Note 7 - Note Receivable Held For Sale

6 Months Ended

Sep. 25, 2011

Asset Impairment Charges [Text Block]

NOTE G – NOTE RECEIVABLE HELD FOR SALE

Nathan’s determines that a note is impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the note agreement. When evaluating a note for impairment, the factors considered include: (a) indications that the borrower is experiencing business problems such as late payments, operating losses, marginal working capital, inadequate cash flow or business interruptions, or (b) notes that are susceptible to deterioration in realizable value.

On May 4, 2011, Nathan’s entered into a Note Purchase and Sale Agreement with Y & Y Capital Co, LLC (“Note Purchaser” and such agreement, the “Purchase Agreement”) pursuant to which Nathan’s agreed to sell to the Note Purchaser for $900,000 in cash the note received by the Company in connection with the sale of its Miami Subs Corporation subsidiary, as amended through May 4, 2011 (the “Amended MSC Note”).  Simultaneously with the execution of the Purchase Agreement, the Note Purchaser paid Nathan’s $450,000 to be applied to the purchase price payable under the Purchase Agreement. The sale of the Amended MSC Note was completed on June 29, 2011 and Nathan’s received the $450,000 balance of the sale proceeds. Simultaneously with the closing of the sale of the Amended MSC Note, Nathan’s assigned to the Note Purchaser certain of its rights under certain related agreements which secure the obligation of the payor under the Amended MSC Note, including a security agreement dated as of June 7, 2007, two personal Guaranties and the majority of an irrevocable direction for the payment of funds under certain circumstances. Nathan’s retained certain rights under the irrevocable direction.  On October 24, 2011 Nathan’s executed a Release and Direction among the parties agreeing to accept $125,000 in full satisfaction of Nathan’s rights under the irrevocable direction.

As of March 27, 2011, management evaluated the Amended MSC Note for impairment by comparing the present value of the expected future cash flows on the Amended MSC Note to the current carrying value and recorded an impairment charge of $263,000 at that time. As of March 27, 2011, the Company classified the Amended MSC Note as a note receivable held for sale in the accompanying Consolidated Balance Sheet as a result of the then pending sale of the Amended MSC Note.

Following (in thousands) is a summary of the impaired note receivable:

	Sept 25,			March 27,
	2011			2011
Total recorded investment in impaired note receivable	$	-		$	1,434
Allowance for impaired note receivable		(-	)		(513	)
		-			921
Less: current portion		-			(921	)
Note receivable – noncurrent portion	$	-		$	-

The Company recognized approximately $30 and $44 of interest income on the Amended MSC Note for the twenty-six  weeks ended September 25, 2011 and September 26, 2010, respectively. The average recorded investment in impaired notes receivable was $1,179 at March 27, 2011.