NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 – Description of Business and Nature of Operations
Star Buffet, Inc., a Delaware corporation (“Star” and collectively with its subsidiaries, the “Company”), is a multi-concept restaurant holding company. The Company as of August 8, 2016 owns and operates 23 full-service restaurants located throughout the United States. At May 21, 2012 it owned and operated 32 full-service restaurants. The Company’s restaurants operate under trade names including 4B’s, JB’s, Casa Bonita and BuddyFreddys. The Company has an executive and an accounting office in Scottsdale, Arizona, and an accounting office in Salt Lake City, Utah.
Chapter 11 Reorganization
On September 28, 2011, Star Buffet, Inc. (the “Company” or “Star”) filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code (“Bankruptcy Code”) in the United States Bankruptcy Court for the District of Arizona (the “Bankruptcy Court”), in the proceeding titled In re: Star Buffet, Inc., Case No.2:11-bk-27518-GBN (the “Chapter 11 Case”). Star’s wholly owned subsidiary, Summit Family Restaurants Inc. (“Summit”) also filed a voluntary petition for reorganization under Chapter 11 on September 29, 2011 in the Bankruptcy Court, in the proceeding titled In re: Summit Family Restaurants Inc., Case No. 2:11-bk-27713-GBN. The cases for Star Buffet, Inc. and Summit Family Restaurants Inc. (collectively the “Debtors”) were consolidated and jointly administered. None of the Company’s other subsidiaries were included in the bankruptcy filings. The Debtors continued to operate their businesses as “debtors-in-possession” under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code. Under the Bankruptcy Code, certain claims against the Debtors that were in existence prior to the filing of the bankruptcy petition were stayed during the pendency of the Chapter 11 Reorganization. The balance of the unresolved claims are reflected in the May 21, 2012 balance sheet as “Liabilities subject to compromise.”
On December 17, 2012, the Bankruptcy Court entered an order (the “Confirmation Order”) confirming the Company’s plan of reorganization (the “Plan”), which provided for the payment in full of all approved claims. A copy of the Confirmation Order and the Plan as confirmed are attached as Exhibits 2.1 and 2.2, to the Company’s Report on Form 8-K filed with the Securities and Exchange Commission on December 20, 2012. The Plan became effective on January 17, 2013 and the Company emerged from bankruptcy. The payment obligations under the Amended Plan were estimated to be in excess of $10 million. The Plan provided for these obligations to be discharged from operating income derived from the restaurants operated by its affiliates, an exit loan of $300,000 from Suzanne H. Wheaton, the wife of CEO Robert E. Wheaton and proceeds from sale of certain restaurant properties.
Since filing for reorganization, the Debtors have sold fifteen properties, $5.8 million of the proceeds were used to pay off the obligation to Wells Fargo, the Company’s primary secured creditor in full, $1.9 million was used to pay the other secured creditors and $801,000 was used to pay unsecured creditors, pursuant to the Plan. As of January 26, 2015, the Company has reduced its liabilities subject to compromise to $800,000 and has made all payments required under the Plan. Resolution and payment of the remaining liabilities subject to compromise will result of payment in full of all of the Company’s creditors at the time of the bankruptcy filing and a complete discharge of the Company.
Note 2 – Significant Accounting Policies
We have prepared the accompanying unaudited condensed consolidated financial statements in accordance with United States generally accepted accounting principles (“US GAAP”), the instructions to Form 10-Q and Article 10 of Regulation S-X. These financial statements should be read in conjunction with the audited consolidated financial statements, and the notes thereto, included in the Company’s Annual Report on Form 10-K. The accounting policies used in preparing these condensed consolidated financial statements are the same as those described in our most recent Form 10-K. The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. In the opinion of the Company’s management, all adjustments (consisting solely of normal recurring adjustments) considered necessary for a fair presentation of the interim financial statements have been included.
STAR BUFFET, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
a) Principles of Consolidation
The condensed consolidated financial statements include the consolidated operations of the company and its subsidiaries through May 21, 2012. The Company utilizes a 52/53 week fiscal year which ends on the last Monday in January. The first quarter of each year contains 16 weeks while the other three quarters each contain 12 weeks, except the fourth quarter has 13 weeks if the fiscal year has 53 weeks. All significant intercompany balances and transactions have been eliminated in consolidation.
b) Earnings or Loss Per Common Share
Basic earnings or loss per common share is computed on the basis of the weighted average number of shares outstanding during the periods. Diluted earnings or loss per common share is calculated based on the weighted-average number of common shares outstanding during the period plus the effect of dilutive common stock equivalents outstanding during the period. Dilutive stock options are considered to be common stock equivalents and are included in the diluted calculation using the treasury stock method. The Company did not have any dilutive stock options as of May 21, 2012 or May 23, 2011. For periods in which a net loss is reported, potential dilutive shares are excluded because they are antidilutive. For periods in which a net income is reported, weighted-average common shares outstanding used to calculate diluted earnings per share exclude stock options to purchase 22,000 shares of common stock due to the market price of the underlying stock being less than the exercise price. Therefore, basic loss per common share is the same as diluted loss per common share for all periods presented.
c) Fair Value of Financial Instruments
The Company determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
|
●
|
Level 1 Inputs: Quoted prices for identical instruments in active markets.
|
|
●
|
Level 2 Inputs: Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuation in which all significant inputs and significant value drivers are observable in active markets.
|
|
●
|
Level 3 Inputs: Valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable.
|
The carrying amounts of the Company’s cash and cash equivalents, receivables, accounts payable and accrued expenses approximates fair value because of the short maturity of these instruments. The carrying amounts of the Company’s notes receivable and long-term debt approximate fair value and are based on discounted cash flows using market rates at the balance sheet dates. The Company does not estimate the fair value of the note payable to officer because of the related party nature of the transaction.
d) Inventories
Inventories consist of food, beverage, gift shop items and certain restaurant supplies and are valued at the lower of cost or market, determined by the first-in, first-out method.
e) Impairments
Impairment of Goodwill
Goodwill primarily represents the excess of the purchase price paid over the fair value of the net assets acquired in connection with business acquisitions. The Company reviews goodwill for possible impairment on an annual basis or when triggering events occur in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 350. ASC 350 requires goodwill to be tested for impairment at the reporting unit level, which is an operating segment or one level below an operating segment. The Company aggregates stores by concept or by geographic region when determining reporting units.
STAR BUFFET, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company utilizes a two-part impairment test. First, the fair value of the reporting unit is compared to carrying value (including goodwill). If the carrying value is greater than the fair value, the second step is performed. In the second step, the implied fair value of the reporting unit goodwill is compared to the carrying amount of goodwill. If the carrying value is greater, a loss is recognized. The goodwill impairment test considers the impact of current conditions and the economic outlook for the restaurant industry, the general overall economic outlook including market data, and governmental and environmental factors in establishing the assumptions used to compute the fair value of each reporting unit. We also take into account the historical, current and future (based on probability) operating results of each reporting unit and any other facts and data pertinent to valuing the reporting units in our impairment test.
The Company performs its annual impairment analysis on February 1st. There were no triggering events during the fiscal quarter ending May 21, 2012 that would have had an impact on goodwill. There were no goodwill impairment charges recorded for fiscal quarters ending May 21, 2012 and May 23, 2011.
Impairment of Long-Lived Assets
The Company evaluates impairment of long-lived assets in accordance with ASC 360, “Property, Plant and Equipment”. The Company assesses whether an impairment write-down is necessary whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment loss to be recognized is measured by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Any impairment is recognized as a charge to earnings, which would adversely affect operating results in the affected period.
Judgments made by the Company related to the expected useful lives of long-lived assets and the ability of the Company to realize undiscounted net cash flows in excess of the carrying amounts of such assets are affected by factors such as the ongoing maintenance and improvements of the assets, changes in economic conditions, and changes in operating performance. As the Company assesses the ongoing expected net cash flows and carrying amounts of its long-lived assets, these factors could cause the Company to realize a material impairment charge and could adversely affect operating results in any period. The Company did not recorded impairment losses associated with certain restaurant facilities for the sixteen weeks ended May 21, 2012 and May 23, 2011.
f) Properties, Building and Equipment
Property, building and equipment are carried at cost less accumulated depreciation and amortization. Depreciation and amortization are provided using the straight-line method over the following useful lives:
|
|
Years
|
Buildings
|
|
|
|
40
|
|
Building and leasehold improvements
|
|
|
15
|
-
|
20
|
Furniture, fixtures and equipment
|
|
|
5
|
-
|
8
|
Building and leasehold improvements are amortized over the lesser of the life of the lease or the estimated economic life of the assets. The life of the lease includes renewal options determined by management at lease inception as reasonably likely to be exercised. If a previously scheduled lease option is not exercised, any remaining unamortized leasehold improvements may be required to be expensed immediately which could result in a significant charge to operating results in that period.
Property and equipment in non-operating units or stored in warehouses, which is held for remodeling or repositioning, is depreciated and is recorded on the balance sheet as property, building and equipment held for future use.
Property and equipment placed on the market for sale is not depreciated and is recorded on the balance sheet as property held for sale and recorded at the lower of cost or market.
Repairs and maintenance are charged to operations as incurred. Major equipment refurbishments and remodeling costs are generally capitalized.
STAR BUFFET, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company's accounting policies regarding buildings and equipment include certain management judgments regarding the estimated useful lives of such assets, the residual values to which the assets are depreciated and the determination as to what constitutes the life of existing assets. These judgments and estimates may produce materially different amounts of depreciation and amortization expense than would be reported if different assumptions were used.
The components of property, buildings and equipment as of May 21, 2012 consist of 32 operating restaurant properties, three restaurant properties that are leased to third parties, four non-operating restaurants that remain closed for remodeling and repositioning one of which is held for sale and two non-operating properties that are used as warehouses for equipment. The components of property, buildings and equipment as of January 30, 2012 consist of 31 operating restaurant properties, three restaurant properties that are leased to third parties, five non-operating restaurants that remain closed for remodeling and repositioning of which one is held for sale and two non-operating properties that are used as warehouses for equipment. The Company recorded depreciation expense of $363,000 and $360,000 for the sixteen weeks ended May 21, 2012 and May 23, 2011, respectively
.
|
|
May
21, 2012
|
|
|
January
30, 2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, building and equipment:
|
|
|
|
|
|
Accum.
|
|
|
|
|
|
|
|
|
|
|
Accum.
|
|
|
|
|
|
(Dollars in Thousands)
|
|
Cost
|
|
|
Depr.
|
|
|
Net
|
|
|
Cost
|
|
|
Depr.
|
|
|
Net
|
|
Operating
|
|
|
31,516
|
|
|
|
(16,684
|
)
|
|
|
14,832
|
|
|
|
31,334
|
|
|
|
(16,223
|
)
|
|
|
15,111
|
|
Leased
|
|
|
2,989
|
|
|
|
(1,251
|
)
|
|
|
1,738
|
|
|
|
2,974
|
|
|
|
(1,224
|
)
|
|
|
1,750
|
|
Held for Future Use
|
|
|
2,930
|
|
|
|
(914
|
)
|
|
|
2,016
|
|
|
|
2,305
|
|
|
|
(731
|
)
|
|
|
1,574
|
|
Held for Sale
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
765
|
|
|
|
(308
|
)
|
|
|
457
|
|
Total
|
|
|
37,435
|
|
|
|
(18,849
|
)
|
|
|
18,586
|
|
|
|
37,378
|
|
|
|
(18,486
|
)
|
|
|
18,892
|
|
g) Other Assets
Other assets consist of deposits and deferred financing fees. Deferred financing fees are amortized to interest expense over the life of the loan.
h) Intangible Assets
The Company’s other assets consist of goodwill and other intangible assets as of May 21, 2012 and January 30, 2012. Goodwill represents the excess of the purchase price paid over the fair value of the net assets acquired in connection with business acquisitions. As of May 21, 2012 and January 30, 2012, the $551,000 in carrying value of goodwill relates to our purchase of two JB’s restaurants in Montana and one in Utah.
In addition, the Company’s other intangible assets consist of franchise fees, license agreements and trademarks. Franchise fees and license agreements are amortized using the straight-line method over the terms of the agreements, which typically range from 10 to 20 years. Trademark assets have an indefinite asset life.
i) Segment Reporting
All of the brands the Company operates are in the U.S. within the full-service dining industry and provide similar products to similar customers and therefore, are considered to be one segment for reporting purposes. The brands also possess similar economic characteristics, resulting in similar long-term expected financial performance characteristics. Sales to external customers are derived principally from food and beverage sales. We do not rely on any major customers as a source of sales. We believe we meet the criteria for aggregating our operating segments into a single reporting segment.
STAR BUFFET, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
j) Income Taxes
Our current provision for income taxes is based on our estimated taxable income in each of the jurisdictions in which we operate, after considering the impact on our taxable income of temporary differences resulting from disparate treatment of items, such as depreciation, estimated liability for closed restaurants, estimated liabilities for self-insurance, tax credits and net operating losses (“NOL”) for tax and financial reporting purposes. Deferred income taxes are provided for the estimated future income tax effect of temporary differences between the financial and tax bases of assets and liabilities using the asset and liability method. Deferred tax assets are also provided for NOL and income tax credit carryforwards. A valuation allowance to reduce the carrying amount of deferred income tax assets is established when it is more likely than not that we will not realize some portion or all of the tax benefit of our deferred income tax assets. We evaluate, on a quarterly basis, whether it is more likely than not that our deferred income tax assets are realizable based upon recent past financial performance, tax reporting positions, and expectations of future taxable income. The determination of deferred tax assets is subject to estimates and assumptions. We periodically evaluate our deferred tax assets to determine if our assumptions and estimates should change. Currently, because there can be no assurance that the Company will generate any specific level of earnings in the future years to realize the benefit of the deferred tax assets existing as of May 21, 2012 and January 30, 2012 the Company has a full valuation allowance against its deferred tax assets, net of expected reversals of existing deferred tax liabilities, as it believes it is more likely than not that these benefits will not be realized.
k) Recent Accounting Pronouncements
During 2014, the FASB issued Accounting Standards Update 2014-09 and 2015-14,
Revenue from Contract with Customers
(Topic 606), respectively, which revises previous revenue recognition standards to improve guidance on revenue recognition requirements. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance also provides additional disclosure requirements. This new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. Early adoption is permitted. The Company has not yet selected a transition date nor have we determined the effect of the standard on our ongoing financial reporting.
In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. This update, which is part of the FASB's larger Simplification Initiative project aimed at reducing the cost and complexity of certain areas of the accounting codification, requires that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position, which eliminates the requirement that an entity separate deferred tax liabilities and assets into current and non-current amounts. This update does not affect the current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount on the balance sheet. This amendment applies to all entities with a classified statement of financial position. For public business entities, this update is effective for fiscal years beginning after December 15, 2016, and interim periods within those annual periods. The Company notes this guidance will apply to its reporting requirements and will implement the new guidance accordingly.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This update requires a lessee to recognize on the balance sheet a liability to make lease payments and a corresponding right-of-use asset. The guidance also requires certain qualitative and quantitative disclosures about the amount, timing and uncertainty of cash flows arising from leases. This update is effective for annual and interim periods beginning after December 15, 2018, which will require us to adopt these provisions in the first quarter of fiscal 2020 using a modified retrospective approach. Early adoption is permitted. The Company has not yet selected a transition date nor have we determined the effect of the standard on our ongoing financial reporting.
Note 3 – Management Update
The Company filed Chapter 11 Reorganization on September 28 and September 29, 2011; the Plan was confirmed on December 17, 2012; and became effective on January 17, 2013. The Company’s payment obligations under the Plan are estimated to be in excess of $10.0 million. The Company intends to discharge all Plan obligations from income derived from the restaurants operated by the Company’s subsidiaries, an exit loan from Suzanne H. Wheaton, wife of CEO Robert E. Wheaton, and proceeds from sale of restaurant properties. Since filing for reorganization, the Debtors have sold fifteen properties, $5.8 million of the proceeds were used to pay off the obligation to Wells Fargo, the Company’s primary secured creditor in full, $1.9 million was used to pay the other secured creditors and $801,000 was used to pay unsecured creditors, pursuant to the Plan. As of January 26, 2015, the Company has reduced its liabilities subject to compromise to $800,000 and has made all payments required under the Plan. Resolution and payment of the remaining liabilities subject to compromise will result of payment in full of all of the Company’s creditors at the time of the bankruptcy filing and a complete discharge of the Company.
STAR BUFFET, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 4 – Note Payable to Officer
During fiscal 2008, the Company borrowed approximately $1,400,000 from Mr. Robert E. Wheaton, a principal shareholder, officer and director of the Company. This secured loan dated June 15, 2007 was subordinated to the obligation to Wells Fargo Bank, N.A., which was subsequently paid in full. In June 2008, the Company borrowed an additional $592,000 from Mr. Wheaton under the same terms. This resulted in an increase in the subordinated note balance from $1,400,000 to $1,992,000, the balance as of May 21, 2012 and January 30, 2012. The Company expensed $0 and $52,000 for interest related to its loans from Mr. Wheaton during the first 16 weeks of fiscal 2013 and fiscal 2012. The principal balance and any unpaid interest was due and payable in full on June 5, 2012. The loan was subsequently modified as a result of Star’s bankruptcy filing and pursuant to the approved Plan of Reorganization is not eligible to be repaid until all obligations owed to other creditors have been fully satisfied. Interest accrued on the principal amount of $1,991,936 and the interest of $196,957 from September 28, 2011 to January 16, 2013 at the bankruptcy plan rate. Interest will accrue on the principal amount of $1,991,936 and the interest of $196,957 from January 17, 2013 until paid at the rate of 3.25%. The interest rate of 3.25% will increase 1% each year on January 17 until paid per Plan of Reorganization. Quarterly interest-only payments on the principal portion will commence when the principal amount owing on the Wells Fargo Loan has been reduced to $1.5 million and continue until paid, provided that Debtors are current on all payments required by the Plan. If Debtors are not current on all payments required by the Plan, the quarterly interest-only payments will not begin until Company bring such payments current.
The Company used the funds borrowed from Mr. Wheaton for working capital requirements.
Note 5 - Long-Term Debt
The following table is a summary of the Company’s outstanding debt obligations.
|
|
May 21,
|
|
|
May 21,
|
|
|
January 30,
|
|
|
January 30,
|
|
|
|
2012
|
|
|
2012
|
|
|
2012
|
|
|
2012
|
|
Type of Debt
|
|
Total Debt
|
|
|
Current Portion
|
|
|
Total Debt
|
|
|
Current Portion
|
|
Real Estate Mortgages
|
|
$
|
5,202,000
|
|
|
$
|
375,000
|
|
|
$
|
5,306,000
|
|
|
$
|
454,000
|
|
Bank Debt-Revolver
|
|
|
2,475,000
|
|
|
|
2,475,000
|
|
|
|
2,475,000
|
|
|
|
2,475,000
|
|
Bank Debt-Term
|
|
|
3,100,000
|
|
|
|
3,100,000
|
|
|
|
3,100,000
|
|
|
|
3,100,000
|
|
Note Payable to Officer
|
|
|
1,992,000
|
|
|
|
-
|
|
|
|
1,992,000
|
|
|
|
-
|
|
Total Debt
|
|
$
|
12,769,000
|
|
|
$
|
5,950,000
|
|
|
$
|
12,873,000
|
|
|
$
|
6,029,000
|
|
The Company had a Credit Facility with Wells Fargo Bank, N.A. The Credit Facility includes an $8,000,000 term loan and a $2,500,000 revolving line of credit. On December 17, 2012, the Bankruptcy Court entered an order confirming the Second Amended Plan. The Confirmation Order required the Company to pay the Wells Fargo Secured Claim. The Wells Fargo Loan was paid in full in July 2014.
Note 6 - Commitments and Contingencies
In connection with the Company’s employment contract with Robert E. Wheaton, the Company’s Chief Executive Officer and President, the Company has agreed to pay Mr. Wheaton six years of his salary plus bonus if he resigns related to a change of control of the Company or is terminated, unless the termination is for cause.
In connection with the purchase of certain K-BOB restaurant locations, the Company entered into license agreements which require the payment of certain fees to K-BOB’S based on the restaurants gross sales that was subject to subsequent litigation. In April 2013, the Company settled all litigation by terminating three restaurants leases including returning certain restaurant equipment. The Company did not have to pay any additional consideration in connection with the agreed upon settlement.
On August 4, 2010 Spirit Master Funding, LLC (‘Spirit”) , a landlord of a Company subsidiary, filed case number CV-2010-022169 in the Superior Court of the State of Arizona for the failure of the subsidiary to pay $3.7 million in rent and accelerated rent for four restaurants leased to the subsidiary. During the bankruptcy, Spirit filed a proof of claim as an unsecured creditor for approximately $1.5 million. The Company believes they owe Spirit less than their claim amount and has filed an objection to this claim with the bankruptcy court arguing that the allowed claim should be approximately $500,000. The outcome of this matter is still pending.
STAR BUFFET, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Company or its subsidiaries are, from time to time, the subject of complaints or litigation from customers, employees, vendors, regulatory authorities and landlords. Adverse publicity resulting from such complaints or litigation may materially, adversely affect the Company and its subsidiaries, regardless of whether such allegations are valid. The Company believes that generally the lawsuits, claims and other legal matters brought in the ordinary course of business are not material to the Company’s business, financial condition or results of operations. However, an existing or future lawsuit or claim could result in an adverse decision against the Company that could have a material adverse effect on the Company’s business, financial condition and results of operations.
Note 7 - Subsequent Events
The Company has evaluated subsequent events through the date that these financial statements were filed with the Securities and Exchange Commission.
On March 26, 2012, the Company filed with the Bankruptcy Court a proposed plan of reorganization and related disclosure statement (the “Disclosure Statement”) in accordance with the Bankruptcy Code. The proposed plan of reorganization was subsequently amended on May 24, 2012 (the “First Amended Plan”) and October 17, 2012 (the “Second Amended Plan” or the “Plan” or the “Amended Plan”). The Second Amended Plan calls for payment in full of all claims. On December 17, 2012, the Bankruptcy Court entered an order (the “Confirmation Order”) confirming the Plan. A copy of the Confirmation Order and the Second Amended Plan as confirmed were included in the Company’s Report on Form 8-K filed December 20, 2012. The deadline to appeal the Confirmation Order was December 31, 2012. The creditors approved the Plan and the Plan become effective on January 17, 2013 and the Company emerged from bankruptcy. The payment obligations under the Amended Plan are estimated to be in excess of $10.0 million. The Debtors intend to discharge these obligations from income derived from the restaurants operated by its affiliates, an exit loan of $300,000 from Suzanne H. Wheaton, the wife of CEO Robert E. Wheaton, and proceeds from sale of certain restaurant properties.
On May 28, 2012 the Company closed the Barnhill’s Buffet restaurant in Huntsville, Alabama. The Company accrued for all anticipated lease termination expenses.
On June 8, 2012 the Company closed the JJ North’s restaurant in Grants Pass, Oregon. The Company accrued for all anticipated lease termination expenses.
On June 14, 2012 the Creditors’ committee retained legal and financial experts to explore alternatives to the Company’s Reorganization Plan. The Disclosure Statement detailing the Reorganization Plan was approved by the Bankruptcy Court on May 24, 2012.
On June 18, 2012 the Company closed the Holiday House restaurant in Ormond Beach, Florida. The Company had a month-to-month lease which was fully paid.
On July 12, 2012 the United State Bankruptcy Court for the District of Arizona scheduled a contested confirmation hearing for October 22, 2012 in connection with the Company’s proposed First Amended Joint Plan of Reorganization dated May 24, 2012 (the “Plan”). The official unsecured creditors’ committee and certain of its members objected to confirmation of the Plan and voted to reject it despite the fact the Plan calls for full repayment of all allowed unsecured creditors’ claims. Stockman Bank of Montana, which holds two secured claims and Wells Fargo Bank, N.A., which holds the largest secured claim, both have voted in favor of the Plan.
On July 17, 2012 the Company closed the Whistle Junction restaurant in Titusville, Florida. In August 2012, the Company leased the Titusville property to a third party and decided not to reopen the JB’s restaurant in Helena, Montana.
On August 12, 2012 the Company closed the JB’s restaurant in Richfield, Utah. The Company had a month-to-month lease which was fully paid.
On September 12, 2012 the Company filed paperwork with the Bankruptcy Court to terminate the license agreements with K-BOB’S USA for the K-BOB’S restaurants in Tucumcari, NM, Beeville, TX, Lamesa, TX and Dumas, TX.
The Company re-opened the Western Sizzlin Steakhouse in Magnolia, Arkansas on October 25, 2012.
STAR BUFFET, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On March 28, 2013, the Company sold the former JB’s Restaurant property in Sierra Vista, Arizona resulting in net sales proceeds of $571,000. All of the sales proceeds were used to pay Wells Fargo pursuant to the Company’s reorganization plan that was approved by the Bankruptcy Court.
On April 4, 2013, the Company settled all outstanding claims with the Tinsley group. As part of the settlement the three K-BOB’s stores in Tucumcari, New Mexico, Lamesa, Texas and Beeville, Texas were closed on April 30, 2013 and returned to the Tinsley group. The transaction was approved by the Bankruptcy Court.
On May 18, 2013, the Company opened a Big Rock Café in Marysvale, Utah.
On May 31, 2013 the Company closed and sold the JJ North’s Country Buffet in Yuma, Arizona for net sales proceeds of $1,247,000 with all of the sales proceeds paying Wells Fargo pursuant to the Company’s reorganization plan that was approved by the Bankruptcy Court.
On June 28, 2013, the Company closed the JJ North’s Country Buffet in Scottsdale, Arizona.
On July 29, 2013, the Company closed the Barnhill’s Buffet in Tupelo, Mississippi.
The Company accrued for all anticipated lease termination expenses.
On September 4, 2013, the Company sold the former Hometown Buffet building in Layton, Utah and restructured its loan from the Bank of Utah. Net proceeds of $998,000 from this sale were paid to Bank of Utah in connection with restructuring the loan agreement.
On September 21, 2013, the Company closed the JB’s Restaurant in Billings, Montana. The Company had a month-to-month lease which was fully paid.
On September 30, 2013, the Company closed the Big Rock Café in Marysvale, Utah. The Company accrued for all anticipated lease termination expenses.
On November 3, 2013, the Company closed the 4B’s Restaurant in Butte, Montana. The Company accrued for all anticipated lease termination expenses.
On January 5, 2014 the Company closed the 4B’s Restaurant in Missoula, Montana. The Company accrued for all anticipated lease termination expenses.
On March 20, 2014, the Company sold the 4B’s Restaurant in Great Falls, Montana. Net proceeds of $157,000 from this sale were paid to Wells Fargo pursuant to the Company’s reorganization plan that was approved by the Bankruptcy Court.
On March 28, 2014 the Company sold the property in South Daytona, Florida for net proceeds of $916,000 with all of the sales proceeds paid to Wells Fargo pursuant to the Company’s reorganization plan that was approved by the Bankruptcy Court.
On April 28, 2014, the Company sold the Pecos Diamond Steakhouse in Artesia, New Mexico. Net proceeds of $367,000 from this sale were paid to Wells Fargo pursuant to the Company’s reorganization plan that was approved by the Bankruptcy Court.
On July 14, 2014, the Company sold the former BuddyFreddys Restaurant in Kissimmee, Florida. Net proceeds of $449,000 from this sale were paid to Wells Fargo pursuant to the Company’s reorganization plan that was approved by the Bankruptcy Court.
On August 4, 2014, the Company sold the JB’s Restaurant in Rexburg, Idaho. Net proceeds of $307,000 from this sale were paid pursuant to the Company’s reorganization plan that was approved by the Bankruptcy Court.
On August 5, 2014 the Company closed the Barnhill’s Restaurant in Jackson, Tennessee. The Company accrued for all anticipated lease termination expenses.
On August 8, 2014, the Company sold the former BuddyFreddys Restaurant in Ocala, Florida. Net proceeds of $279,000 from this sale were paid pursuant to the Company’s reorganization plan that was approved by the Bankruptcy Court.
STAR BUFFET, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
On October 14, 2014, the Company sold the former Hometown Buffet building in Scottsdale, Arizona using seller financing of $1,550,000. The Company collected the mortgage in April 2015.
On October 31, 2014, the Company sold the JB’s Restaurant in Great Falls, Montana. Net proceeds of $232,000 from this sale were paid pursuant to the Company’s reorganization plan that was approved by the Bankruptcy Court.
On November 1, 2014 the Company opened a 4B’s Restaurant in Dillon, Montana.
On November 19, 2014, the Company sold the JB’s Restaurant in Vernal, Utah. Net proceeds of $203,000 from this sale were paid pursuant to the Company’s reorganization plan that was approved by the Bankruptcy Court.
On March 2, 2015, the Company sold the former Whistle Junction Restaurant in Titusville, Florida. Net proceeds of $1,044,000 from this sale were paid pursuant to the Company’s reorganization plan that was approved by the Bankruptcy Court.
On April 24, 2015, the Company sold the BuddyFreddys Restaurant in Plant City, Florida. Net proceeds of $669,000 from this sale were paid pursuant to the Company’s reorganization plan that was approved by the Bankruptcy Court.
On June 1, 2015 the Company opened a JB’s Restaurant in Evanston, Wyoming.
On June 15, 2015 the Company opened a 4 Aces in Lewistown, Montana.
On August 1, 2015 the Company opened a JB’s Restaurant in Kingman, Arizona.
On November 18, 2015 the Company opened the Original 4B’s Café in Deer Lodge, Montana.
On April 18, 2016 the Company purchased property in Missoula, Montana. The Company intends to open a 4B’s restaurant.
On May 3, 2016 the Company opened a Whistle Junction restaurant in Keystone, South Dakota.
On May 16, 2016 the Company opened a Finnegan’s Restaurant in Kalispell, Montana.
On June 1, 2016 the Company leased property in Billings, Montana. The Company intends to open a 4B’s restaurant.
STAR BUFFET, INC. AND SUBSIDIARIES