EMPLOYEE RETENTION CREDIT AND RESTAURANT REVITALIZATION FUND
|9 Months Ended
Sep. 30, 2022
|Employee Retention Credit And Restaurant Revitalization Fund
|EMPLOYEE RETENTION CREDIT AND RESTAURANT REVITALIZATION FUND
3. EMPLOYEE RETENTION CREDIT AND RESTAURANT REVITALIZATION FUND
Employee Retention Credit
The Employee Retention Credit (“ERC”) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) is a refundable tax credit which encouraged businesses to keep employees on the payroll during the COVID-19 pandemic. Although the program ended on January 1, 2022, the Company performed an analysis during the nine months ended September 30, 2022 and determined that it was eligible for additional credits related to 2021 wages. As of each of September 30, 2022 and December 31, 2021, approximately $0.8 million of ERC is included in accounts and other receivables in the condensed consolidated balance sheets. For the three and nine months ended September 30, 2022 the Company recognized $-0- and $.7 million, and for the three and nine months ended September 30, 2021, the Company recognized $1.2 million and $2.7 million, respectively, of ERC as a contra-expense included in employee retention credit and other grant income in the condensed consolidated statements of operations.
In addition to the ERC, the Company received credits under other government/government agency programs of approximately $-0- and $128,000 for the three and nine months ended September 30, 2021, respectively, of which approximately $-0- and $41,000 and $112,000 and $44,000 were recorded as an offset to restaurant operating expenses and as other income, respectively, in the condensed consolidated statements of operations.
Restaurant Revitalization Fund
The American Rescue Plan Act established the Restaurant Revitalization Fund (“RRF”) to provide funding to help restaurants and other eligible businesses keep their doors open. This program provided restaurants with funding equal to their pandemic-related revenue loss up to $10.0 million per business and no more than $5.0 million per physical location. Recipients are not required to repay the funding as long as funds are used for eligible uses no later than March 11, 2023. In 2021 and prior to its acquisition by the Company in August 2021, Pie Squared Holdings (see Note 9) received a grant under the U.S. Small Business Administration’s (“U.S. SBA”) RRF for approximately $10.0 million. The proceeds received were mainly used to repay existing debt and to also pay operating expenses. The unused funds received under the RRF at closing of the acquisition were $2.0 million, and these funds were placed into escrow for the benefit of the Company for working capital to be used solely in the operations of the acquired business. Restricted cash and a deferred grant income liability were recorded for the unused proceeds from the RRF, and grant income is being recognized as the Company expends the funds on eligible costs incurred under the RRF post acquisition. As of September 30, 2022 and December 31, 2021, the Company had restricted cash of and $1.7 million, respectively, related to the unused proceeds from the RRF. For the three and nine months ended September 30, 2022, the Company recognized $0.4 million and $1.5 million, respectively, related to the RRF as a contra-expense included in employee retention credit and other grant income and in the condensed consolidated statements of operations. As of September 30, 2022 all RRF funds were utilized.
The Company periodically would submit to the escrow agent for the acquisition the planned uses of these funds, and the sellers had the right to review the planned uses to determine whether, in the sellers’ opinion, the planned uses met the criteria of “eligible uses” under the RRF. If determined to not meet such criteria, then the escrow agent would not distribute that portion of the request. As the Company acquired all the outstanding membership interests in Pie Squared Holdings, the Company is now responsible that the grant proceeds were, in fact, properly obtained and disbursed for “eligible uses.” If it is determined that Pie Squared Holdings obtained the grant improperly or that disbursements of such grant monies were not “eligible uses,” then the Company would be responsible for the ramifications of such actions, including repayment of the approximately $10.0 million of grant monies, among other items. Management completed its analysis of this contingency and concluded that, through the date at which the condensed consolidated financial statements were available to be issued, a liability does not need to be recorded for this contingency. In connection with the acquisition, the Company obtained an indemnification from the sellers which is inclusive of any matters related to the RRF.