 2020

(in thousands)

(Unaudited)

	September 26, 2021			September 27, 2020
Cash flows from operating activities:
Net income	$	9,308		$	7,655
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization		548			612
Non-cash rental expense		208			127
Amortization of debt issuance costs		346			346
Share-based compensation expense		58			58
Provision for doubtful accounts		27			27
Deferred income taxes		(16	)		(16	)
Changes in operating assets and liabilities:
Accounts and other receivables, net		(3,192	)		2,114
Inventories		(324	)		(179	)
Prepaid expenses and other current assets		713			560
Other assets		10			9
Accounts payable, accrued expenses and other current liabilities		830			(2,166	)
Deferred franchise fees		346			(83	)
Other liabilities		60			43

Net cash provided by operating activities		8,922			9,107

Cash flows from investing activities:
Purchase of property and equipment		(343	)		(318	)

Net cash used in investing activities		(343	)		(318	)

Cash flows from financing activities:
Dividends paid to stockholders		(2,880	)		(2,880	)
Payments of withholding tax on net share settlement of share-based compensation plans		(7	)		(6	)
Repurchase of treasury stock		0			(1,501	)

Net cash used in financing activities		(2,887	)		(4,387	)

Net increase in cash and cash equivalents		5,692			4,402

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

Cash and cash equivalents, end of period	$	86,756		$	81,519

Cash paid during the period for:
Interest	$	4,969		$	4,969
Income taxes	$	2,673		$	2,743

Non-cash financing activity:
Dividends declared per share	$	.70		$	.70

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

NATHAN'S FAMOUS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~December 24, 2017~~September 26, 2021

(Unaudited)

NOTE A - BASIS OF PRESENTATION

The accompanying consolidated financial statements of Nathan's Famous, Inc. and subsidiaries (collectively ~~“Nathan’s,~~“Nathan’s,” the “Company,” “we,” “us” or “our”) as of and for the thirteen and ~~thirty-nine~~twenty-six week periods ended ~~December 24, 2017~~ September 26, 2021 and ~~December 25, 2016~~ September 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 prepared 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~~Consolidated Financial Statements and ~~notes~~Notes thereto included in Nathan’s Annual Report on Form ~~10-K~~10-K for the fiscal year ended March ~~26, 2017.~~28, 2021.

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

A summary of the ~~Company~~’sCompany’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~~10-K for the fiscal year ended March ~~26, 2017. There have been no changes to~~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 ~~significant accounting policies subsequent~~business, financial condition, cash flows and results of operations for the thirteen and twenty-six weeks ended September 26, 2021 (“fiscal 2022 period”) and continues into the third quarter of fiscal 2022. Governmental restrictions and public perceptions of the risks associated with COVID-19 have caused consumers to ~~March 26, 2017.~~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. We cannot predict the ultimate duration, scope and severity of the COVID-19 pandemic or its ultimate impact on our business in the short or long-term, which may be impacted by variants of the COVID-19 virus and the adoption rate of the COVID-19 vaccines in the areas in which the Company operates.

NOTE B–B – ADOPTION OF NEW ACCOUNTING ~~PRONOUNCEMENTS~~STANDARD

In ~~July 2015, the~~ Financial Accounting Standards Board (“FASB”) updated U.S. accounting guidance to simplify the ways businesses measure inventory. Companies that use the first-in, first-out (FIFO) method or the average cost method will measure inventory at the lower of its cost or net realizable value. Net realizable value is the estimated selling price in the normal course of business, minus the cost of completion, disposal, and transportation. Companies will no longer consider replacement cost or net realizable value less a normal profit margin when measuring inventory. The guidance was effective for the Company beginning in the quarter ended June 25, 2017 and did not have a material impact on its results of operations or financial position.

~~In August 2016,~~ December 2019, the FASB issued ASU ~~2016-15,~~2019-12, “~~Statement of Cash Flows~~Income Taxes (Topic ~~230)~~740): ~~Classification of Certain Cash Receipts~~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 ~~Cash Payments (a consensus of the Emerging Issues Task Force)”. This update addresses eight specific cash flow topics with the objective of reducing the~~also clarifies and amends existing ~~diversity in practice for certain aspects under Topic 230. ASU 2016-15 is effective for annual reporting periods, and interim periods therein, beginning after December 15, 2017.~~guidance to improve consistent application. The Company ~~elected to early adopt ASU 2016-15 during the quarter ending December 24, 2017.~~ adopted this guidance on March 29, 2021. The adoption of this guidance did not have a ~~significant~~material impact on the Company’s ~~consolidated financial statements.~~Consolidated Financial Statements.

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

In ~~May 2014,~~ June 2016, the FASB issued ~~a new accounting standard that attempts to establish a uniform basis~~ASU 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,”which significantly changes the impairment model for ~~recording~~ ~~revenue to virtually all industries’~~most financial ~~statements, under U.S. GAAP as further amended during 2016. The FASB issued certain updates to~~instruments. Current guidance requires the standard, including clarifying reporting revenue between Principle versus Agent and clarification in determining performance obligations and licenses guidance. The revenue standard’s core principle is built on the contract between a vendor and a customer for the provisionrecognition of ~~goods and services. It attempts to depict the exchange of rights and obligations between the parties in the pattern of revenue recognition~~credit losses based on an incurred loss impairment methodology that reflects losses once the ~~consideration to which the vendor is entitled.~~In order to accomplish this objective, companies must evaluate the following five basic steps: (i) identify the contract with the customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

~~There~~losses are ~~two basic transition methods that are available~~ ~~– full retrospective, or modified retrospective transition methods. Early adoption is prohibited. Public companies were originally expected to apply~~probable. Under the new standard, ~~for annual periods beginning after December 15, 2016,~~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 ~~interim periods therein, which for Nathan’s would have been its first quarter~~trade receivables. The CECL model uses a broader range of ~~fiscal 2018, beginning on March 27, 2017. On July 9, 2015,~~ reasonable and supportable information in the development of credit loss estimates. In November 2019, the FASB ~~agreed to delay~~deferred the ~~standard’s~~ effective date ~~to annual~~for smaller reporting ~~periods beginning after December 15, 2017 which will now be our first quarter (June 2018) of our fiscal year ending March 31, 2019.~~

~~The Company~~ has assigned internal resources to evaluate and implement the new standard, and will continue to provide updates during fiscal year 2018. The Company is continuing its evaluation of the impact of the new standard, but currently does not believe that the standard will materially impact its recognition of revenue for its Company-operated restaurants or its recognition of royalties from its franchised restaurants or retail licenses, which are based on a percentage of sales. The Company is still assessing the impact of the new standard on revenues from its Branded Product Program as well as decisions reached by the FASB Transition Resource Group in November 2016 on the treatment of minimum guarantees in licensing arrangements, which may affect the timing of the Company’s recognition of royalty revenues. Currently, franchise and international development fees are recognized when the Company has performed substantially all initial services required by the agreements, which is generally when the franchisee begins operations. Under the new guidance, these fees may be recognized over the term of the agreements. The Company also expects that the adoption of this new guidance may change the reporting of contributions to the advertising fund from franchisees and other third parties and the related advertising fund expenditures, which are currently reported on a net basis in the Consolidated Statements of Earnings and Consolidated Balance Sheets. The Company expects the new guidance will require these advertising fund contributions and expenditures to be reported on a gross basis in the Consolidated Statement of Earnings. For the fiscal year ended March 26, 2017, advertising fund contributions from franchisees and other third parties were $2,572,000, and therefore we expect this change may impact our total revenues and expenses. The Company plans to adopt this standard in the first quarter of fiscal 2019, beginning March 26, 2018, using the modified retrospective method.

~~-7-~~

~~In February 2016, the FASB issued a new accounting standard on leases.~~ The new standard, among other changes, will require lessees to recognize a right-of-use asset and a lease liability on the balance sheet for all leases. The lease liability will be measured at the present value of the lease payments over the lease term. The right-of-use asset will be measured at the lease liability amount, adjusted for lease prepayments, lease incentives received and the lessee’s initial direct costs (e.g. commissions). The new standard is effectivecompanies for annual reporting periods beginning after December 15, ~~2018, including interim reporting periods within those annual reporting periods.~~ 2022. This standard is required to take effect in Nathan’s first quarter ~~(June 2019)~~ ( June 2023) of our fiscal year ending March ~~29, 2020. The adoption will require a modified retrospective approach for leases that exist or are entered into after the beginning of the earliest period presented.~~ 31, 2024. The Company is currently evaluating the ~~standard to determine~~impact that the ~~impact~~adoption of ~~the adoption~~this guidance will have on its consolidated financial statements ~~but expects that the standard will result in a significant increase to its other assets~~ and ~~other liabilities.~~related disclosures.

In January 2017, the FASB issued an update to the accounting 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. The guidance is effective prospectively for public business entities for annual reporting periods beginning after December 15, 2019. This standard is required to take effect in Nathan’s first quarter (June 2020) of our fiscal year ending March 28, 2021. Nathan’s does not expect the adoption of this new guidance to have a material impact on its results of operations or financial position.

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.

N~~OTE~~NOTE D – REVENUES

The Company’s disaggregated revenues for the thirteen and twenty-six weeks ended September 26, 2021 and September 27, 2020 are as follows (in thousands):

	Thirteen weeks ended				Twenty-six weeks ended
	September 26, 2021		September 27, 2020		September 26, 2021		September 27, 2020

Branded Products	$	19,063	$	9,698	$	35,059	$	14,447
Company-operated restaurants		4,437		2,994		7,766		4,928
Total sales		23,500		12,692		42,825		19,375

License royalties		7,658		8,268		18,340		18,791

Franchise royalties		1,037		409		1,837		519
Franchise fees		130		67		237		148
Total franchise fees and royalties		1,167		476		2,074		667

Advertising fund revenue		553		403		958		692

Total revenues	$	32,878	$	21,839	$	64,197	$	39,525

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

	Thirteen weeks ended				Twenty-six weeks ended
	September 26, 2021		September 27, 2020		September 26, 2021		September 27, 2020

United States	$	31,878	$	21,501	$	62,479	$	38,913
International		1,000		338		1,718		612
Total revenues	$	32,878	$	21,839	$	64,197	$	39,525

Contract balances

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

September 26,

2021

March 28,

2021

Receivables, which are included in “Accounts and other receivables, net” (a)

250

Deferred franchise fees (b)

2,119

1,773

(a)

Includes receivables related to “franchise fees and royalties”

(b)

Deferred franchise fees of $351 and $1,768as of September 26, 2021 and $237 and $1,536 as of March 28, 2021 are included in Deferred franchise fees – current and long term, respectively.

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

	Twenty-six weeks ended
	September 26, 2021			September 27, 2020
Deferred franchise fees at beginning of period		1,773			1,917
Additions to deferred revenue		583			65
Revenue recognized during the period		(237	)		(148	)
Deferred franchise fees at end of period	$	2,119		$	1,834

Anticipated future recognition of 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
2022 (a)	$	180
2023		322
2024		301
2025		285
2026		258
Thereafter		773
Total	$	2,119

(a)

Represents franchise fees expected to be recognized for the remainder of the 2022 fiscal year, which includes international development fees expected to be recognized over the duration of one year or less. Amount does not include $237 of franchise fee revenue recognized for the twenty-six weeks ended September 26, 2021.

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~~twenty-six week periods ended ~~December 24, 2017~~ September 26, 2021 and ~~December 25, 2016,~~ September 27, 2020, respectively.

Thirteen weeks
										Net (Loss) Income													Net Income
	Net (Loss) Income					Number of Shares				Per Share					Net Income				Number of Shares				Per Share
	2017			2016		2017		2016		2017			2016		2021		2020		2021		2020		2021		2020
	(in thousands)					(in thousands)									(in thousands)				(in thousands)
Basic EPS
Basic calculation	$	(3,779	)	$	699		4,185		4,175	$	(0.90	)	$	0.17	$	3,545	$	3,655		4,115		4,115	$	0.86	$	0.89
Effect of dilutive employee stock options		-			-		-		34		-			-		-		-		0		0		0		0
Diluted EPS
Diluted calculation	$	(3,779	)	$	699		4,185		4,209	$	(0.90	)	$	0.17	$	3,545	$	3,655		4,115		4,115	$	0.86	$	0.89

~~-8-~~10

Thirty-nine weeks

Net Income

Net Income

Number of Shares

Per Share

2017

2016

2017

2016

2017

2016

(in thousands)

(in thousands)

Basic EPS

Basic calculation
$ 2,263 $ 6,756 4,180 4,171 $ 0.54 $ 1.62
Effect of dilutive employee stock options
- - 39 31 - (0.01 )
Diluted EPS

Diluted calculation
$ 2,263 $ 6,756 4,219 4,202 $ 0.54 $ 1.61

Twenty-six weeks
									Net Income
	Net Income				Number of Shares				Per Share
	2021		2020		2021		2020		2021		2020
	(in thousands)				(in thousands)
Basic EPS
Basic calculation	$	9,308	$	7,655		4,115		4,118	$	2.26	$	1.86
Effect of dilutive employee stock options		-		-		0		0		0		0
Diluted EPS
Diluted calculation	$	9,308	$	7,655		4,115		4,118	$	2.26	$	1.86

~~No options~~Options to purchase 20,000 shares of common stock ~~for~~in the ~~thirty-nine~~thirteen and twenty-six week periods ended ~~December 24, 2017 and December 25, 2016 or for the thirteen week period ended December 25, 2016~~ September 26, 2021 were ~~excluded from~~not included in the computation of diluted ~~earnings per share. For~~EPS because the ~~thirteen week period ended December 24, 2017, 47,000 options~~exercise price exceeded the average market price of common shares during the period.

Options to purchase 10,000 shares of common stock in the thirteen and twenty-six week periods ended September 27, 2020 were ~~excluded from~~not included in the computation of ~~dilutive earnings per share as~~diluted EPS because the ~~effect would be anti-dilutive.~~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 September 26, 2021 and March 28, 2021.

At September 26, 2021 and March 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 E–G – FAIR VALUE MEASUREMENTS

~~Nathan~~’sNathan’s follows a ~~three-level~~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 ~~Company’s long-term debt had a~~ face value ~~of $150,000,000 as of December 24, 2017~~ and a fair value of ~~$155,625,000~~long-term debt as of ~~December 24, 2017.~~ September 26, 2021 and March 28, 2021 were as follows (in thousands):

	September 26, 2021				March 28, 2021
	Face value		Fair value		Face Value		Fair value

Long-term debt	$	150,000	$	153,212	$	150,000	$	154,420

The Company estimates the fair value of its long-term debt 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 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.

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 24, 2017,~~ September 26, 2021, no fair value adjustment or material fair value measurements were required for non-financial assets or liabilities.

NOTE FH – ACCOUNTS AND OTHER RECEIVABLES, NET

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

	December 24,		March 26,		September 26,		March 28,
	2017		2017		2021		2021

Branded product sales	$	8,726	$	6,037	$	10,458	$	6,480
Franchise and license royalties		2,534		2,746		3,307		5,224
Other		1,093		622		1,347		293
		12,353		9,405		15,112		11,997

Less: allowance for doubtful accounts		480		457		295		345
Accounts and other receivables, net	$	11,873	$	8,948	$	14,817	$	11,652

Accounts receivable are due within 30 days and are ~~stat~~edstated at amounts due from franchisees, 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.

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.

~~-9-~~

Changes in the ~~Company~~’sCompany’s allowance for doubtful accounts for the ~~thirty-nine~~twenty-six week period ended ~~December 24, 2017~~ September 26, 2021 and the fiscal year ended March ~~26, 2017~~ 28, 2021 are as follows (in thousands):

	December 24, 2017			March 26, 2017			September 26, 2021			March 28, 2021

Beginning balance	$	457		$	471		$	345		$	237
Bad debt expense		42			53			27			101
Accounts written off		(19	)		(67	)
Write-offs and other								(77	)		7
Ending balance	$	480		$	457		$	295		$	345

NOTE GI – PREPAID EXPENSES AND OTHER CURRENT ASSETS

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

	December 24,		March 26,		September 26,		March 28,
	2017		2017		2021		2021

Income taxes	$	2,751	$	-	$	0	$	280
Real estate taxes						72		87
Insurance		247		319		162		388
Marketing						0		196
Other		354		774		378		374
Total prepaid expenses and other current assets	$	3,352	$	1,093	$	612	$	1,325

NOTE J - GOODWILL AND INTANGIBLE ASSET

N~~OTE H~~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. Based on the quantitative test performed, management determined that the Company’s goodwill has not been impaired as of September 26, 2021 and September 27, 2020, and as a result, 0 impairment charge was recorded for the thirteen and twenty-six week periods ended September 26, 2021 and September 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, the Company determined that the definite-lived intangible asset was recoverable and 0 impairment charge was recorded for the thirteen and twenty-six week periods ended September 26, 2021 and September 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 September 26, 2021 and September 27, 2020.

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. As a result of the Company’s analysis, no long-lived assets were deemed to be impaired as of September 26, 2021 and September 27, 2020, and, as a result, 0 impairment charge was recorded for the thirteen and twenty-six week periods ended September 26, 2021 and September 27, 2020.

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

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

	December 24,		March 26,		September 26,		March 28,
	2017		2017		2021		2021
Payroll and other benefits	$	2,087	$	2,708	$	1,942	$	2,793
Accrued rebates		1,245		1,050		460		132
Rent and occupancy costs		207		215		458		73
Deferred revenue		17		723		201		841
Construction costs		70		160		55		60
Interest		1,470		463		4,043		4,057
Professional fees		168		109		158		200
Income taxes		33		143
Dividend payable		21,073		125
Sales, use and other taxes						192		60
Corporate income taxes						621		0
Other		274		169		455		262
Total accrued expenses and other current liabilities	$	26,644	$	5,865	$	8,585	$	8,478

Other liabilities consist of the following (in thousands):

	December 24,		March 26,		September 26,		March 28,
	2017		2017		2021		2021
Deferred development fees	$	154	$	67
Reserve for uncertain tax positions		419		366	$	713	$	653
Deferred rental liability		700		786
Dividend payable		-		125
Other		211		211		121		121
Total other liabilities	$	1,484	$	1,555	$	834	$	774

~~-10-~~

N~~OTE I~~NOTE M – ~~SALES~~INCOME TAXES

~~The Company’s sales~~On March 27, 2020, the Coronavirus Aid, Relief and Economic Security (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 ~~thirteen and thirty-nine weeks ended December 24, 2017 and December 25, 2016 are as follows (in thousands):~~

Thirteen weeks ended Thirty-nine weeks ended

December 24,
2017

December 25,
2016

December 24,
2017

December 25,
2016

Branded Products
$ 14,674 $ 12,868 $ 50,741 $ 44,349
Company-operated restaurants
2,093 1,991 12,898 13,449
Other
- - - 214
Total sales
$ 16,767 $ 14,859 $ 63,639 $ 58,012

~~NOTE~~ ~~J – INCOME TAXES~~ 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~~twenty-six week periods ended ~~December 24, 2017~~ September 26, 2021 and ~~December 25, 2016~~ September 27, 2020 reflect effective tax rates of ~~21.5%~~28.0% and ~~37.1%~~27.9%, respectively. Nathan’s effective tax rates for the thirty-nine week periods ended December 24, 2017 and December 25, 2016 were reduced by 670 BPS and 610 BPS, respectively, as a result of the tax benefits associated with stock compensation. For the thirty-nine week periods ended December 24, 2017 and December 25, 2016, excess tax benefits of $194,000 and $659,000, respectively, were reflected in the Consolidated Statements of Earnings as a reduction to the provision for income taxes.

The amount of unrecognized tax benefits at ~~December 24, 2017~~ September 26, 2021 was ~~$207,000,~~$433,000 all of which would impact Nathan’s effective tax rate, if recognized. As of ~~December 24, 2017,~~ September 26, 2021, Nathan’s had ~~$212,000~~$293,000 of accrued interest and penalties in connection with unrecognized tax benefits.

NOTE N – SEGMENT INFORMATION

~~During the fiscal year ending March 25, 2018, Nathan~~’s will seek to settle additional uncertain tax positions with the tax authorities. As a result, it is reasonably possible the amount of unrecognized tax benefits, excluding the related accrued interest and penalties, could be reduced by up to $5,000, which would favorably impact Nathan’s ~~effective tax rate, although no assurances can be given in this regard.~~

~~On December 22, 2017~~, the Enactment Date, President Trump signed the Tax Cuts and Jobs Act (“Act”) into law which among other provisions, permanently reduces the top corporate tax rate from 35 percent to a flat 21 percent beginning January 1, 2018 and eliminates the corporate Alternative Minimum Tax. The new law limits the deduction of business interest, net of interest income, to 30 percent of the adjusted taxable income of the taxpayer in any taxable year. Any amount disallowed under the limitation is treated as business interest paid or accrued in the following year. Disallowed interest will have an indefinite carryforward. The new law also repeals the performance-based exception to the $1.0 million deduction limitation on executive compensation and modifies the definition of “covered employees”. The new law allows businesses to immediately write of the full cost of new equipment.

~~Pursuant to Staff Accounting Bulletin #118, Nathan~~’s has determined reasonable estimates to its deferred assets and liabilities and pursuant to ASC 740, Income Taxes, the Company has recognized the effect(s) of the Act on current and deferred income taxes in its financial statements during the quarter ended December 24, 2017. Nathan’s has recorded the following discrete adjustment to its deferred tax liability and unrecognized tax benefits which reduced the provision for income taxes by $436,000 or 1510 BPS during the thirty-nine weeks ended December 24, 2017.

~~Nathan~~’s estimates that its blended federal tax rate will be 31% for its fiscal year ending March 25, 2018 and that its annual tax rate for the fiscal year ending March 25, 2018 will be in the range of approximately 40.8% to 43.1%, excluding the impact of the discrete items recorded and excess tax benefit associated with stock compensation. The final annual tax rate is subject to many variables, including the ultimate determination of revenue and income tax by state, among other factors, and therefore cannot be determined until the end of the fiscal year; therefore, the actual tax rate could differ from our current estimates. In addition, the ultimate benefit of the Act on Nathan’s is unclear as the lower annual tax rate could be outweighed by the limitation of the deduction of interest expense and other provisions.

~~NOTE~~ ~~K – 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 ~~system~~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 ~~Corporate.~~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 ~~hotdogs,~~hot dogs, sausage and corned beef products, frozen French fries and additional products through retail grocery channels and club stores throughout the United States.

~~-11-~~

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 f~~rom~~from operations attributable to ~~corporate~~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.~~costs and expenses of the advertising fund.

~~Interest~~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.

Operating segment information is as follows (in thousands):

	Thirteen weeks ended						Thirty-nine weeks ended						Thirteen weeks ended						Twenty-six weeks ended
	Dec. 24, 2017			Dec. 25, 2016			Dec. 24, 2017			Dec. 25, 2016			September 26, 2021			September 27, 2020			September 26, 2021			September 27, 2020

Revenues
Branded Product Program	$	14,674		$	12,868		$	50,741		$	44,563		$	19,063		$	9,698		$	35,059		$	14,447
Product licensing		4,228			3,990			17,393			15,602			7,658			8,268			18,340			18,791
Restaurant operations		3,181			3,079			16,473			17,201			5,604			3,470			9,840			5,595
Corporate		-			-			-			-
Corporate (1)														553			403			958			692
Total revenues	$	22,083		$	19,937		$	84,607		$	77,366		$	32,878		$	21,839		$	64,197		$	39,525

Income from operations
Branded Product Program	$	2,924		$	2,886		$	7,888		$	8,336		$	1,161		$	1,252		$	3,415		$	1,524
Product licensing		4,182			3,944			17,257			15,465			7,612			8,223			18,249			18,700
Restaurant operations		(21	)		48			3,209			4,083			694			(138	)		692			(1,031	)
Corporate		(1,715	)		(2,124	)		(5,800	)		(6,275	)		(2,028	)		(1,753	)		(4,215	)		(3,515	)
Income from operations	$	5,370		$	4,754		$	22,554		$	21,609		$	7,439		$	7,584		$	18,141		$	15,678

Loss on debt extinguishment		(8,872	)		-			(8,872	)		-
Interest expense		(3,650	)		(3,663	)		(10,976	)		(11,002	)		(2,651	)		(2,651	)		(5,301	)		(5,301	)
Interest income		44			35			114			71			28			103			64			220
Other income, net		22			21			64			64			5			22			21			22
(Loss) income before provision for income taxes	$	(7,086	)	$	1,147		$	2,884		$	10,742
Income before provision for income taxes													$	4,821		$	5,058		$	12,925		$	10,619

(1)

Represents advertising fund revenue

NOTE LO – SHARE-BASED COMPENSATION

Total share-based compensation during each of the ~~thirteen-week~~thirteen week periods ended ~~December 24, 2017~~ September 26, 2021 and ~~December 25, 2016~~ September 27, 2020 was ~~$99,000 and $136,000, respectively.~~$29,000. Total share-based compensation during each of the ~~thirty-nine~~twenty-six week periods ended ~~December 24, 2017~~ September 26, 2021 and ~~December 25, 2016~~ September 27, 2020 was ~~$298,000 and $482,000, respectively. Total share-based compensation is included in general and administrative expense in our accompanying Consolidated Statements of Earnings.~~ $58,000.As of ~~December 24, 2017,~~ September 26, 2021, there was ~~$200,000~~ $126,000of unamortized compensation expense related to share-based incentive awards. We ~~expect~~expects to recognize this expense over approximately ~~seven~~twenty-three 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 24, 2017

December 25, 2016

December 24, 2017

December 25, 2016

Stock options
$ 38 $ 38 $ 114 $ 114
Restricted stock
61 98 184 368
Total compensation cost
$ 99 $ 136 $ 298 $ 482

~~-12-~~

	Thirteen weeks ended				Twenty-six weeks ended
	September 26, 2021		September 27, 2020		September 26, 2021		September 27, 2020

Stock options	$	23	$	21	$	44	$	42
Restricted stock		6		8		14		16
Total compensation cost	$	29	$	29	$	58	$	58

Stock ~~options outstanding:~~options:

~~There were no new share-based awards granted during~~During the ~~thirty-nine~~twenty-six week period ended ~~December 24, 2017.~~

~~In connection with the Company’s special cash dividend, paid on January 4, 2018, to stockholders of record as of December 22, 2017,~~ September 26, 2021, the Company ~~performed an analysis, pursuant to the anti-dilution provisions of the 2010 Plan (the “2010 Plan”), and issued replacement~~granted options to purchase ~~68,498~~10,000 shares at an exercise price of $33.438 for the unvested stock options outstanding as of the record date of December 22, 2017, cancelling 64,384 shares at an exercise price of $35.58 per share. Nathan’s performed its evaluation based on the closing price of its common stock on December 20, 2017, the day before the stock went ex-dividend, of $83.20 per share, or $78.20 per share excluding the dividend of $5.00 per share. No other terms or conditions of the outstanding options were modified. The anti-dilution provisions of the original award were structured to equalize the award’s fair value before and after the modification.

~~During the fiscal year ended March 29, 2015, the Company granted options to purchase 50,000 shares at an exercise price of $53.89~~$68.50 per share, all of which expire five years from the date of grant. All such ~~stock~~ options vest ratably over a ~~four-year~~four-year period commencing August ~~6, 2015.~~10, 2021.

~~In connection with~~The weighted-average option fair values, as determined using the ~~Company’s special cash~~Black-Scholes option valuation model, and the assumptions used to estimate these values for stock options granted during the twenty-six week period ended September 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	%

The expected dividend ~~paid~~yield is based on ~~March 27, 2015, to stockholders~~historical and projected dividend yields. The Company estimates volatility based primarily on historical monthly price changes of ~~record as of March 20, 2015,~~ the ~~Company performed an analysis, pursuant~~Company’s stock equal to the ~~anti-dilution provisions~~expected life of the 2010 Plan, and issued replacement options to purchase 75,745 shares at an exercise price of $35.58 for the unvested stock options outstanding as of March 29, 2015, canceling 50,000 shares at an exercise price of $53.89. Nathan’s performed its evaluationoption. The risk-free interest rate is based on the ~~closing price~~U.S. Treasury yield in effect at the time of ~~its common stock~~grant. The expected option term is the number of years the Company estimates the options will be outstanding prior to exercise based on March 27, 2015 of $73.56 per share, or $48.56 per share excluding the dividend of $25.00 per share. No other terms or conditions of the outstanding options were modified. The anti-dilution provisions of the original award were structured to equalize the award’s fair value beforeexpected historical exercise patterns and ~~after the modification.~~employment termination behavior.

Transactions with respect to stock options for the ~~thirty-nine~~twenty-six weeks ended ~~December 24, 2017~~ September 26, 2021 are as ~~follows:~~follows:

Weighted-

Weighted-

Aggregate

Average

Average

Intrinsic

Exercise

Remaining

Value

Shares

Price

Contractual Life

(in thousands)

Options outstanding at the beginning of the fiscal year
75,745 $ 35.58 2.36 $ 1,899

Granted
- - - -

Replacement options issued (A)
68,498 $ 33.438 1.61 $ 3,093

Expired
- - - -

Cancellation of outstanding options (A)
(64,384 ) $ 35.58 1.61 $ 3,093

Exercised
(11,361 ) $ 35.58 - 379

Options Outstanding at December 24, 2017 (A)
68,498 $ 33.438 1.61 $ 3,093

Options exercisable at December 24, 2017 (A)
48,348 $ 33.438 1.61 $ 2,183

A-

~~Represents the effects on outstanding options after giving effect to the replacement options issued in connection with the Company’s special dividend to shareholders of record on December 22, 2017.~~

~~-13-~~

			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		4.87		-
Exercised		0		0		-		0
Options outstanding at September 26, 2021		20,000	$	79.20		3.42		0

Options exercisable at September 26, 2021		10,000	$	89.90		1.96		0

Restricted stock:

Transactions with respect to restricted stock for the ~~thirty-nine~~twenty-six weeks ended ~~December 24, 2017~~ September 26, 2021 are as follows:

	Shares			Weighted- Average Grant-date Fair value Per share					Weighted-
Unvested restricted stock at March 26, 2017		10,000		$	49.80
									Average
									Grant-date Fair value
						Shares			Per share
Unvested restricted stock at March 28, 2021							333		$	89.90
Granted		-			-		0			0
Vested		(5,000	)	$	49.80		(333	)	$	89.90

Unvested restricted stock at December 24, 2017		5,000		$	49.80
Unvested restricted stock at September 26, 2021							0			0

NOTE MP – STOCKHOLDERS’ EQUITY

1.~~Dividend~~Dividendss

~~On November 1, 2017,~~ Effective June 11, 2021, the ~~Company~~’s Board of Directors (the “Board”) declared ~~a special~~its first quarterly cash dividend of ~~$5.00~~$0.35 per share ~~payable~~ for fiscal year 2022, aggregating $1,440,000, which was paid on June 25, 2021 to stockholders of record as of ~~December 22, 2017~~the close of business on June 21, 2021.

Effective August 6, 2021, the Board declared its second quarterly cash dividend of $0.35 per share for fiscal year 2022, aggregating $1,440,000, which ~~approximately $20,923,000~~ was paid on January 4, 2018 to the stockholders. The Company also accrued $25,000 for the expected dividends payable on unvested restricted shares pursuant to the terms of the restricted stock agreement. As unvested restricted stock vests, the declared dividend is paid. We estimate that $25,000 (see Note H) will be paid during our fiscal year ending March 31, 2019.

~~On March 10, 2015, the Company’s Board of Directors declared a special cash dividend of $25.00 per share payable~~ September 3, 2021 to stockholders of record as of ~~March 20, 2015~~the close of ~~which approximately $115,100,000 was paid~~business on ~~March 27, 2015 to~~ August 23, 2021.

Effective November 5, 2021 the ~~stockholders. The Company accrued $1,000,000 for the expected dividends~~Board declared its third quarterly cash dividend of $0.35 per share payable on ~~unvested restricted shares pursuant~~December 3, 2021 to stockholders of record as of the close of business on November 22, 2021.

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 ~~restricted stock agreements. As unvested restricted stock vests,~~Indenture, the ~~declared dividend is paid. We have paid $875,000~~declaration and payment of any cash dividends in the future are subject to final determination of the ~~accrued dividend~~Board and ~~estimate that the remaining $125,000(see Note H)~~ will be ~~paid during~~dependent upon our ~~fiscal year ending March 31, 2019.~~earnings and financial requirements.

2. ~~Common~~ Stock ~~Purchase Rights~~Incentive Plans

O~~n June 5, 2013,~~On September 18, 2019, the Company’s shareholders approved the Nathan’s ~~adopted a new stockholder rights plan~~Famous, Inc. 2019 Stock Incentive Plan (the ~~“2013 Rights~~“2019 Plan”) ~~under which all stockholders of record~~. The 2019 Plan became effective as of ~~June 17, 2013 received rights~~July 1, 2020 (the "Effective Date"). Following the Effective Date, (i) no additional stock awards were granted under the 2010 Stock Incentive Plan (the “2010 Plan”) and (ii) all outstanding stock awards previously granted under the 2010 Plan remained subject to ~~purchase~~the terms of the 2010 Plan. All awards granted on or after the Effective Date are subject to the terms of the 2019 Plan.

As of the Effective Date, we were able to issue up to: (a) 369,584 shares of common stock ~~(the “2013 Rights”)~~under the 2019 Plan which includes: (i) shares that have 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 ~~previously existing “New Rights Plan” was terminated.~~Company that were outstanding as of the Effective Date and that subsequently expire unexercised, or are otherwise forfeited, up to a maximum of an additional 11,000 shares. As of September 26, 2021, there were up to 198,584 shares available to be issued for future option grants or up to 181,683 shares of restricted stock that may be granted under the 2019 Plan.

~~The 2013 Rights were distributed as a dividend. Initially, the 2013 Rights will attach to, and trade with, the Company~~’s common stock. Subject to the terms, conditions and limitations of the 2013 Rights Plan, the 2013 Rights will become exercisable if (among other things) a person or group acquires 15% or more of the Company’s common stock. Upon such an event and payment of the purchase price of $100.00 (the “2013 Right Purchase Price”), each 2013 Right (except those held by the acquiring person or group) will entitle the holder to acquire one share of the Company’s common stock (or the economic equivalent thereof) or, if the then-current market price is less than the then current 2013 Right Purchase Price, a number of shares of the Company’s common stock which at the time of the transaction has a market value equal to the then current 2013 Right Purchase Price at a purchase price per share equal to the then current market price of the Company’s Common Stock.

~~The Company~~’s Board of Directors may redeem the 2013 Rights prior to the time they are triggered. Upon adoption of the 2013 Rights Plan, the Company initially reserved 10,188,600 shares of common stock for issuance upon exercise of the 2013 Rights. The 2013 Rights will expire on June 17, 2018 unless earlier redeemed or exchanged by the Company.

~~At December 24, 2017, the Company has reserved 5,696,732 shares of common stock for issuance upon exercise of the Common Stock Purchase Rights approved by the Board of Directors on June 5, 2013.~~

3.Stock Repurchase Programs

During the period from October 2001 through ~~December 24, 2017,~~ September 26, 2021, Nathan’s purchased ~~5,127,373~~5,254,081 shares of ~~its~~ common stock at a cost of ~~approximately~~ ~~$77,303,000~~$84,770,000 pursuant to various stock repurchase plans previously authorized by the ~~Board of Directors.~~Board. During the ~~thirty-nine~~twenty-six week period ended ~~December 24, 2017,~~ September 26, 2021, we did not repurchase anyshares of common stock.

In 2016, the Board 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 24, 2017, an aggregate~~September 26, 2021, Nathan’s had repurchased 1,066,450 shares at a cost of ~~260,258~~$37,108,000 under the sixth stock repurchase plan. At September 26, 2021 there were 133,550 shares ~~can still~~remaining to be ~~purchased~~repurchased pursuant to the sixth stock repurchase plan. The plan does not have a set expiration date. Purchases under ~~Nathan’s existing~~the Company’s stock ~~buy-back program.~~

~~Purchase~~s 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 to be made~~repurchases.

On March 13, 2020, the Board 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 ~~these stock-repurchase plans.~~the 10b5-1 Plan.

~~-14-~~

NOTE NQ – LONG-TERM DEBT

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

December 24,

March 26,

2017

2017

6.625% Senior secured notes due 2025
$ 150,000 -
10.000% Senior secured notes due 2020
- $ 135,000
Less: unamortized debt issuance costs
(5,374 ) (3,525 )
Total long-term debt
$ 144,626 $ 131,475

September 26,

March 28,

2021

2021

6.625% Senior Secured Notes due 2025
$ 150,000 $ 150,000
Less: unamortized debt issuance costs
(2,823 ) (3,169 )
Long-term debt, net
$ 147,177 $ 146,831

On November 1, 2017, the Company ~~completed the issuance of~~issued $150,000,000 of 6.625% Senior Secured Notes due 2025 (the ~~"2025~~"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 ~~(the “Indenture”)~~ by and among the Company, certain of its wholly-owned subsidiaries ~~as guarantors,~~ and U.S. Bank National Association ~~as trustee and collateral trustee.~~(the “Indenture”). The Company used the net proceeds of the 2025 Notes offering to satisfy and discharge the Indenture relating to the ~~2020~~$135,000,000 of 10.000% Senior Secured Notes ~~(as hereinafter defined)~~due 2020 and ~~redeem the 2020 Notes~~redeemed such notes (the "Redemption"), paid a portion of a special $5.00 per share cash dividend to Nathan's stockholders of record, ~~(see Note M.1), 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 Company performed the required evaluation of the refinancing and determined that a portion of the Redemption of the 2020 Notes is accounted for as a modification of the debt and a portion as an extinguishment of the debt. In connection with the Redemption, the Company recorded a loss on early extinguishment of debt of $8,872,000 that primarily reflects a portion of the premium paid to redeem the 2020 Notes and the write-off of certain debt issuance costs.
~~On March 10, 2015, the Company completed the issuance of $135,000,000 of 10.000% Senior Secured Notes due 2020 (“the 2020 Notes”) in a Rule 144A transaction. The~~ 2020 Notes were issued pursuant to an indenture, dated March 10, 2015 by and among the Company, certain of its wholly-owned subsidiaries, as guarantors, and U.S. Bank National Association, a national banking association, as trustee and collateral trustee. The Company used the proceeds to pay a special cash dividend of approximately $116,100,000 (see Note M.1) with the remaining net proceeds for general corporate purposes, including working capital. Debt issuance costs of approximately $5,985,000 were incurred, which were being amortized into interest expense over the remaining 5-year term of the 2020 Notes, or until redeemed.

The ~~2020~~2025 Notes b~~ore~~bear interest at ~~10.000%~~6.625% per annum, payable semi-annually on ~~March 15~~May 1^thst and ~~September 15~~November 1^thst~~. An~~ of each year. The Company made its required semi-annual interest ~~payment~~payments of ~~$6,750,000 was paid~~$4,968,750 on ~~September 14, 2017.~~May 1, 2021 and November 1, 2021.
The ~~2020~~2025 Notes ~~had~~ have no scheduled principal amortization payments prior to its final maturity on ~~March 10, 2020.~~
~~The 2025 Notes~~ ~~will have no scheduled principal amortization payments prior to its final maturity on~~ November 1, 2025.
~~The Company paid a 5% call premium of $6,750,000 associated with the~~ Redemption and incurred debt issuance costs of $4,902,000 in connection with the issuance of the 2025 Notes. The Company also incurred additional interest expense of approximately $562,500 from the closing of the 2025 Notes on November 1, 2017 until the Redemption 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, beginning on May 1, 2018. Semi-annual interest payments are expected to be $4,968,750. The Company expects to reduce its annual cash interest expense by approximately $3,562,500 per annum.

The terms and conditions of the 2025 Notes are as ~~follows:~~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 24, 2017,~~ September 26, 2021, Nathan’s was in compliance with all covenants associated with the 2025 Notes.

The Indenture ~~contain~~scontains 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.

~~-15-~~
17

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 ~~contain~~scontains 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.

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 ~~will be~~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~~’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~~’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~~’sCompany’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 as of, 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 has 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, ~~2021 and prior to November 1,~~ 2022
~~101.656~~100.000 %
~~On or after November 1, 2022~~
~~100.000~~ %
~~-16-~~

In certain circumstances involving a change of control, the Company will be required to make an offer to repurchase all or, at the ~~holder~~’sholder’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.

18
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, the Board 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.
NOTE OR – 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 twenty-six week periods ended September 26, 2021 and September 27, 2020 were as follows (in thousands):

Thirteen weeks ended

Twenty-six weeks ended

September 26,
2021

September 27,
2020

September 26,
2021

September 27,
2020

Statement of Earnings

Operating lease cost
$ 413 $ 396 $ 845 $ 811
Variable lease cost
524 377 966 715
Less: Sublease income, net
(5 ) (22 ) (21 ) (22 )

Total net lease cost (a)
$ 932 $ 751 $ 1,790 $ 1,504
(a)
The thirteen and twenty-six week periods ended September 26, 2021 and September 27, 2020 include $770, net and $1,470, net and $614, net and $1,194, net, respectively, recorded to “Restaurant Operating Expenses” for leases for Company-operated restaurants; $167 and $341, and $159 and $332, respectively, recorded to “General and administrative expenses” for leases for corporate offices and equipment; and $5 and $21, and $22 and $22, 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

Twenty-six weeks ended

September 26,
2021

September 27,
2020

September 26,
2021

September 27,
2020

Operating cash flows from operating leases
$ 183 $ 202 $ 357 $ 407
The weighted average remaining lease term and weighted-average discount rate for operating leases as of September 26, 2021 were as follows:
Weighted average remaining lease term (years):
6.7
Weighted average discount rate:
8.882 %
19
Future lease commitments to be paid and received by the Company as of September 26, 2021 were as follows (in thousands):

Payments

Receipts

Operating Leases

Subleases

Net Leases

Fiscal year:

2022 (a)
$ 760 $ 77 $ 683
2023
1,849 168 1,681
2024
1,774 169 1,605
2025
1,678 169 1,509
2026
1,712 169 1,543
Thereafter
3,762 183 3,579
Total lease commitments
$ 11,535 $ 935 $ 10,600
Less: Amount representing interest
2,822
Present value of lease liabilities (b)
$ 8,713
(a)
Represents future lease commitments to be paid and received by the Company for the remainder of the 2022 fiscal year. Amount does not include $890of lease commitments paid and received by the Company for the twenty-six week period ended September 26, 2021.
(b)
The present value of minimum operating lease payments of $1,846 and $6,867are included in “Current portion of operating lease liabilities” and “Long-term operating lease liabilities,” respectively on the Consolidated Balance Sheet.
Company as lessor
The components of net lease income for the thirteen week and twenty-six week periods ended September 26, 2021 and September 27, 2020 were as follows (in thousands):

Thirteen weeks ended

Twenty-six weeks ended

September 26,
2021

September 27,
2020

September 26,
2021

September 27,
2020

Operating lease income, net
$ 5 $ 22 $ 21 $ 22
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 is obligated to make payments under the Brooklyn Guaranty in the event of a default by the tenant/franchisee. The Brooklyn Guaranty has an initial term of 10 years and one ~~5-year~~5-year renewal option and is limited to 24 months of rent for the firstthree years of the term. For the remainder of the term, the Brooklyn Guaranty is limited to 12 months of rent plus reasonable costs of collection and attorney’s fees. As of September 26, 2021, Nathan’s has recorded a liability of ~~$204,000~~$113,000 in connection with the Brooklyn Guaranty which does not 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. ~~For the remainder of the term, the Brooklyn Guaranty is limited to 12 months of rent plus reasonable costs of collection and attorney’s fees.~~

On December 6, 2017, the Company amended its employment agreement with Howard M. Lorber. Under the amendment, the term of the employment agreement was extended from December 31, 2017 to December 31, 2022 and the base compensation of Mr. Lorber will be $1,000,000 per annum. All other terms and conditions remained the same.
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~~’sCompany’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 Financial Statements were issued and filed with the U.S. Securities and Exchange Commission. There were no subsequent events that require recognition or disclosure.

~~-17-~~
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 ~~Summer~~the 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, ~~and~~ business ~~conditions;~~conditions or tariffs; the collectibility of receivables; changes in consumer tastes; the status of our licensing and supply agreements, including the impact of our supply agreement for hot dogs with John Morrell & Co., the impact of our debt service and repayment obligations under the 2025 Notes; the impact of the Tax Cuts and Jobs Act (“~~the 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 ~~26, 2017,~~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”~~“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“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.
21

Our revenues are generated primarily from selling products under ~~Nathan~~’sNathan’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 24, 2017,~~September 26, 2021, our restaurant system, excluding virtual or “ghost” kitchens, consisted of ~~285 units comprised of 280~~224 Nathan’s franchised units, including ~~124~~109 Branded Menu Program units, and ~~five~~four Company-owned units (including one seasonal unit), located in 18states, and 12 foreign countries. At September 27, 2020, our restaurant system, excluding virtual or “ghost” kitchens, consisted of 214 Nathan’s franchised units, including 93 Branded Menu Program units, and four Company-owned units (including one seasonal unit), located in 19 states, and 129 foreign countries. ~~At December 25, 2016,~~
Our strategic emphasis 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 ~~consisted of 287 units~~ comprised of ~~282 Nathan’s~~both Company-owned and franchised units, including ~~114~~virtual or “ghost” kitchens. The primary drivers of our recent growth have been our Licensing and Branded ~~Menu units, and five Company-owned units (including one seasonal unit), located in 20 states, and 10 foreign countries.~~Product Programs which have been the largest contributors to the Company’s profits.

~~In addition~~We remain committed to ~~plans~~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 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, including virtual or “ghost” kitchens. While we do not expect to significantly increase the number of company-owned restaurants, we do expect to opportunistically and strategically invest in a small number of new units as showcase locations for ~~expansion through~~prospective franchisees and master developers as we seek to grow our ~~Branded Product Program, licensing and franchising, Nathan’s continues~~franchise system. We continue to seek opportunities to ~~co-brand within its restaurant system. Nathan’s is also~~drive sales in a variety of ways as we adapt to the ~~owner~~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 ~~the Arthur Treacher’s brand. Currently there are seven locations operating under~~ our ~~Arthur Treacher’s Branded Menu Program agreement.~~customers.

As described in our Annual Report on Form 10-K for the year ended March ~~26, 2017,~~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 compared to earlier ~~periods.~~periods in addition to the potential impact that any future tariffs may have on the business.
~~-18-~~

On November 1, 2017, the Company ~~completed the issuance of~~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 2020 Notes~~(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 ~~will use~~used any remaining proceeds for general corporate purposes, including working capital. Our future results could also be impacted by our obligations under the 2025 Notes. As a result of the issuance of the 2025 Notes, Nathan’s ~~expects to incur~~incurs interest expense of $9,937,500 ~~per annum, reducing its cash interest expense by $3,562,500~~ per annum. Nathan’s expects to incur annual amortization of debt issuance costs of approximately $685,000. Please refer to Note N – Long Term Debt, for the effects of the Company’s refinancing from the preceding consolidated financial statements. The impact of interest expense on net income has been reflected in our results for the thirteen and thirty-nine week periods ended December 24, 2017 and December 25, 2016.$691,000 through November 1, 2025.

On March 10, 2015, we consummated a $135,000,000 offering of 10.000% Senior Secured Notes due 2020 (the “2020 Notes”) and paid a dividend of $25.00 per share (or approximately $116,100,000 in the aggregate). As ~~a result of the issuance of the 2020 Notes, Nathan’s incurred interest expense of $13,500,000 per annum and annual amortization of debt issuance costs of approximately $1,200,000.~~
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.”

~~On November 1, 2017,~~Impact of COVID-19 pandemic on our business
In March 2020, the ~~Board~~World Health Organization declared the novel strain of ~~Directors declared~~coronavirus (“COVID-19”) a ~~special cash dividend~~global pandemic. During the fiscal 2022 period, the number of ~~$5.00 per share~~,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 has experienced some recovery from the initial impact of COVID-19, the long-term impact of COVID-19 on the economy and on the Company’s business remains uncertain, the duration and scope of which cannot currently be predicted. Our ability to attract and retain employees at our Company-owned restaurants has become more challenging, as the job market for these employees has become more competitive. The challenges in the labor market have also affected some suppliers, resulting in some intermittent product shortages. The Company cannot predict if new variants of COVID-19 will be discovered or ~~$20,923,000~~if there will be another surge, what additional restrictions may be enacted, to ~~stockholders~~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 or venues such as professional sports arenas, amusement parks, shopping malls or movie theaters during or following social distancing protocols, and what long-lasting effects the COVID-19 pandemic may have on the Company as a whole.
The full impact of ~~record~~the COVID-19 pandemic continues to evolve as of the date of this report. The duration of the disruption on global, national, and local economies cannot be reasonably estimated at this time due to the ~~close~~ongoing effects of ~~business~~this situation. Management is continually evaluating the impact of this global crisis on ~~December 22, 2017, which was paid on January 4, 2018.~~its financial condition, liquidity, operations, and 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 ~~26, 2017,~~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 ~~discussed~~ in Note B – simplifying the ~~measurement of inventory and simplifying the elements of cash flow classification;~~accounting for income taxes, there have been no other significant changes to the Company’s ~~significant~~ accounting policies subsequent to March ~~26, 2017.~~28, 2021.

Adoption of New Accounting Standard~~Pronouncements~~

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

New Accounting ~~Pronouncements~~Standard Not Yet Adopted

Please refer to Note C of the preceding consolidated financial statements for our discussion of the New Accounting ~~Pronouncements~~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.

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 ~~excludes~~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 ~~loss on early extinguishment of debt and stock-based~~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 ~~(loss)~~ 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~~non-US GAAP basis should be used as a complement to, and in conjunction with, data presented in accordance with US GAAP.

~~-19-~~

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

Thirteen weeks ended Thirty-nine weeks ended
Thirteen weeks ended

Twenty-six weeks ended

December 24, 2017

December 25, 2016

December 24, 2017

December 25, 2016

September 26,
2021

September 27,
2020

September 26,
2021

September 27,
2020

(unaudited)

(unaudited)

Net (loss) income
$ (3,779 ) $ 699 $ 2,263 $ 6,756

Net income
$ 3,545 $ 3,655 $ 9,308 $ 7,655
Interest expense
3,650 3,663 10,976 11,002 2,651 2,651 5,301 5,301
(Benefit) provision for income taxes
(3,307 ) 448 621 3,986
Provision for income taxes
1,276 1,403 3,617 2,964
Depreciation and amortization
320 309 1,055 1,005 270 302 548 612
EBITDA
(3,116 ) 5,119 14,915 22,749 7,742 8,011 18,774 16,532

Loss on debt extinguishment
8,872 - 8,872 -
Stock-based compensation
99 136 298 482
Share-based compensation
29 29 58 58
Adjusted EBITDA
$ 5,855 $ 5,255 $ 24,085 $ 23,231 $ 7,771 $ 8,040 $ 18,832 $ 16,590

Results of Operations

Thirteen weeks ended ~~December 2~~4~~, 201~~7September 26, 2021 compared to thirteen weeks ended ~~December 2~~5~~, 201~~6September 27, 2020

Revenues

Total ~~sales~~ revenues increased by ~~12.8%~~51% to ~~$16,767,000~~$32,878,000 for the thirteen weeks ended ~~December 24, 2017~~September 26, 2021 (“~~third~~second quarter fiscal ~~2018”~~2022”) as compared to ~~$14,859,000~~$21,839,000 for the thirteen weeks ended ~~December 25, 2016~~September 27, 2020 (“~~third~~second quarter fiscal ~~2017”~~2021”). as we continue to lap the significant impact of COVID-19 on our results beginning in March 2020.

Total sales increasedby 85% to $23,500,000 for the second quarter fiscal 2022 as compared to $12,692,000 for the second quarter fiscal 2021. Foodservice sales from the Branded Product Program increasedby ~~14.0%~~97% to ~~$14,674,000~~$19,063,000 for the ~~third~~second quarter fiscal ~~2018~~2022 as compared to sales of ~~$12,868,000~~$9,698,000 for the second quarter fiscal 2021. The sales from our Branded Product Program have increased as certain government mandated restrictions associated with the COVID-19 pandemic have eased with approved vaccines being more widely distributed and administered. As a result, most of our Branded Product Program customers have reopened adhering to state and local guidelines, such as professional sports arenas, amusement parks, shopping malls and movie theaters. During the second quarter fiscal 2022, the total pounds of hot dogs sold in the ~~third quarter fiscal 2017. During the third quarter fiscal 2018, the volume of business~~Branded Product Program increased by approximately ~~10.4%.~~92% as compared to the second quarter fiscal 2021. Our average selling prices increased by approximately ~~3.0% as a result of our pricing strategy, which is more closely correlated to the cost of beef which increased by approximately 8.0%, during the third quarter fiscal 2018~~3.7% as compared to the ~~third~~second quarter fiscal ~~2017.~~ 2021.

Total Company-owned restaurant sales increased by ~~5.1%~~48% to ~~$2,093,000~~$4,437,000 during the ~~third~~second quarter fiscal ~~2018~~2022 as compared to ~~$1,991,000~~$2,994,000 during the ~~third~~second quarter fiscal ~~2017~~2021. The increase was primarily due ~~primarily~~ to ~~higher sales~~an increase in traffic at our Coney Island ~~and Yonkers~~ locations ~~attributable~~driven, in part, by the re-opening of Luna Park, the amusement park in Coney Island, as well as the easing of certain government mandated restrictions as a result of the public health measures taken to ~~a higher check average of 3.8% and higher customer counts.~~reduce exposure to the COVID-19 virus compared to the second quarter fiscal 2021.

License royalties ~~increased 6.0%~~decreased by 7% to ~~$4,228,000~~$7,658,000 in the ~~third~~second quarter fiscal ~~2018~~2022 as compared to ~~$3,990,000~~$8,268,000 in the ~~third~~second quarter fiscal ~~2017.~~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, increased $180,000~~WalMart, decreased 9% to ~~$3,680,000~~$7,042,000 for the ~~third~~second quarter fiscal ~~2018~~2022 as compared to ~~$3,500,000~~$7,716,000 in the ~~third~~second quarter fiscal ~~2017.~~2021. The ~~increase~~decrease is due to ~~an increase~~a 6% decrease in retail volume during the ~~third~~second quarter fiscal ~~2018~~2022 period and a 2% decrease in average net selling price as compared to the ~~third~~second quarter fiscal ~~2017, partly offset by~~2021. The foodservice business earned lower ~~average selling prices, on which our~~ royalties ~~are calculated.~~of $11,000 as compared to the second quarter fiscal 2021. Royalties earned from all other licensing agreements for the manufacture and sale of Nathan’s products increased by ~~$58,000~~$65,000 during the ~~third~~second quarter fiscal ~~2018~~2022 as compared to the ~~third~~second quarter fiscal ~~2017.~~2021 primarily due to additional royalties earned on sales of proprietary spices, offset in part, by lower royalties earned on pickles and French fries.

Franchise fees and royalties were $~~1,088,000~~$1,167,000 in ~~both~~ the ~~third~~second quarter fiscal ~~2018 and~~2022 as compared to $476,000 in the ~~third~~second quarter fiscal ~~2017.~~2021. The increase was primarily due to the continued momentum associated with the recovery from the COVID-19 pandemic. Total royalties were ~~$963,000~~$1,037,000 in the ~~third~~second quarter fiscal ~~2018~~2022 as compared to ~~$984,000~~$409,000 in the ~~third~~second quarter fiscal ~~2017.~~2021. Royalties earned under the Branded Menu ~~program~~Program were ~~$259,000~~$207,000 in the ~~third~~second quarter fiscal ~~2018~~2022 as compared to ~~$214,000~~$70,000 in the ~~third~~second quarter fiscal ~~2017.~~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 $97,000 in the second quarter fiscal 2022. Traditional franchise royalties ~~decreased to $704,000~~were $733,000 in the ~~third~~second quarter fiscal ~~2018~~2022 as compared to ~~$770,000~~$339,000 in the ~~third~~second quarter fiscal ~~2017.~~2021. Franchise restaurant sales ~~decreased~~increased to ~~$15,596,000~~$15,644,000 in the ~~third~~second quarter fiscal ~~2018~~2022 as compared to ~~$17,184,000~~$6,969,000 in the ~~third~~second quarter fiscal ~~2017~~2021 primarily due to the ~~decline in comparable domestic sales and~~reopening of a majority of our franchised locations. Approximately 87% of our franchise system was open at the ~~impact~~end of ~~units closed in~~ the ~~previous~~second quarter fiscal ~~year.~~2022 as compared to 58% at the end of the second quarter fiscal 2021. Comparable domestic franchise sales (consisting of 9247 Nathan’s outlets, excluding sales under the Branded Menu Program) were ~~$12,251,000~~$11,425,000 in the ~~third~~second quarter fiscal ~~2018~~2022 as compared to ~~$12,863,000~~$5,991,000 in the ~~third~~second quarter fiscal ~~2017.~~2021.

At ~~December 24, 2017, 280~~ September 26, 2021, 224franchised outlets, including domestic, international and Branded Menu Program outlets were operating as compared to ~~282~~214 franchised outlets, including domestic, international and Branded Menu Program outlets at ~~December 25, 2016.~~September 27, 2020. Total franchise fee income was ~~$125,000~~$130,000 in the ~~third~~second quarter fiscal ~~2018 as~~2022 compared to ~~$104,000~~$67,000 in the ~~third~~second quarter fiscal ~~2017.~~2021. Domestic franchise fee income was ~~$33,000~~$38,000 in the ~~third~~second quarter fiscal ~~2018 as~~2022 compared to ~~$90,000~~$31,000 in the ~~third~~second quarter fiscal ~~2017, due primarily to the difference in the types of locations opened, and associated fees earned, between the two periods.~~2021. International franchise fee income was ~~$92,000~~$56,000 in the ~~third~~second quarter fiscal ~~2018 as~~2022 compared to ~~$6,000~~$26,000 during the ~~third~~second quarter fiscal ~~2017, primarily due to the timing of new international development fees.~~ 2021.

We ~~also~~ recognized ~~$8,000~~$36,000and $10,000 in forfeited fees in the ~~third~~second quarter fiscal ~~2017.~~ 2022 and the second quarter fiscal 2021, respectively.During the ~~third~~second quarter fiscal ~~2018, 8~~2022, two new traditional franchised outlets opened, ~~including three units in Australia, one unit in the Philippines and two~~as well as eleven new Branded Menu Program outlets. Additionally, 54 new virtual kitchens opened. During the ~~third~~second quarter fiscal ~~2017, 22~~ 2021, twonew traditional franchised outlets opened, including ~~nine~~ onenew Branded Menu Program ~~outlets.~~outlet.

~~-20-~~

Advertising fund revenue, after eliminating Company contributions, was $553,000 during the second quarter fiscal 2022, as compared to $403,000 during the second quarter fiscal 2021.

Costs and Expenses

Overall, our cost of sales increased by ~~16.8% or $1,814,000~~103% to ~~$12,599,000~~$20,131,000 in the ~~third~~second quarter fiscal ~~2018,~~2022 as compared to ~~$10,785,000~~$9,927,000 in the ~~third~~second quarter fiscal ~~2017.~~2021. Our gross profit (representing the difference between sales and cost of sales) ~~was $4,168,000~~increased to $3,369,000 or ~~24.9%~~14.3% of sales during the ~~third~~second quarter fiscal ~~2018~~2022 as compared to ~~$4,074,000~~$2,765,000 or ~~27.4%~~21.8% of sales during the ~~third~~second quarter fiscal 2017. The margin reduction was primarily due to the higher cost of beef in the Branded Product Program and in the Company-operated restaurants in addition to the higher labor costs at the Company-owned restaurants.2021.

Cost of sales in the Branded Product Program increased by ~~approximately $1,736,000 during~~115% to $17,389,000 in the ~~third~~second quarter fiscal ~~2018~~2022 as compared to $8,087,000 in the ~~third~~second quarter fiscal ~~2017,~~2021, primarily due to the ~~10.4%~~92% increase in the volume of product sold ~~and the 8.0%~~as discussed above, as well as a 16% increase in the average cost per pound of our hot dogs. Beginning in July 2021, the cost of hot dogs increased significantly due to ongoing supply chain challenges associated with increased consumer demand as a result of the continued recovery from the COVID-19 pandemic which caused some delays and shortages. This trend continued during the summer months of August and September 2021. We did not make any ~~purchases~~purchase commitments of beef during the ~~third~~second quarter fiscal ~~2018~~2022 or ~~third~~the second quarter fiscal ~~2017 pursuant to any purchase commitments.~~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.

With respect to Company-owned restaurants, our cost of sales during the ~~third~~second quarter fiscal ~~201~~82022 was ~~$1,434,000~~$2,742,000 or ~~68.5%~~61.8% of restaurant sales, as compared to ~~$1,355,000~~$1,840,000 or ~~68.1%~~61.5% of restaurant sales induring the ~~third~~second quarter fiscal ~~2017~~2021. The increase in cost of sales, during the second quarter of fiscal 2022 was primarily due ~~primarily~~ to the ~~impact~~48% increase in sales as discussed above, in addition to higher commodity costs and restaurant labor costs. The availability of ~~higher food costs on higher revenues~~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 ~~principally associated with the effects of the New York State minimum wage increase. We expect that our labor costs going forward will continue to be~~were impacted by the ~~multi-year new~~additional increase in minimum wage requirements in New York State ~~and any increase in~~which commenced on July 1, 2021. Our food costs ~~from higher~~may be impacted by increases in commodity ~~costs.~~costs, as well as the mix of products that we sell.

Restaurant operating expenses were $~~760,000~~$1,216,000 in the ~~third~~second quarter fiscal ~~2018~~2022 as compared to ~~$695,000~~$1,011,000 in the ~~third~~second quarter fiscal ~~2017. The increase in restaurant operating costs results primarily from~~2021. We incurred higher occupancy ~~costs,~~expenses of $123,000, higher insurance expenses of $33,000, higher repairs and ~~utilities.~~maintenance expenses of $26,000and higher delivery charges of $23,000 associated with offsite consumption.

Depreciation and amortization, which primarily consists of the depreciation of fixed assets, including leasehold improvements and equipment, was $~~320,000~~$270,000 in the ~~third~~second quarter fiscal ~~2018~~2022 as compared to ~~$309,000~~$302,000 in the ~~third~~second quarter fiscal ~~2017.~~2021.

General and administrative expenses ~~decreased~~increased by ~~$360,000~~$657,000 or ~~10.6%~~25% to ~~$3,034,000~~$3,269,000 in the ~~third~~second quarter fiscal ~~2018~~2022 as compared to ~~$3,394,000~~$2,612,000 in the ~~third~~second quarter fiscal ~~2017.~~2021. The ~~decrease~~increase in general and administrative expenses was primarily attributable to ~~lower~~higher corporate payroll expenses of $171,000, a higher incentive compensation accrual of $95,000, higher insurance costs of $46,000 and higher marketing expenses of $162,000.

Advertising fund expense, after eliminating Company contributions, was $553,000 during the ~~timing of expenses~~second quarter fiscal 2022, as compared to $403,000 in ~~connection with our~~the second quarter fiscal ~~2018 audit and lower bad debts.~~2021.

Other Items

On November 1, 2017, the Company completed the issuance of $150,000,000 of the 2025 Notes in a private offering in accordance with Rule 144A under the Securities Act. The 2025 Notes were issued pursuant to the Indenture by and among the Company, certain of its wholly-owned subsidiaries, as guarantors, and U.S. Bank National Association, as trustee and collateral trustee. The Company used the net proceeds of the 2025 Notes offering to satisfy and discharge the Indenture relating to the 2020 Notes and redeem the 2020 Notes, paid a portion of a special $5.00 per share cash dividend to Nathan's stockholders of record (see Note M.1), with the remaining net proceeds for general corporate purposes, including working capital. The Redemption occurred on November 16, 2017. The Company performed the required evaluation of the refinancing and determined that a portion of the Redemption of the 2020 Notes is accounted for as a modification of the debt and a portion as an extinguishment of the debt. In connection with the Redemption, the Company recorded a loss on early extinguishment of debt of $8,872,000 that primarily reflects a portion of the premium paid to redeem the 2020 Notes and the write-off of certain debt issuance costs.

Interest expense of ~~$3,650,000~~$2,651,000 in both the ~~third~~second quarter fiscal ~~2018 represents~~2022 and the second quarter fiscal 2021 represented accrued interest of ~~$1,847,000 on the 2020 Notes, $1,470,000 accrued interest~~$2,478,000 on the 2025 Notes at 6.625% per annum and ~~total~~ amortization of debt issuance costs of ~~$333,000. On November 1, 2017, the Company issued the 2025 Notes and~~ the Redemption occurred on November 16, 2017. The Company incurred additional interest expense of approximately $562,500 from the time the 2025 Notes closed until the Redemption. As a result of the issuance of the 2025 Notes and the Redemption, the Company expects to reduce its annual interest expense by approximately $3,562,500 per annum.$173,000.

I~~nterest~~Interest income was ~~$44,000~~ $28,000in the ~~third~~second quarter fiscal ~~2018~~2022 as compared to ~~$35,000~~$103,000 in the ~~third~~second quarter fiscal ~~2017 due principally to rising interest rates earned on our money market account.~~2021.

Other income, which primarily relates to a sublease of a franchised restaurant, was $5,000 in the second quarter fiscal 2022, as compared to $22,000 in the ~~third~~second quarter fiscal ~~2018 and $21,000 in the third quarter fiscal 2017~~.2021.

Provision for Income Taxes

~~In the third quarter fiscal 2018, the income tax benefit was $(3,307,000) or 46.7% of loss before income taxes as compared to the~~The income tax provision ~~of $448,000 or 39.1% of earnings before income taxes in~~for the ~~third~~second quarter fiscal ~~2017.~~2022 and second quarter fiscal 2021 reflect effective tax rates of 26.5% and 27.7%, respectively.

~~Nathan~~’sThe amount of unrecognized tax benefits at September 26, 2021 was $433,000 all of which would impact Nathan’s effective tax rate, for the thirteen week period ended December 25, 2016 was reduced by 330 BPS, as a result of the tax benefits associated with stock compensation. For the thirteen week period ended December 25, 2016, excess tax benefits of $39,000, were reflected in the Consolidated Statements of Earnings as a reduction to the provision for income taxes. Pursuant to Staff Accounting Bulletin #118, Nathan’s has determined reasonable estimates to its deferred assets and liabilities and pursuant to ASC 740, Income Taxes, the Company has recognized the effect(s) of the Act on current and deferred income taxes in its financial statements during the quarter ended December 24, 2017. Nathan’s has recorded the following discrete adjustment to its deferred tax liability and unrecognized tax benefits which reduced the provision for income taxes by $436,000 during the thirteen weeks ended December 24, 2017. As described in Note J to the Consolidated Financial Statements, Nathan’s estimates that its blended federal tax rate will be 31% for its fiscal year ending March 25, 2018 and that its annual tax rate for the fiscal year ending March 25, 2018 will be in the range of approximately 40.8% to 43.1%, excluding the impact of the discrete items recorded and excess tax benefit associated with stock compensation. The final annual tax rate is subject to many variables, including the ultimate determination of revenue and income tax by state, among other factors, and therefore cannot be determined until the end of the fiscal year; therefore, the actual tax rate could differ from our current estimates.if recognized. As of ~~December 24, 2017,~~September 26, 2021 Nathan’s had ~~$212,000~~$293,000 of accrued interest and penalties in connection with unrecognized tax benefits.

Nathan’s estimates that its unrecognized tax ~~benefits, including the related~~benefit excluding accrued interest and penalties could be further reduced by up to ~~$5,000~~$19,000 during the ~~remainder of~~ fiscal ~~2018.~~year ending March 27, 2022.

~~-21-~~

Results of Operations

T~~hirty-nine~~Twenty-six weeks ended ~~Dec~~~~ember 2~~4~~, 201~~7September 26, 2021 compared to t~~hirty-nine~~twenty-six weeks ended ~~Dec~~~~ember 2~~5~~, 201~~6September 27, 2020

Revenues

Total revenues increased by 62% to $64,197,000 for the twenty-six weeks ended September 26, 2021 (“fiscal 2022 period”) as compared to $39,525,000 for the twenty-six weeks ended September 27, 2020 (“fiscal 2021 period”) as we continue to lap the significant impact of COVID-19 on our results beginning in March 2020.

Total sales increasedby ~~9.7%~~121% to ~~$63,639,000~~$42,825,000 for the ~~thirty-nine weeks ended December 24, 2017 (“~~fiscal ~~2018 period”)~~2022 period as compared to ~~$58,012,000~~$19,375,000 for the ~~thirty-nine weeks ended December 25, 2016 (“~~fiscal ~~2017 period”).~~2021 period. Foodservice sales from the Branded Product Program increasedby ~~14.4%~~143% to ~~$50,741,000~~$35,059,000 for the fiscal ~~2018~~2022 period as compared to sales of ~~$44,349,000~~$14,447,000 for the fiscal ~~2017~~2021 period. The sales from our Branded Product Program have increased as certain government mandated restrictions associated with the COVID-19 pandemic have eased with approved vaccines being more widely distributed and administered. As a result, most of our Branded Product Program customers have reopened adhering to state and local guidelines, such as professional sports arenas, amusement parks, shopping malls and movie theaters. During the fiscal ~~2018~~2022 period, the ~~volume~~total pounds of ~~business~~hot dogs sold in the Branded Product Program increased by approximately 10.9%. Our average selling prices increased by approximately 3.2% in the fiscal 2018 period as a result of our pricing strategy, which is more closely correlated to the cost of beef which increased by approximately 8.6%, during the fiscal 2018 period140% as compared to the fiscal ~~2017~~2021 period. Total Company-owned restaurant sales were $12,898,000 during the fiscal 2018 period as compared to $13,449,000 during the fiscal 2017 period due primarily to lower sales at both Coney Island locations. Sales at our Company-owned restaurants were unfavorably affected during the fiscal 2018 period due primarily to unfavorable weather conditions. Direct retail sales alsoOur average selling prices decreased by ~~$214,000 during the fiscal 2018 period~~approximately 0.3% as compared to the fiscal ~~2017~~2021 period.

Total Company-owned restaurant sales increased by 58% to $7,766,000 during the fiscal 2022 period as ~~we began~~compared to ~~transition this business into~~$4,928,000 during the fiscal 2021 period. The increase was primarily due to an increase in traffic at our ~~Branded Product Program during~~Coney Island locations driven, in part, by the re-opening of Luna Park, the amusement park in Coney Island, as well as 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 the fiscal ~~2017.~~2021 period.

License royalties ~~were $17,393,000~~decreased by 2.4% to $18,340,000 in the fiscal ~~2018~~2022 period as compared to ~~$15,602,000~~$18,791,000 in the fiscal ~~2017~~2021 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, increased 11.5%~~WalMart, decreased 3% to ~~$15,853,000~~$16,922,000 for the fiscal ~~2018~~2022 period as compared to ~~$14,214,000 for~~$17,460,000 in the fiscal ~~2017~~2021 period. The ~~increase~~decrease is due to ~~an 8.5%~~a 1.5% increase in retail volume during the fiscal ~~2018~~2022 period which was offset by a 4% decrease in average net selling price as compared to the fiscal ~~2017 period, in addition~~2021 period. The foodservice business earned higher royalties of $92,000 as compared to ~~a 4.1% increase in average selling prices, on which our royalties are calculated.~~the fiscal 2021 period. Royalties earned from all other licensing agreements for the manufacture and sale of Nathan’s products increased by ~~$152,000~~$87,000 during the fiscal ~~2018~~2022 period as compared to the fiscal ~~2017 period.~~2021 period primarily due to additional royalties earned on sales of proprietary spices, offset, in part, by lower royalties earned on French fries.

Franchise fees and royalties were $~~3,575,000~~$2,074,000 in the fiscal ~~2018~~2022 period as compared to ~~$3,752,000~~$667,000 in the fiscal ~~2017~~2021 period. The increase was primarily due to the continued momentum associated with the recovery from the COVID-19 pandemic. Total royalties were ~~$3,293,000~~$1,837,000 in the fiscal ~~2018~~2022 period as compared to ~~$3,386,000~~$519,000 in the fiscal ~~2017~~2021 period. Royalties earned under the Branded Menu ~~program~~Program were ~~$873,000~~$329,000 in the fiscal ~~2018~~2022 period as compared to ~~$779,000~~$87,000 in the fiscal ~~2017~~2021 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 $170,000 in the fiscal 2022 period. Traditional franchise royalties were ~~$2,420,000~~$1,338,000 in the fiscal ~~2018~~2022 period as compared to ~~$2,607,000~~$432,000 in the fiscal ~~2017~~2021 period. Franchise restaurant sales ~~decreased~~increased to ~~$54,737,000~~$28,630,000 in the fiscal ~~2018~~2022 period as compared to ~~$58,118,000~~$9,188,000 in the fiscal ~~2017~~2021 period primarily due to the ~~decline in comparable domestic sales and the impact~~reopening of ~~units closed in the previous fiscal year.~~a majority of our franchised locations. Comparable domestic franchise sales (consisting of 8949 Nathan’s outlets, excluding sales under the Branded Menu Program) were ~~$40,490,000~~$21,793,000 in the fiscal ~~2018~~2022 period as compared to ~~$41,709,000~~$7,565,000 in the fiscal ~~2017~~2021 period.

At ~~December 24, 2017, 280~~ September 26, 2021, 224franchised outlets, including domestic, international and Branded Menu Program outlets were operating as compared to ~~282~~ 214 franchised outlets, including domestic, international and Branded Menu Program ~~outlet~~soutlets at ~~December 25, 2016.~~September 27, 2020. Total franchise fee income was ~~$282,000~~$237,000 in the fiscal ~~2018~~2022 period as compared to ~~$366,000~~$148,000 in the fiscal ~~2017~~2021 period. Domestic franchise fee income was ~~$140,000~~$73,000 in the fiscal ~~2018~~2022 period as compared to ~~$177,000~~$64,000 in the fiscal ~~2017 period due primarily to the difference in the types of locations opened, and associated fees earned, between the two periods.~~2021 period. International franchise fee income was ~~$132,000~~$110,000 in the fiscal ~~2018~~2022 period as compared to ~~$156,000 in~~$51,000 during the fiscal ~~2017 period due to the timing of new international development fees.~~ 2021 period.

We ~~also~~ recognized ~~$10,000~~ $54,000and $33,000 in forfeited fees in the fiscal ~~2018~~2022 period and fiscal ~~2017 periods,~~2021 period, respectively.During the fiscal ~~2018~~2022 period, 35three new franchised outlets opened, ~~including 13 international locations, and 17~~as well as eighteen new Branded Menu Program outlets. Additionally, 125 new virtual kitchens opened. During the fiscal ~~2017~~2021 period, 42 sixnew traditional franchised outlets opened, including ~~16 international locations, and 20~~threenew Branded Menu Program outlets.

Advertising fund revenue, after eliminating Company contributions, was $958,000 during the fiscal 2022 period, as compared to $692,000 during the fiscal 2021 period.

Costs and Expenses

Overall, our cost of sales increased by ~~$6,433,000~~133% to ~~$48,165,000~~$35,496,000 in the fiscal ~~2018~~2022 period as compared to ~~$41,732,000~~$15,224,000 in the fiscal ~~2017~~2021 period. Our gross profit (representing the difference between sales and cost of sales) ~~was $15,474,000~~increased to $7,329,000 or ~~24.3%~~17.1% of sales during the fiscal ~~2018~~2022 period as compared to ~~$16,280,000~~$4,151,000 or ~~28.1%~~21.4% of sales during the fiscal ~~2017~~2021 period. The margin decline was primarily due to the higher cost of beef in the Branded Products Program and in the Company-operated restaurants, in addition to the higher labor costs at the Company-owned restaurants.

~~-22-~~

Cost of sales in the Branded Product Program increased by ~~approximately $6,677,000~~154% to $30,619,000 during the fiscal ~~2018~~2022 period as compared to $12,040,000 during the fiscal ~~2017~~2021 period, primarily due to the ~~10.9%~~140% increase in the volume of product sold ~~and the 8.6%~~as discussed above, as well as a 6% increase in the average cost per pound of our hot dogs. During the fiscal 2017 period, we completed our purchase of approximately 662,000 lbs. of hot dogs pursuant to the open purchase commitment, representing approximately 4.1% of volume, which reduced our overall cost of hot dogs by approximately 36 BPS. We did not make any ~~purchases~~purchase commitments of beef during the fiscal ~~2018~~2022 period ~~pursuant to any purchase commitments.~~or the fiscal 2021 period. 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.

With respect to Company-owned restaurants, our cost of sales during the fiscal ~~201~~82022 period was ~~$7,199,000~~$4,877,000 or ~~55.8%~~62.8% of restaurant sales, as compared to ~~$7,247,000~~$3,184,000 or ~~53.9%~~64.6% of restaurant sales in the fiscal ~~2017~~2021 period. The increase in cost of sales during the fiscal 2022 period was primarily due ~~primarily~~ to the ~~impact~~58% increase in sales discussed above, in addition to higher commodity costs and restaurant labor costs. The availability of ~~lower revenues~~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 ~~principally associated with the effects of the New York State minimum wage increase. We expect that our future labor costs will continue to be~~were impacted by the ~~multi-year new~~additional increase in minimum wage requirements in New York State ~~and any increase in~~which commenced on July 1, 2021. Our food costs ~~from higher~~may be impacted by increases in commodity ~~costs.~~costs, as well as the mix of products that we sell.

Restaurant operating expenses were $~~2,769,000~~$2,327,000 in the fiscal ~~2018~~2022 period as compared to ~~$2,711,000~~$1,863,000 in the fiscal ~~2017~~2021 period. ~~The increase in restaurant operating costs results primarily from~~We incurred higher occupancy expenses of $212,000, higher utility expenses of $31,000, higher insurance expense of $65,000, higher repairs and ~~insurance costs.~~maintenance expenses of $42,000and higher delivery charges of $60,000 associated with offsite consumption.

Depreciation and amortization, which primarily consists of the depreciation of fixed assets, including leasehold improvements and equipment, was $~~1,055,000~~$548,000 in the fiscal ~~2018~~2022 period as compared to ~~$1,005,000~~$612,000 in the fiscal ~~2017~~2021 period.

General and administrative expenses ~~decreased $245,000~~increased by $1,271,000 or ~~2.4%~~23% to ~~$10,064,000~~$6,727,000 in the fiscal ~~2018~~2022 period as compared to ~~$10,309,000~~$5,456,000 in the fiscal ~~2017~~2021 period. The ~~decrease~~increase in general and administrative expenses was primarily attributable to ~~reduced~~higher corporate payroll expenses of $241,000, a higher incentive compensation accrual of $354,000, higher insurance costs of $83,000 and higher marketing ~~and promotional activities in connection with the commemoration~~expenses of ~~our 100th anniversary~~$181,000.

Advertising fund expense, after eliminating Company contributions, was $958,000 during the fiscal ~~2017~~2022 period, ~~partly offset by higher compensation expenses during~~as compared to $692,000 in the fiscal ~~2018~~2021 period.

Other Items

Interest expense of $~~10,976,000~~$5,301,000 in both the fiscal ~~2018~~2022 period ~~represents~~and the fiscal 2021 period represented accrued interest of ~~$8,574,000 on the 2020 Notes, $1,470,000 accrued interest~~$4,955,000 on the 2025 Notes at 6.625% per annum and ~~total~~ amortization of debt issuance costs of $932,000. On November 1, 2017, the Company issued the 2025 Notes and the Redemption occurred on November 16, 2017. The Company incurred additional interest expense of approximately $562,500 from the time the 2025 Notes closed until the Redemption. As a result of the issuance of the 2025 Notes and the Redemption, the Company expects to reduce its annual interest expense by approximately $3,562,500 per annum.$346,000.

Interest income was ~~$114,000~~$64,000 in the fiscal ~~2018~~2022 period as compared to ~~$71,000~~$220,000 in the fiscal ~~2017~~2021 period. ~~Nathan’s established its interest bearing money market account during the fiscal 2017 period.~~

Other income, which primarily relates to a sublease of a franchised restaurant, was ~~$64,000~~$21,000 and $22,000 in the fiscal ~~2018 period, as compared to $64,000 in the~~2022 and fiscal ~~2017 period.~~2021 periods, respectively.

Provision for Income Taxes

The income tax ~~provisions~~provision for the ~~thirty-nine week periods ended December 24, 2017~~fiscal 2022 period and ~~December 25, 2016~~fiscal 2021 period reflect effective tax rates of ~~21.5%~~28.0% and ~~37.1%~~27.9%, respectively. ~~Nathan~~’s effective tax rates for the thirty-nine week periods ended December 24, 2017 and December 25, 2016 were reduced by 670 BPS and 610 BPS, respectively, as a result of the tax benefits associated with stock compensation. For the thirty-nine week periods December 24, 2017 and December 25, 2016, excess tax benefits of $194,000 and $659,000, respectively, were reflected in the Consolidated Statements of Earnings as a reduction to the provision for income taxes.

The amount of unrecognized tax benefits at ~~December 24, 2017~~September 26, 2021 was ~~$207,000,~~$433,000 all of which would impact Nathan’s effective tax rate, if recognized. Pursuant to Staff Accounting Bulletin #118, Nathan’s has determined reasonable estimates to its deferred assets and liabilities and pursuant to ASC 740, Income Taxes, the Company has recognized the effect(s) of the Act on current and deferred income taxes in its financial statements during the quarter ended December 24, 2017. Nathan’s has recorded the following discrete adjustments to its deferred tax liability and unrecognized tax benefits which reduced the provision for income taxes by $436,000 or 1510 BPS during the thirty-nine weeks ended December 24, 2017. As described in Note J to the Consolidated Financial Statements, Nathan’s estimates that its blended federal tax rate will be 31% for its fiscal year ending March 25, 2018 and that its annual tax rate for the fiscal year ending March 25, 2018 will be in the range of approximately 40.8% to 43.1%, excluding the impact of the discrete items recorded and excess tax benefit associated with stock compensation. The final annual tax rate is subject to many variables, including the ultimate determination of revenue and income tax by state, among other factors, and therefore cannot be determined until the end of the fiscal year; therefore, the actual tax rate could differ from our current estimates. As of ~~December 24, 2017,~~September 26, 2021, Nathan’s had ~~$212,000~~$293,000 of accrued interest and penalties in connection with unrecognized tax benefits.

~~-23-~~

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

Off-Balance Sheet Arrangements

~~Nathan~~’sAt September 26, 2021 and September 27, 2020, Nathan’s did not have any open purchase commitments for hot ~~dogs outstanding as of December 24, 2017.~~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 24, 2017~~September 26, 2021 aggregated ~~$67,288,000,~~$86,756,000, a ~~$10,373,000~~$5,692,000 increase during the fiscal ~~2018~~2022 period as compared to cash and cash equivalents of ~~$56,915,000~~$81,064,000 at March ~~26, 2017.~~28, 2021. Net working capital ~~decreased~~increased to ~~$51,809,000~~$87,267,000 from ~~$56,763,000~~$80,072,000 at March ~~26, 2017, which primarily relates~~28, 2021. We paid our semi-annual interest payments for fiscal 2022 of $4,968,750 on May 1, 2021 and November 1, 2021, respectively. We paid our first and second quarter fiscal 2022 dividend payments of $1,440,000 on June 25, 2021 and September 3, 2021, respectively. We expect to ~~the special~~pay our third quarter dividend ~~of approximately $20,923,000 payable to the shareholders of record~~ on December ~~22, 2017 that was paid on January 4, 2018.~~3, 2021.

OnIn November 1, 2017, the Company ~~issued the~~refinanced its then-outstanding 2020 Notes totaling $135.0 million at 10.000% per annum by issuing $150.0 million 2025 Notes and used the majority of the proceeds for the Redemption, paid a portion of the special $5.00 cash dividend and will use any remaining proceeds for general corporate purposes, including working capital. Our future results could also be impacted by our obligations under the 2025 Notes, as well as the new limitation on the deduction of interest expense under the Act. As a result of the issuance of the 2025 Notes, Nathan’s expects to incur interest expense of $9,937,500at 6.625% per ~~annum, reducing its cash interest expense by $3,562,500 per~~ annum. ~~Nathan’s expects to incur annual amortization of debt issuance costs of approximately $685,000.~~ Please refer to Note NQ – Long Term Debt in the accompanying Consolidated Financial Statements, for ~~the effects~~further discussion of the Company’s refinancing from the preceding consolidated financial statements. The impact of interest expense on net income has been reflected in our results for the thirteen and thirty-nine week periods ended December 24, 2017 and December 25, 2016.

~~On March 10, 2015,~~ we issued the 2020 Notes and paid a dividend of $25.00 per share (or approximately $116,100,000 in the aggregate). In connection with the 2020 Notes, Nathan’s incurred interest expense of $13,500,000 per annum and annual amortization of debt issuance costs of approximately $1,200,000.

~~Nathan's use~~d the net proceeds of the 2025 Notes offering to satisfy and discharge the Indenture relating to the 2020 Notes and the Redemption, paid a portion of a special $5.00 per share cash dividend to Nathan's stockholders of record (see Note M.1) with the remaining net proceeds for general corporate purposes, including working capital. The payment in connection with the Redemption was approximately $144,000,000. Nathan's also funded the majority of the special dividend through its existing cash. The Redemption occurred on November 16, 2017.

The Company paid a 5% call premium of $6,750,000 associated with the Redemption and incurred debt issuance costs of $4,902,000 in connection with the issuance of the 2025 Notes. The Company also incurred additional interest expense of approximately $562,500 from the closing of the 2025 Notes on November 1, 2017 until the Redemption.

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. ~~Semi-annual interest payments are expected to be $4,968,750.~~ The 2025 Notes have no scheduled principal amortization payments prior to its final maturity on November 1, 2025. ~~As a result of the issuance of the 2025 Notes and the Redemption, the Company expects to reduce its annual interest expense by approximately $3,562,500 per annum.~~

~~The Indenture~~ for the 2025 Notes 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.

~~The Indenture~~ for the 2025 Notes 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. 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.

~~-24-~~

~~The~~ ~~2025 Notes and the guarantees will be 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.~~

Cash provided by operations of ~~$7,795,000~~$8,922,000 in the fiscal ~~2018~~2022 period is primarily attributable to net income of ~~$2,263,000~~$9,308,000 in addition to other non-cash operating items of ~~$11,330,000,~~$1,171,000, offset by ~~increases in~~ changes in other operating assets and liabilities of ~~$5,798,000.~~$1,557,000. Non-cash operating ~~items include $194,000~~expenses consist principally of ~~excess income tax benefits from stock-based~~depreciation and amortization of $548,000, amortization of debt issuance costs of $346,000, share-based compensation ~~arrangements as a result~~expense of ~~the accounting for certain aspects~~$58,000, and non-cash rental expense of ~~its share-based payments to employees.~~$208,000. In the fiscal ~~2018~~2022 period, accounts and other receivables increased by ~~$2,967,000 compared to the fiscal 2017 period~~$3,192,000 due primarily to higher ~~receivables from~~ Branded Product Program ~~sales~~receivables of ~~$2,489,000 and increased seasonal advances~~$3,978,000, higher receivables due to the Advertising Fund of ~~$593,000, partly~~$1,007,000 which were offset, in part, by lower ~~seasonal~~franchise and license royalties receivable of ~~$358,000. In the fiscal 2018 period, prepaid~~$1,917,000. Prepaid expenses and other current assets ~~increased~~decreased by ~~$2,259,000~~$713,000 due ~~principally~~primarily to the reduction of prepaid income taxes, insurance and marketing expenses of ~~$2,751,000 which were deposited prior to~~$280,000, $226,000, and $196,000, respectively. In the ~~successful debt refinancing. The decrease in~~fiscal 2022 period, accounts payable, accrued expenses and other current liabilities ~~of $779,000 is primarily~~increased by $830,000 due to ~~reductions~~an increase in ~~deferred revenue~~accrued rebates of ~~$706,000 that was recognized into~~$328,000 due under the Branded Product Program as a result of higher sales; an increase in accrued rent and occupancy costs of $385,000; as well as increase in accrued corporate income ~~during~~taxes of $621,000. Accounts payable increased by $1,043,000 due principally to seasonally higher product purchases for the ~~fiscal 2018 period,~~Branded Product Program. These increases were partially offset by a decline in accrued payroll and other benefits of ~~$621,000 due~~$851,000 resulting primarily tofrom the payment of ~~prior year~~year-end fiscal 2021 incentive compensation ~~lower accounts payable~~and earned deferred revenue of $541,000 arising primarily from seasonally lower product purchases for the Branded Product Program, which were partly offset by higher accrued interest of $1,007,000 and accrued rebates of $195,000. The decrease in other liabilities of $71,000 is primarily due to dividend payments of $125,000 on vested restricted stock, offset by an increase in the accrual for uncertain tax positions of $53,000. The Company also declared a $5.00 per share special cash dividend to the shareholders of record as of the close of business on December 22, 2017 which was paid on January 4, 2018 in the amount of $20,923,000 which has been presented as a noncash financing activity on the accompanying consolidated statement of cash flows.$640,000.

Cash used in investing activities was ~~$488,000~~$343,000 in the fiscal ~~2018~~2022 period primarily in connection with capital expenditures incurred for our Branded Product Program and ~~select restaurant improvements.~~our Coney Island restaurants.

Cash ~~provided by~~used in financing activities of ~~$3,066,000~~$2,887,000 in the fiscal ~~2018~~2022 period relates to the Company’s refinancing of the 2020 Notes. The Company received gross proceeds of $150,000,000 from the sale of 2025 Notes, repaid the 2020 Notes, paid a call premium of $6,750,000 in addition to $4,902,000 of debt issuance costs. The Company also paid $157,000 for withholding taxes on the net share vesting of employee restricted stock and dividends of $125,000 relating to the previously declared special cash dividend in connection with the vesting of 5,000 sharespayments of the Company’s ~~restricted stock.~~quarterly $0.35 per share cash dividends on June 25, 2021 and September 3, 2021 totaling $2,880,000.

During the period from October 2001 through ~~December 24, 2017,~~September 26, 2021, Nathan’s purchased ~~5,127,373~~5,254,081 shares of its common stock at a cost of approximately ~~$77,303,000~~$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 ~~3,236,273~~3,362,981 shares at a total cost of approximately ~~$70,145,000,~~$77,612,000, reducing the number of shares then-outstanding by ~~53.8%~~55.9%.

~~On February 1, 2016 and March 11,~~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 24, 2017,~~September 26, 2021, Nathan’s has repurchased ~~939,742~~1,066,450 shares at a cost of ~~$29,641,000~~ $37,108,000under the sixth stock repurchase plan. At ~~December 24, 2017,~~September 26, 2021, there were ~~260,258~~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.

~~-25-~~

On March 13, 2020, the Board 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.

~~Management believes that available cash,~~ ~~marketable securities and cash generated~~Effective June 1, 2020, the Board 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 ~~operations should provide sufficient capital~~time to ~~finance our operations, and satisfy our debt service requirements, for at least~~time. There is no set time limit on the ~~next 12 months.~~repurchases.

As discussed above, we had cash and cash equivalents at ~~December 24, 2017~~September 26, 2021 aggregating ~~$67,288,000.~~ $86,756,000.Our Board routinely monitors and assesses its cash position and our current and potential capital requirements. In November 2017, we ~~successfully~~ refinanced ~~$135.0 million 10.000%~~our 2020 Notes ~~due 2020 with $150.0 million 6.625%~~through the issuance of the 2025 Notes ~~due 2025~~ 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. ~~We may continue~~On May 31, 2018, the Board 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, the Board authorized the increase of its regular quarterly dividend to ~~return capital to our shareholders through stock repurchases or cash dividends, subject to any restrictions in the Indenture, although there is no assurance that~~$0.35 from $0.25. The Company paid its first quarter fiscal 2022 dividend of $1,440,000 on June 25, 2021 and its second quarter fiscal 2022 dividend of $1,440,000 on September 3, 2021.

Effective November 5, 2021, the Company ~~will make any repurchases under~~declared its ~~existing stock-repurchase plan.~~third quarter dividend of $0.35 per common share to stockholders of record as of the close of business on November 22, 2021, which is payable on December 3, 2021.

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. ~~We are not required to make interest payments during~~During the ~~remainder of our~~ fiscal year ending March ~~25, 2018. Pursuant to the Indenture,~~27, 2022, we will be required to make ~~semi-annual~~ interest payments of ~~$4,968,750 on May 1, 2018 and~~$9,937,500, of which all have been made as of November 1, ~~2018.~~2021.

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 24, 2017,~~September 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 ~~any of~~ such ~~leases.~~lease.

~~The following schedule represents Nathan’s cash~~Our contractual obligations primarily consist of the 2025 Notes and ~~commitments by maturity as of December 24, 2017 (in thousands):~~ the related interest payments, operating leases, and employment agreement 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 28, 2021.

Payments Due by Period

Cash Contractual Obligations

Total

Less than
1 Year

1-3 Years

3-5 Years

More than
5 Years

Long term debt (a)
$ 150,000 $ - $ - $ - $ 150,000
Employment Agreements
6,700 1,100 2,000 2,000 1,600
Dividends Payable
21,073 21,073 - - -
Operating Leases
11,540 1,652 2,717 2,137 5,034
Gross Cash Contractual Obligations
189,313 23,825 4,717 4,137 156,634
Sublease Income
2,175 329 640 474 732
Net Cash Contractual Obligations
$ 187,138 $ 23,496 $ 4,077 $ 3,663 $ 155,902
a)
~~Represents~~ ~~the Notes due 2025.~~
b)
At December 24, 2017, the Company had unrecognized tax benefits of $207,000. The Company believes that it is reasonably possible that the unrecognized tax benefits may decrease by $5,000 within the next year. A reasonable estimate of the timing of the remaining liabilities is not practicable.

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 is obligated to make payments under the Brooklyn Guaranty in the event of a default by the tenant/franchisee. The Brooklyn Guaranty has an initial term of 10 years and one 5-year renewal option and is limited to 24 months of rent for the first three years of the term. For the remainder of the term, the Brooklyn Guaranty is limited to 12 months of rent plus reasonable costs of collection and attorney’s fees. As of September 26, 2021, Nathan’s has recorded a liability of ~~$204,015~~$113,000 in connection with the Brooklyn Guaranty which does not 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. ~~For the remainder of the term, the Brooklyn Guaranty is limited to 12 months of rent plus reasonable costs of collection and attorney’s fees.~~

~~-26-~~

Inflationary Impact

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. ~~From 2011 through 2014, we experienced unprecedented increases~~Our average cost of hot dogs between April 2021 and September 2021 was approximately 6% higher than between April 2020 and September 2020.
Beginning in July 2021, the cost of ~~beef. Beginning March 2015, the beef markets stabilized through June 2015 before subsequently declining by approximately 30%.~~ Ashot dogs increased significantly due to ongoing supply chain challenges associated with increased consumer demand as a result of the ~~decline through March 2016,~~continued recovery from the ~~market price of hot dogs~~COVID-19 pandemic which caused some delays and shortages. This trend continued during the fiscal year ended March 27, 2016 was approximately 7.1% lower than the fiscal year ended March 29, 2015. During the fiscal 2017 period, beef prices remained favorable, and as such, our market price for hot dogs was 17.1% lower than during the period ended September 25, 2016. Despite the favorable pricing of fiscal 2017, prices began escalating in January 2017 and continued through June 2017 before beginning to slightly decline until July which is when the costs stabilized for the balance of 2017 at approximately 10% higher than the last sixsummer months of ~~2016. As such, our market price for hot dogs during our fiscal 2018 period was approximately 8.2% higher than the fiscal 2017 period.~~ August and September 2021.
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 ~~2018.~~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. ~~Most recently, we concluded a~~Our most recent purchase commitment was completed in 2016 for approximately 2,600,000 pounds of hot ~~dogs at approximately $2.01 per pound which we purchased between February and May 2016.~~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.
In March 2010, the Federal government passed new legislation to reform the U.S. health care system. As part of the plan, employers will be expected to provide their employees that work more than 30 hours per week with minimum levels of healthcare coverage or incur certain financial penalties. As Nathan’s workforce includes numerous part-time workers that typically are not offered healthcare coverage, we may be forced to expand healthcare coverage or potentially incur new penalties which may increase our health care costs.

New York State ~~recently~~ passed legislation increasing the minimum hourly wage for fast food workers of restaurant chains with 30 or more locations nationwide. The increase ~~will be~~was phased in differently between New York City and the rest of New York State. Effective December 31, ~~2017,~~2019, the minimum wage ~~increased to $13.50 and $11.75~~was $15.00 in New York City and ~~outside~~increased to $13.75 per hour for the remainder of New York ~~City, respectively.~~
~~In New York City,~~ ~~the hourly rate of pay will increase to $15.00 on Dec. 31, 2018.~~
TheState. The minimum hourly rate of pay for the remainder of New York State ~~will increase to:~~
~~$12.75 on Dec. 31, 2018;~~ ~~$13.75 on Dec. 31, 2019;~~increased to $14.50 on Dec. 31, ~~2020;~~2020, and increased to $15.00 on July 1, 2021.
All of Nathan’s ~~Company-operated~~Company-owned restaurants are within New York State ~~three of which operate within New York City that~~and have been affected by this new legislation.

~~The Company is further studying the impact on the Company’s operations and is developing strategies and tactics, including pricing and potential operating efficiencies,~~We may attempt to ~~minimize~~offset the effects of ~~these increases and future increases. We have recently increased certain selling prices to pass on recent cost of sales~~wage inflation, at least in part, through periodic menu price increases. However, ifno assurance can be given that we will be able to offset these wage increases in the future.
Effective November 27, 2017, the City of New York Fair Work Week Legislation package of bills took effect that covers City of New York 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 ~~fully~~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 this 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 ~~these and future increases through pricing and~~reduced operating ~~efficiencies, our margins and profits will be negatively affected.~~ margins.
We believe that these increases in the minimum wage ~~could~~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.
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 three restaurants that have been affected by this legislation.~~
~~Effective December 1, 2016, changes to the Fair Labor Standards Act~~ were to take effect until nationwide implementation was enjoined by a Federal District Court. The legislation would have increased the minimum salary threshold for overtime exemption from $23,660 to $47,476 per annum. Nathan’s performed its evaluation of its workforce and determined that the proposed legislation is not expected to have a significant impact on our results of operations.
On May 30, 2017, New York City Mayor Bill de Blasio signed into law the Fair Work Week Legislation package of bills that the city estimates will cover some 65,000 fast food workers by giving them more predictable work schedules effective November 27, 2017. 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 beach locations during the summer, we are unable to determine the potential impact on our results of operations, which could be material. We have estimated that the daily penalty could amount to as much as $10,000 per day during the height of the summer season for these two restaurants.
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.

The ~~Company~~’sCompany’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 ~~this Form 10-Q and~~ our Form 10-K for our fiscal year ended March ~~26, 2017.~~28, 2021.

~~-27-~~

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 24, 2017,~~September 26, 2021, Nathan’s cash and cash equivalents aggregated ~~$67,288,000.~~ $86,756,000.Earnings on this cash would increase or decrease by approximately ~~$168,000~~$217,000 per annum for each 0.25% change in interest rates.

Borrowings

At ~~December 24, 2017,~~September 26, 2021, we had ~~$150.0 Million~~$150,000,000 of 2025 Notes outstanding which are due in November 2025. 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

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. Our ~~commodity costs for beef have been especially volatile since fiscal 2004. From 2011 through 2014, we experienced unprecedented increases~~average cost of hot dogs between April 2021 and September 2021 was approximately 6% higher than between April 2020 and September 2020.
Beginning in July 2021, the cost of ~~beef. Beginning March 2015, the beef markets stabilized through June 2015 before subsequently declining by approximately 30%. As~~hot dogs increased significantly due to ongoing supply chain challenges associated with increased consumer demand as a result of the ~~decline through March 2016,~~continued recovery from the ~~market price of hot dogs~~COVID-19 pandemic which caused some delays and shortages. This trend continued during the ~~fiscal 2016 period was approximately 7.1% lower than the fiscal 2015 period. During the fiscal 2017 period, beef prices remained favorable, and as such, our market price for hot dogs~~ was 17.1% lower than during the fiscal 2016 period. Despite the favorable pricing of fiscal 2017, prices began escalating in January 2017 and continued through June 2017 before beginning to slightly decline until July which is when the costs stabilized for the balance of 2017 at approximately 10% higher than the last sixsummer months of ~~2016. As such, our market price for hot dogs during our fiscal 2018 period was approximately 8.2% higher than the fiscal 2017 period.~~ August and September 2021.
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 ~~2018.~~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. ~~During fiscal 2017, we concluded a~~Our most recent purchase commitment was completed in 2016 for approximately 2,600,000 pounds of hot ~~dogs at approximately $2.01 per pound which we purchased between February and May 2016.~~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 weeks~~twenty-six week period ended ~~December 24, 2017~~September 26, 2021 would have increased or decreased our cost of sales by approximately ~~$4,303,000.~~$3,216,000.

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.

~~-28-~~

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.~~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 24, 2017~~September 26, 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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.

~~-29-~~

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 2~~6, 2017,~~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.~~On September 12, 2021, the Company accepted the surrender of 113 shares of common stock of the Company in connection with the payment of taxes upon the vesting of restricted stock.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

~~None~~Effective November 5, 2021, the Board declared its quarterly cash dividend of $0.35 per share which is payable on December 3, 2021 to shareholders of record as of the close of business on November 22, 2021.

~~-30-~~

~~Item~~Item 6. Exhibits.

~~3.1~~
31.1
~~Certificate of Incorporation. (Incorporated by reference to Exhibit 3.1 to Registration Statement on Form S-1 No. 33- 56976.)~~
~~3.2~~
~~Amendment to the Certificate of Incorporation, filed December 15, 1992. (Incorporated by reference to Exhibit 3.2 to Registration Statement on Form S-1 No. 33-56976.)~~
~~3.3~~
~~By-Laws, as amended. (Incorporated by reference to Exhibit 3.1 to Form 8-K dated November 6, 2006.)~~
~~4.1~~
~~Specimen Stock Certificate. (Incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-1 No. 33-56976.)~~
~~4.2~~
Rights Agreement, dated as of June 5, 2013, between Nathan’s Famous, Inc. and American Stock Transfer and Trust Company, LLC, as Rights Agent, which includes form of Rights Certificate as Exhibit A and the Summary of Rights to Purchase as Exhibit B. (Incorporated by reference to Exhibit 4.2 to the Company’s Current Report filed on Form 8-K dated June 11, 2013.)
4.3
Indenture, dated as of November 1, 2017, by and among Nathan’s Famous, Inc., certain of its wholly owned subsidiaries, as guarantors, and U.S. Bank National Association, a National Banking Association, as trustee and collateral trustee (including the form of Note (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report filed on Form 8-K dated November 1, 2017.))
~~10.1~~ **Amendment, dated as of December 6, 2017 to the Employment Agreement dated as of December 15, 2016, as amended November 1, 2012 between Howard M. Lorber and Nathan’s Famous, Inc. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report filed on Form 8-K dated December 12, 2017.)
~~10.2~~ *Parity Lien Security Agreement, dated November 1, 2017, by and among Nathan's Famous, Inc. and The Other Assignors Identified Herein and U.S. Bank National Association, as Collateral Trustee.
~~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 ~~Ronald G. DeVos,~~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 24, 2017~~September 26, 2021 formatted in Inline Extensible Business Reporting Language ~~(XBRL)~~(iXBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Earnings, (iii) the Consolidated ~~Statement~~Statements of Stockholders’ ~~Equity,~~Deficit, (iv) the Consolidated Statements of Cash Flows and (v) related notes.
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).
*Filed herewith.
*~~Filed herewith.~~
** Indicates a management plan or amendment.

~~-31-~~

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

Date: ~~February 2, 2018~~ November 5, 2021 By: /s/ ~~Eric Gatoff~~
Robert Steinberg
~~Eric Gatoff~~
~~Chief Executive Officer~~
~~(Principal Executive Officer)~~

~~Date:~~ ~~February 2, 2018~~ ~~By:~~ ~~/s/ Ronald G. DeVos~~
Robert Steinberg
~~Ronald G. DeVos~~
~~Vice President - Finance~~
~~and Chief Financial Officer~~
~~(Principal Financial and Accounting Officer)~~
~~-32-~~
~~Exhibit Index.~~
~~3.1~~
~~Certificate of Incorporation. (Incorporated by reference to Exhibit 3.1 to Registration Statement on Form S-1 No. 33- 56976.)~~
~~3.2~~
~~Amendment to the Certificate of Incorporation, filed December 15, 1992. (Incorporated by reference to Exhibit 3.2 to Registration Statement on Form S-1 No. 33-56976.)~~
~~3.3~~
~~By-Laws, as amended. (Incorporated by reference to Exhibit 3.1 to Form 8-K dated November 6, 2006.)~~
~~4.1~~
~~Specimen Stock Certificate. (Incorporated by reference to Exhibit 4.1 to Registration Statement on Form S-1 No. 33-56976.)~~
~~4.2~~
Rights Agreement, dated as of June 5, 2013, between Nathan’s Famous, Inc. and American Stock Transfer and Trust Company, LLC, as Rights Agent, which includes form of Rights Certificate as Exhibit A and the Summary of Rights to Purchase as Exhibit B. (Incorporated by reference to Exhibit 4.2 to the Company’s Current Report filed on Form 8-K dated June 11, 2013.)
4.3
Indenture, dated as of November 1, 2017, by and among Nathan’s Famous, Inc., certain of its wholly owned subsidiaries, as guarantors, and U.S. Bank National Association, a National Banking Association, as trustee and collateral trustee (including the form of Note (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report filed on Form 8-K dated November 1, 2017.))
Vice President - Finance
~~10.1~~ **Amendment, dated as of December 6, 2017 to the Employment Agreement dated as of December 15, 2016, as amended November 1, 2012 between Howard M. Lorber and Nathan’s Famous, Inc. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report filed on Form 8-K dated December 12, 2017.)
and Chief Financial Officer
~~10.2~~ *Parity Lien Security Agreement, dated November 1, 2013, by and among Nathan's Famous, Inc. and The Other Assignors Identified Herein and U.S. Bank National Association, as Collateral Trustee.
(Principal Financial and Accounting Officer)

~~31.1~~
*Certification of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

~~31.2~~
*Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
~~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~~
*Certification by Ronald G. DeVos, 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
*The following materials from the Nathan’s Famous, Inc., Quarterly Report on Form 10-Q for the quarter ended December 24, 2017 formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Earnings, (iii) the Consolidated Statement of Stockholders’ Equity, (iv) the Consolidated Statements of Cash Flows and (v) related notes.
*~~Filed herewith.~~
** Indicates a management plan or amendment.
~~-33-~~
35

	December 24, 2017			March 26, 2017
	(Unaudited)
ASSETS

CURRENT ASSETS
Cash	$	67,288		$	56,915
Accounts and other receivables, net		11,873			8,948
Inventories		406			579
Prepaid expenses and other current assets (Note G)		3,352			1,093
Total current assets		82,919			67,535

Property and equipment, net of accumulated depreciation of $8,525 and $7,522, respectively		8,276			8,844
Goodwill		95			95
Intangible asset		1,353			1,353
Other assets		293			298
Total assets	$	92,936		$	78,125

LIABILITIES AND STOCKHOLDERS’ (DEFICIT)

CURRENT LIABILITIES
Accounts payable	$	4,268		$	4,809
Accrued expenses and other current liabilities (Note H)		26,644			5,865
Deferred franchise fees		198			98
Total current liabilities		31,110			10,772

Long-term debt, net of unamortized debt issuance costs of $5,374 and $3,525, respectively (Note N)		144,626			131,475
Other liabilities		1,484			1,555
Deferred income taxes		751			814

Total liabilities		177,971			144,616

COMMITMENTS AND CONTINGENCIES (Note O)

STOCKHOLDERS’ (DEFICIT)
Common stock, $.01 par value; 30,000,000 shares authorized; 9,311,922 and 9,303,870 shares issued; and 4,184,549 and 4,176,497 shares outstanding at December 24, 2017 and March 26, 2017, respectively		93			93
Additional paid-in capital		60,723			60,582
(Accumulated deficit)		(68,548	)		(49,863	)
Stockholders’ (deficit) equity before treasury stock		(7,732	)		10,812
Treasury stock, at cost, 5,127,373 shares at December 24, 2017 and March 26, 2017, respectively		(77,303	)		(77,303	)
Total stockholders’ (deficit)		(85,035	)		(66,491	)

Total liabilities and stockholders’ (deficit)	$	92,936		$	78,125

	December 24, 2017			December 25, 2016
Cash flows from operating activities:
Net income	$	2,263		$	6,756
Adjustments to reconcile net income to net cash provided by operating activities
Loss on debt extinguishment		8,872			-
Depreciation and amortization		1,055			1,005
Amortization of debt issuance costs		932			910
Share-based compensation expense		298			482
Income tax benefit on stock option exercises		194			659
Provision for doubtful accounts		42			34
Deferred income taxes		(63	)		92
Changes in operating assets and liabilities:
Accounts and other receivables, net		(2,967	)		(1,523	)
Inventories		173			293
Prepaid expenses and other current assets		(2,259	)		643
Other assets		5			15
Accounts payable, accrued expenses and other current liabilities		(779	)		545
Deferred franchise fees		100			4
Other liabilities		(71	)		(142	)

Net cash provided by operating activities		7,795			9,773

Cash flows from investing activities:
Purchase of property and equipment		(488	)		(1,001	)

Net cash (used in) investing activities		(488	)		(1,001	)

Cash flows from financing activities:
Proceeds from issuance of long-term debt		150,000			-
Cash payments for extinguishment of debt		(135,000	)		-
Premium paid on extinguishment of debt		(6,750	)		-
Debt issuance costs		(4,902	)		-
Proceeds from exercise of stock options		-			44
Dividends paid upon vesting of restricted stock		(125	)		(375	)
Payments of withholding tax on net share settlement of share-based compensation plans		(157	)		(994	)
Repurchase of treasury stock		-			(1,272	)

Net cash provided by (used in) financing activities		3,066			(2,597	)

Net increase in cash		10,373			6,175

Cash, beginning of period		56,915			50,228

Cash, end of period	$	67,288		$	56,403

Cash paid during the period for:
Interest	$	9,038		$	6,750
Income taxes paid	$	3,447		$	2,976

Noncash financing activity:
Dividends declared	$	20,948		$	-

Thirty-nine weeks
									Net Income
	Net Income				Number of Shares				Per Share
	2017		2016		2017		2016		2017		2016
	(in thousands)				(in thousands)
Basic EPS
Basic calculation	$	2,263	$	6,756		4,180		4,171	$	0.54	$	1.62
Effect of dilutive employee stock options		-		-		39		31		-		(0.01	)
Diluted EPS
Diluted calculation	$	2,263	$	6,756		4,219		4,202	$	0.54	$	1.61

	Thirteen weeks ended				Thirty-nine weeks ended
	December 24, 2017		December 25, 2016		December 24, 2017		December 25, 2016

Branded Products	$	14,674	$	12,868	$	50,741	$	44,349
Company-operated restaurants		2,093		1,991		12,898		13,449
Other		-		-		-		214
Total sales	$	16,767	$	14,859	$	63,639	$	58,012

	Thirteen weeks ended				Thirty-nine weeks ended
	December 24, 2017		December 25, 2016		December 24, 2017		December 25, 2016

Stock options	$	38	$	38	$	114	$	114
Restricted stock		61		98		184		368
Total compensation cost	$	99	$	136	$	298	$	482

	December 24,			March 26,
	2017			2017

6.625% Senior secured notes due 2025	$	150,000			-
10.000% Senior secured notes due 2020		-		$	135,000
Less: unamortized debt issuance costs		(5,374	)		(3,525	)
Total long-term debt	$	144,626		$	131,475

	●	senior in right of payment to all of the Company and the ~~guarantors~~’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~~’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~~’sCompany’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, ~~2021 and prior to November 1,~~ 2022		~~101.656~~100.000	%
~~On or after November 1, 2022~~		~~100.000~~	%

Weighted average remaining lease term (years):	6.7

Weighted average discount rate:	8.882	%

	Payments		Receipts
	Operating Leases		Subleases		Net Leases

Fiscal year:
2022 (a)	$	760	$	77	$	683
2023		1,849		168		1,681
2024		1,774		169		1,605
2025		1,678		169		1,509
2026		1,712		169		1,543
Thereafter		3,762		183		3,579
Total lease commitments	$	11,535	$	935	$	10,600
Less: Amount representing interest		2,822
Present value of lease liabilities (b)	$	8,713

	(a)	Represents future lease commitments to be paid and received by the Company for the remainder of the 2022 fiscal year. Amount does not include $890of lease commitments paid and received by the Company for the twenty-six week period ended September 26, 2021.
	(b)	The present value of minimum operating lease payments of $1,846 and $6,867are included in “Current portion of operating lease liabilities” and “Long-term operating lease liabilities,” respectively on the Consolidated Balance Sheet.

	Payments Due by Period
Cash Contractual Obligations	Total		Less than 1 Year		1-3 Years		3-5 Years		More than 5 Years
Long term debt (a)	$	150,000	$	-	$	-	$	-	$	150,000
Employment Agreements		6,700		1,100		2,000		2,000		1,600
Dividends Payable		21,073		21,073		-		-		-
Operating Leases		11,540		1,652		2,717		2,137		5,034
Gross Cash Contractual Obligations		189,313		23,825		4,717		4,137		156,634
Sublease Income		2,175		329		640		474		732
Net Cash Contractual Obligations	$	187,138	$	23,496	$	4,077	$	3,663	$	155,902

	4.3	Indenture, dated as of November 1, 2017, by and among Nathan’s Famous, Inc., certain of its wholly owned subsidiaries, as guarantors, and U.S. Bank National Association, a National Banking Association, as trustee and collateral trustee (including the form of Note (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report filed on Form 8-K dated November 1, 2017.))

	~~10.1~~	**Amendment, dated as of December 6, 2017 to the Employment Agreement dated as of December 15, 2016, as amended November 1, 2012 between Howard M. Lorber and Nathan’s Famous, Inc. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report filed on Form 8-K dated December 12, 2017.)

	~~10.2~~	*Parity Lien Security Agreement, dated November 1, 2017, by and among Nathan's Famous, Inc. and The Other Assignors Identified Herein and U.S. Bank National Association, as Collateral Trustee.

	~~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 ~~Ronald G. DeVos,~~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 24, 2017~~September 26, 2021 formatted in Inline Extensible Business Reporting Language ~~(XBRL)~~(iXBRL): (i) the Consolidated Balance Sheets, (ii) the Consolidated Statements of Earnings, (iii) the Consolidated ~~Statement~~Statements of Stockholders’ ~~Equity,~~Deficit, (iv) the Consolidated Statements of Cash Flows and (v) related notes.

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


	*Filed herewith.

	NATHAN'S FAMOUS, INC.

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

Date: ~~February 2, 2018~~ November 5, 2021	By:	/s/ ~~Eric Gatoff~~
Robert Steinberg		~~Eric Gatoff~~ ~~Chief Executive Officer~~ ~~(Principal Executive Officer)~~

~~Date:~~ ~~February 2, 2018~~	~~By:~~	~~/s/ Ronald G. DeVos~~
Robert Steinberg		~~Ronald G. DeVos~~ ~~Vice President - Finance~~ ~~and Chief Financial Officer~~ ~~(Principal Financial and Accounting Officer)~~

	4.3	Indenture, dated as of November 1, 2017, by and among Nathan’s Famous, Inc., certain of its wholly owned subsidiaries, as guarantors, and U.S. Bank National Association, a National Banking Association, as trustee and collateral trustee (including the form of Note (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report filed on Form 8-K dated November 1, 2017.))
		Vice President - Finance
	~~10.1~~	**Amendment, dated as of December 6, 2017 to the Employment Agreement dated as of December 15, 2016, as amended November 1, 2012 between Howard M. Lorber and Nathan’s Famous, Inc. (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report filed on Form 8-K dated December 12, 2017.)
		and Chief Financial Officer
	~~10.2~~	*Parity Lien Security Agreement, dated November 1, 2013, by and among Nathan's Famous, Inc. and The Other Assignors Identified Herein and U.S. Bank National Association, as Collateral Trustee.
		(Principal Financial and Accounting Officer)