NOTE A - BASIS OF PRESENTATION

The accompanying consolidated financial statements of Nathan's Famous, Inc. and subsidiaries (collectively “Nathan’s,” the “Company,” “we,” “us” or “our”) as of and for the thirteen and thirty-nine week periods ended December 25, 2022 and December 26, 2021 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 (“SEC”).

Management believes that the disclosures included in the accompanying consolidated interim financial statements and footnotes are adequate to make the information not misleading, but should be read in conjunction with the Consolidated Financial Statements and Notes thereto included in Nathan’s Annual Report on Form 10-K for the fiscal year ended March 27, 2022 as filed with the SEC on June 10, 2022.

Our significant interim accounting policies include the recognition of advertising fund expense in proportion to advertising funds revenue, and the recognition of income taxes using an estimated annual effective tax rate.

A summary of the Company’s significant accounting policies is identified in Note B of the Notes to Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended March 27, 2022.

COVID-19 Pandemic and Inflation

In March 2020, the World Health Organization declared the novel strain of coronavirus (COVID-19), a global pandemic. The COVID-19 pandemic has had and may continue to have a significant impact on our business and results of operations.

During fiscal 2022, we experienced pandemic and inflationary pressures, most notably within our Restaurant Operations and Branded Products Program segments. We experienced macroeconomic impacts arising from the long-term duration of the pandemic, including rising labor costs, increasing commodity prices, higher packaging costs and fuel prices, which contributed to a decline in consumer confidence and spending. We expect this trend to continue for the remainder of fiscal 2023. Our average cost of hot dogs for the thirty-nine week period ended December 25, 2022 was approximately 3% higher than during the thirty-nine week period ended December 26, 2021.

Inflation has an impact on food, paper, utility, labor and benefits and other general and administrative expenses which can impact our results of operations. In general, we have been able to offset cost increases resulting from inflation by increasing prices. We may not be able to offset cost increases in the future.

The Company’s franchisees and Branded Menu Program operators also have experienced some disruptions and challenges as a result of the pandemic including workforce absences, as well as changes in the availability and cost of labor, including higher wages and overtime costs.

There is continued uncertainty due to the COVID-19 pandemic and supply chain disruptions and their impacts on the Company’s business. We remain in regular contact with our major suppliers and to date we have not experienced significant disruptions in our supply chain.

The extent to which COVID-19 will continue to impact the Company will depend on future developments, which cannot be predicted, including the duration and severity of the COVID-19 pandemic, which may be impacted by new and evolving variants, the adoption rates of vaccines in the jurisdictions in which the Company operates, and further actions that may be taken to limit the public health and economic impact.

Such impacts may include non-cash asset impairments and difficulty collecting trade receivables, among other things.