What changed in this filing

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Item 2. Management’s Discussion and Analysis

2020-08-11 compared with 2020-06-23 · 75 added, 90 removed, 127 unchanged (57% of the section changed)

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On March 11, 2020, in light of the rapid spread of the novel Coronavirus (“COVID-19” or "Coronavirus"), the World Health Organization declared the COVID-19 outbreak to be a global pandemic and the United States declared a National Public Health Emergency.

The COVID-19 pandemic has significantly impacted health and economic conditions throughout the United States.

Federal, state and local governments took a variety of actions to contain the spread of COVID-19 and the Company was required to temporarily close all of its restaurants as of March 28, 2020, until the related governmental authorities allow us to reopen them.

The coronavirus has caused unprecedented business disruptions, especially in the hospitality industry, and the Company fully supports all governmental actions to help stem the effects of the Coronavirus.

While neither the length of time of the closures nor the extent of the impact of the Coronavirus on our results of operations and financial condition may be known for quite some time, we do expect that there will be a material adverse effect.

As a result of these developments, the Company is experiencing a significant negative impact on its revenues, results of operations and cash flows, which could negatively impact its ability to meet its obligations over the next twelve months.

In response to the business disruption caused by the COVID-19 pandemic, the Company has taken the following actions, which management expects will enable it to meet its obligations over the next twelve months:

Furloughed all of hourly employees and approximately 95% of restaurant management personnel, while enacting temporary salary reductions for all remaining restaurant management personnel.

In addition, the Company temporarily reduced the pay of all corporate and administrative staff by 50% to 75%, temporarily reduced senior management salaries by 75% to 95%, and temporarily suspended all board fees.

Subsequent to the second quarter of 2020, the Company entered into a Payment Suspension Agreement with its bank which deferred all monthly interest payments through June 1, 2020 and deferred aggregate principal payments of $675,000 due on June 1, 2020 to the respective loan maturity dates.

In addition, our bank agreed to relaxed financial covenants through fiscal Q3 2021.

Indefinitely deferred the payment of the $0.25 dividend declared on March 2, 2020.

The COVID-19 pandemic has significantly disrupted consumer demand, as well as the Company’s restaurant operations.

Following the pandemic declaration in March 2020, federal, state and local governments began to respond to the public health crisis by requiring social distancing, "stay at home" directives, and mandatory closure of all of our locations.

As a result of state and local governments lifting “stay at home” orders and mandatory shut-down requirements in May and June 2020, the Company has reopened:

(i) all of its properties located in Florida and Alabama, (ii) its operations in the New York-New York Hotel & Casino Resort in Las Vegas, (iii) Sequoia in Washington, DC, (iv) The Porch at Bryant Park in New York, NY, (v) Bryant Park Grill and Café in New York, NY, and (vi) El Rio Grande in New York, NY at varying levels of limited capacity as allowed by federal, state and local governments.

Due to the impact of the COVID-19 pandemic, during the 13 and 39 weeks ended June 27, 2020, the Company has temporarily closed several restaurants, typically for one to five days.

The Coronavirus has caused unprecedented business disruptions, especially in the hospitality industry.

Although we have experienced some recovery from the initial impact of COVID-19, the long-term impact of COVID-19 on the economy and on our business remains uncertain, the duration and scope of which cannot currently be predicted.

However, we believe that our existing cash balances, which include the proceeds from Paycheck Protection Program loans (see Note 7 - Notes Payable) and actions taken by management since mid-March 2020, set out below and otherwise, will be sufficient to meet our liquidity and capital spending requirements through August 12, 2021.

In response to the business disruption and liquidity concerns caused by the COVID-19 pandemic, the Company has taken the following actions, which management expects will enable it to meet its obligations over the next 12 months:

While restaurants were closed or continue to be closed, we furloughed all hourly employees and approximately 95% of salaried restaurant management personnel, while enacting salary reductions for all remaining restaurant management personnel.

As restaurants re-open, restaurants management salaries were restored to 70% of pre-pandemic amounts.

If a location is producing sustained cash flow, restaurant management salaries were restored to 100% of pre-pandemic amounts.

Initially reduced the pay of all corporate and administrative staff by 50% to 75% and senior management salaries by 75% to 95%, and temporarily suspended all board fees.

As of June 27, 2020, most corporate salaries have been restored to 65% of pre-pandemic levels.

Entered into a Payment Suspension Agreement with its bank which deferred aggregate principal payments of $675,000 due on June 1, 2020 to the respective loan maturity dates.

In addition, the bank agreed to relaxed financial covenants through fiscal Q3 2021.

Canceled the payment of the $0.25 dividend declared on March 2, 2020.

Suspended future dividend payments until such time as the Board deems appropriate to reinstate.

Canceled or delayed all non-essential capital expenditures.

Suspended the vast majority of lease payments for the months of April, May and June 2020 and is currently in negotiations for rent concessions, abatements and deferrals with its landlords to reduce these lease payments.

While some landlords have agreed to certain concessions subsequent to quarter end, there can be no assurance that the Company will be successful in obtaining all of the relief it is seeking.

Certain Company subsidiaries applied for and received approximately $14.9 million of loans under the Paycheck Protection Program of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), which was enacted March 27, 2020.

Suspended the vast majority of lease payments for the months of April, May and June 2020 and through August 2020 for all locations that are still closed and is currently in negotiations for rent concessions, abatements and deferrals with its landlords to reduce these lease payments.

While most landlords have agreed to certain concessions subsequent to quarter end, there can be no assurance that the Company will be successful in obtaining all of the relief it is seeking.

Certain Company subsidiaries applied for and received a total of approximately $15.0 million of loans under the Paycheck Protection Program of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”), which was enacted March 27, 2020.

Utilized additional provisions of the CARES Act to obtain tax savings as well as the deferral of our portion of social security taxes to future years.

Due to the rapid development and fluidity of this situation, the Company cannot determine the ultimate impact that the COVID-19 pandemic will have on the Company’s consolidated financial condition, liquidity, and future results of operations, and therefore any prediction as to the ultimate material adverse impact on the Company’s consolidated financial condition, liquidity, and future results of operations is uncertain.

We cannot predict how soon we will be able to reopen all of our restaurants at full capacity, and our ability to reopen will depend in part on the actions of a number of governmental bodies over which we have no control.

Due to the rapid development and fluidity of this situation, the management cannot determine the ultimate impact that the COVID-19 pandemic will have on the Company’s consolidated financial condition, liquidity, future results of operations, suppliers, industry, and workforce and therefore any prediction as to the ultimate material adverse impact on the Company’s consolidated financial condition, liquidity, and future results of operations is uncertain.

The disruption in operations has led the Company to consider the impact of the COVID-19 pandemic on its liquidity, debt covenant compliance, and recoverability of long-lived and ROU assets, goodwill and intangible assets, among others.

In addition, we cannot predict how soon we will be able to reopen all of our restaurants at full capacity, and our ability to reopen will depend in part on the actions of a number of governmental bodies over which we have no control.

Moreover, once restrictions are lifted, it is unclear how quickly customers will return to our restaurants, which may be a function of continued concerns over safety and/or depressed consumer sentiment due to adverse economic conditions, including job losses.

As of March 28, 2020 , the Company owned and operated 20 restaurants and bars, 17 fast food concepts and catering operations, exclusively in the United States, that have similar economic characteristics, nature of products and service, class of customer and distribution methods.

If these disruptions continue, the Company expects a continued material negative impact on its consolidated financial condition, future results of operations and liquidity.

The extent of such negative impact will be determined, in part, by the longevity and severity of the pandemic.

As of June 27, 2020 , the Company owned and operated 20 restaurants and bars, 17 fast food concepts and catering operations, exclusively in the United States, that have similar economic characteristics, nature of products and service, class of customer and distribution methods.

The Company believes it meets the criteria for aggregating its operating segments into a single reporting segment in accordance with applicable accounting guidance.

The consolidated condensed statements of operations for the 13 and 26 weeks ended March 28, 2020 include revenues and income of approximately $3,058,000 and $5,480,000 and $580,000 and $622,000, respectively, related to JB's on the Beach , which was acquired on May 15, 2019.

The consolidated condensed statements of operations for the 13 and 39 weeks ended June 27, 2020 include revenues and income (loss) of approximately $646,000 and $6,126,000 and $(307,000) and $316,000, respectively, related to JB's on the Beach , which was acquired on May 15, 2019.

As of December 29, 2018 , the Company determined that it would not be able to operate Durgin-Park profitably due to decreased traffic at the Faneuil Hall Marketplace in Boston, MA, where it was located, and rising labor costs.

As a result, included in the consolidated condensed statement of income for the 13 and 26 weeks ended March 30, 2019 are losses on closure in the amounts of $39,000 and $1,106,000 consisting of:

As a result, included in the consolidated condensed statement of income for the 39 weeks ended June 29, 2019 are losses on closure in the amounts of $1,106,000 consisting of:

(i) impairment of trademarks in the amount of $721,000 , (ii) accelerated depreciation of fixed assets in the amount of $333,000 , and (iii) write-offs of prepaid and other expenses in the amount of $52,000 .

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Under this method, certain years including the current year ending October 3, 2020 will contain 53 weeks.

The periods ended March 28, 2020 and March 30, 2019 each included 13 and 26 weeks.

The periods ended June 27, 2020 and June 29, 2019 each included 13 and 39 weeks.

The Company has substantial fixed costs that do not decline proportionately with sales.

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Results of Operations

The Company’s restaurants had an operating loss of ($1,936,000) for the 13 weeks ended March 28, 2020 , as compared to operating income of $78,000 for the 13 weeks ended March 30, 2019 .

The Company’s operating loss for the 13 weeks ended June 27, 2020 was $(5,623,000), as compared to operating income of $4,731,000 for the 13 weeks ended June 29, 2019 .

This decrease resulted primarily from the government mandated closure of all of our restaurants in March 2020 in connection with the COVID-19 pandemic and a $364,000 loss on the termination of a lease.

The Company’s operating income for the 26 weeks ended March 28, 2020 was $500,000 as compared to $384,000 for the 26 weeks ended March 30, 2019 which included a loss of $1,106,000 relating to the closure of Durgin-Park located in Boston, MA.

This increase resulted primarily from strong catering revenues at our New York properties in the first fiscal quarter combined with strong performance at our properties located in Florida and Alabama partially offset by the government mandated closure of all of our restaurants in March 2020 and a $364,000 loss on the termination of a lease.

The following table summarizes the significant components of the Company’s operating results for the 13- and 26- week periods ended March 28, 2020 and March 30, 2019 :

The Company’s operating loss for the 39 weeks ended June 27, 2020 was $(5,123,000) as compared to operating income of $5,114,000 for the 39 weeks ended June 29, 2019 which included a loss of $1,106,000 relating to the closure of Durgin-Park located in Boston, MA.

In addition to the decrease in restaurant revenue from the mandatory closures and operating at varying levels of limited capacity, the Company estimates that it incurred approximately $2,300,000 and $3,000,000 of costs directly related to COVID-19 during the 13 and 39 weeks ended June 27, 2020 consisting primarily of payments to employees for paid-time off during restaurant closures, inventory waste, and rent and rent related costs for closed restaurants from the day that they closed.

Recently, there has been a significant increase in reported COVID-19 cases in certain states, including Florida and Alabama, where we have significant locations.

This has resulted in some local governments responding by taking additional measures, including implementing a further reduction of in-restaurant capacity in certain locations.

Although this is a developing situation, to this point these capacity reductions have not had a significant impact on our overall sales trends.

We continue to monitor and adhere to local restrictions and are maintaining elevated safety measures, including additional sanitation and disinfecting practices and the use of gloves and facial protection for our employees.

The following table summarizes the significant components of the Company’s operating results for the 13- and 39- week periods ended June 27, 2020 and June 29, 2019 :

13 Weeks Ended

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OPERATING INCOME (LOSS)

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NM - Not meaningful

During the Company’s 13-week period ended March 28, 2020 , revenues decreased 3.7% as compared to revenues in the 13-week period ended March 30, 2019 .

This decrease resulted primarily from the government mandated closure of all of our restaurants in March 2020 in connection with the COVID-19 pandemic.

During the Company’s 13-week period ended June 27, 2020 , revenues decreased 83.9% as compared to revenues in the 13-week period ended June 29, 2019 .

This decrease resulted primarily from the government mandated closure of all of our restaurants in March 2020 and limited re-openings beginning in late May 2020 in connection with the COVID-19 pandemic.

Food and Beverage Same-Store Sales

On a Company-wide basis, same-store sales decreased 12.4% during the second fiscal quarter of 2020 as compared to the same period last year as follows:

On a Company-wide basis, same-store sales decreased 84.3% during the third fiscal quarter of 2020 as compared to the same period last year as follows:

13 Weeks Ended

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Food and beverage sales

All of the above decreases in sales are the result of the government mandated closure of all of our restaurants in March 2020 in connection with the COVID-19 pandemic.

Other food and beverage sales consist of sales related to new restaurants opened or acquired during the applicable period, sales related to properties that were closed and other fees.

A discussion of same-store sales has not been presented for the 13-week period ended June 27, 2020 as it is not meaningful as a result of the government mandated closure of all of our restaurants in March 2020 and limited re-openings beginning in late May 2020 in connection with the COVID-19 pandemic.

Costs and Expenses

Costs and expenses for the 13 and 26 weeks ended March 28, 2020 and March 30, 2019 were as follows (in thousands):

Costs and expenses for the 13 and 39 weeks ended June 27, 2020 and June 29, 2019 were as follows (in thousands):

13 Weeks Ended

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Total costs and expenses

Food and beverage costs as a percentage of total revenues for the 13 weeks ended March 28, 2020 increased as compared with the same period of last year primarily as a result of inventory write-offs required as a result of the government mandated closures of all of our restaurants in March 2020 in connection with the COVID-19 pandemic.

Food and beverage costs as a percentage of total revenues for the 26 weeks ended March 28, 2020 decreased as compared with the same period of last year as a result of a better mix of catering versus a la carte business at our larger properties (through the closure respective closure date) combined with menu price increases partially offset by increases in food costs and inventory write-offs required as a result of the government mandated closures of all of our restaurants in March 2020 in connection with the COVID-19 pandemic.

Payroll expenses as a percentage of total revenues for the 13 and 26 weeks ended March 28, 2020 increased as compared with the same periods of last year primarily as a result of retaining key restaurant management personnel at reduced salaries from the respective closure date through the end of the quarter with no corresponding revenues as a result of the government mandated closures of all of our restaurants in March 2020 in connection with the COVID-19 pandemic.

Occupancy expenses as a percentage of total revenues for the 13 and 26 weeks ended March 28, 2020 increased as compared with the same periods of last year primarily as a result of rents being paid on the first of the month and having no sales from the respective closure date through the end of the quarter as a result of the government mandated closures of all of our restaurants in March 2020 in connection with the COVID-19 pandemic.

Other operating costs and expenses as a percentage of total revenues for the 13 and 26 weeks ended March 28, 2020 as compared to the same period of last year increased primarily as a result of increased professional fees at the restaurant-level.

General and administrative expenses (which relate solely to the corporate office in New York City) as a percentage of total revenues for the 13 weeks ended March 28, 2020 increased as compared with the same period of last year primarily as a result of retaining corporate personnel at temporarily reduced salaries from the respective closure date through the end of the quarter with no corresponding revenues as a result of the government mandated closures of all of our restaurants in March 2020 in connection with the COVID-19 pandemic.

General and administrative expenses of total revenues for the 26 weeks ended March 28, 2020, decreased as compared with the same period of last year primarily as a result of lower professional fees and better cost management partially offset by the above.

Depreciation and amortization expense for the 13 and 26 weeks ended March 28, 2020 decreased as compared to the same period of last year primarily as a result of lower charges in the current period as a result of asset impairments in the fourth quarter of 2019 partially offset by depreciation on improvements placed in service in fiscal 2019.

Food and beverage costs as a percentage of total revenues for the 13 weeks ended June 27, 2020 increased as compared with the same period of last year primarily as a result of inventory write-offs required as a result of the government mandated closures of all of our restaurants in March 2020 in connection with the COVID-19 pandemic.

Food and beverage costs as a percentage of total revenues for the 39 weeks ended June 27, 2020 decreased as compared with the same period of last year as a result of a better mix of catering versus a la carte business at our larger properties (through the respective closure date) combined with menu price increases partially offset by increases in food costs and inventory write-offs required as a result of the government mandated closures of all of our restaurants in March 2020 in connection with the COVID-19 pandemic.

Payroll expenses as a percentage of total revenues for the 13 and 39 weeks ended June 27, 2020 increased as compared with the same periods of last year primarily as a result of retaining key restaurant management personnel at reduced salaries from the respective closure date through the end of the quarter with no or limited corresponding revenues as a result of the government mandated closures of all of our restaurants in March 2020 in connection with the COVID-19 pandemic.

Occupancy expenses as a percentage of total revenues for the 13 and 39 weeks ended June 27, 2020 increased as compared with the same periods of last year primarily as a result of accrued rents and having no or limited sales from the respective closure date through the end of the quarter as a result of the government mandated closures of all of our restaurants in March 2020 in connection with the COVID-19 pandemic.

Other operating costs and expenses as a percentage of total revenues for the 13 and 39 weeks ended June 27, 2020 as compared to the same period of last year increased primarily as a result of increased professional fees at the restaurant-level.

General and administrative expenses (which relate solely to the corporate office in New York City) as a percentage of total revenues for the 13 and 39 weeks ended June 27, 2020 increased as compared with the same periods of last year primarily as a result of retaining corporate personnel at temporarily reduced salaries from the respective closure date through the end of the quarter with no or limited corresponding revenues as a result of the government mandated closures of all of our restaurants in March 2020 in connection with the COVID-19 pandemic.

Depreciation and amortization expense for the 13 and 39 weeks ended June 27, 2020 decreased as compared to the same period of last year primarily as a result of lower charges in the current period as a result of asset impairments in the fourth quarter of 2019 and second quarter of 2020 partially offset by depreciation on improvements placed in service in fiscal 2019.

We calculate our interim income tax provision in accordance with ASC Topic 270, Interim Reporting and ASC Topic 740, Accounting for Income Taxes.

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The CARES Act includes provisions, among others, allowing for the carryback of net operating losses generated in 2018, 2019 and 2020, refunds of alternative minimum tax credits, temporary modifications to the limitations placed on the tax deductibility of net interest expense, and technical amendments regarding the expensing of qualified improvement property.

As a result of the CARES Act, the Company is expecting to carryback estimated taxable losses in fiscal year 2020 to previous tax years in which the Company was subject to higher federal corporate income tax rates.

As a result of the CARES Act, the Company is expecting to carry back estimated taxable losses in fiscal year 2020 to previous tax years in which the Company was subject to higher federal corporate income tax rates.

The Company accounted for this income tax benefit as part of its estimated annual effective tax rate.

The income tax benefit for the 26-week period ended March 28, 2020 was ($95,000).

The effective tax rate for the 26-week period ended March 28, 2020 of 50.4% differed from the statutory rate of 21% primarily as a result of the tax benefits related to the generation of FICA tax credits and the incremental benefit arising from the ability to carryback the 2020 net operating loss to prior years when the tax rate was 34%.

The income tax provision for the 26-week period ended March 30, 2019 was $446,000 and included a discrete tax provision of approximately $450,000 in connection with the settlement of a tax examination.

The effective tax rate for the 26-week period ended March 30, 2019 of (182.3)% differed from the statutory rate of 21% as a result of the tax benefits related to the generation of FICA tax credits offset by a discrete tax provision in connection with the settlement of a tax examination.

The income tax benefit for the 39-week period ended June 27, 2020 was $(3,213,000).

The effective tax rate for the 39-week period ended June 27, 2020 of 52.3% differed from the statutory rate of 21% primarily as a result of the tax benefits related to the generation of FICA tax credits and the incremental benefit arising from the ability to carry back the 2020 net operating loss to prior years when the tax rate was 34%.

The income tax provision for the 39-week periods ended June 29, 2019 was $728,000 and includes a discrete tax provision of approximately $304,000 in connection with the settlement of various state and local tax examinations as well as changes in the uncertain tax position liability as a result of lapses in the statute of limitations.

The effective tax rate for the 39-week period ended June 29, 2019 of 17.6% differed from the statutory rate of 21% as a result of the tax benefits related to the generation of FICA tax credits, a discrete tax provision in connection with the settlement of various state and local tax examinations offset by changes in the uncertain tax position liability as a result of lapses in the statute of limitations during the interim period ended June 29, 2019.

The Company’s overall effective tax rate in the future will be affected by factors such as the utilization of state and local net operating loss carryforwards, the generation of FICA tax credits and the mix of earnings by state taxing jurisdictions as Nevada does not impose a state income tax, as compared to the other major state and local jurisdictions in which the Company has operations.

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We believe that our operating lease arrangements provide appropriate leverage of our capital structure in a financially efficient manner.

As of March 28, 2020, we had a cash and cash equivalents balance of $7,330,000.

As of June 27, 2020 , we had a cash and cash equivalents balance of $20,725,000.

Our liquidity may be adversely affected by a number of factors, including a decrease in customer traffic or average check per customer due to changes in economic conditions.

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Although we were in compliance with all of our financial covenants under our Revolving Facility, our lender agreed to relaxed financial covenants through fiscal Q3 2021.

Indefinitely deferred the payment of the $0.25 dividend declared on March 2, 2020.

Canceled the payment of the $0.25 dividend declared on March 2, 2020.

Suspended future dividend payments until such time as the Board deems appropriate to reinstate.

Canceled or delayed all non-essential capital expenditures.

Suspended the vast majority of lease payments for the months of April, May and June 2020 and are currently in negotiations for rent concessions, abatements and deferrals with our landlords to reduce these lease payments.

Suspended the vast majority of lease payments for the months of April, May and June 2020 and through August 2020 for all locations that are still closed and we are currently in negotiations for rent concessions, abatements and deferrals with our landlords to reduce these lease payments.

While some landlords have agreed to certain concessions, there can be no assurance that the Company will be successful in obtaining all of the relief it is seeking.

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Utilized additional provisions of the CARES Act to obtain tax savings as well as the deferral of our portion of social security taxes to future years.

The Company had a working capital deficiency of ($10,023,000) at March 28, 2020 as compared with a deficiency of ($4,373,000) at September 28, 2019.

This decrease resulted primarily from the recognition of $6,218,000 of current operating lease liabilities in connection with the adoption of ASC 842 on September 29, 2019.

We believe that our existing cash balances combined with measures taken due to COVID-19 pandemic described above, will be sufficient to meet our liquidity and capital spending requirements and finance our operating activities for at least the next twelve months.

Cash Flows for 26 Weeks Ended March 28, 2020 and March 30, 2019

Net cash provided by operating activities for the 26 weeks ended March 28, 2020 increased to $2,110,000 as compared to $2,002,000 provided by operations in the same period of last year.

This increase was attributable to increased operating income as discussed above and changes in net working capital primarily related to accounts receivable, inventory and accounts payable and accrued expenses.

Net cash used in investing activities for the 26 weeks ended March 28, 2020 and March 30, 2019 was ($1,769,000) and ($1,512,000), respectively, and resulted primarily from purchases of fixed assets at existing restaurants.

Net cash used in financing activities for the 26 weeks ended March 28, 2020 and March 30, 2019 of ($188,000) and ($2,663,000), respectively, resulted primarily from the payment of dividends, principal payments on notes payable, borrowings under our credit facility, and distributions to non-controlling interests.

The Company had a working capital of $5,610,000 at June 27, 2020 as compared with a deficiency of $(4,373,000) at September 28, 2019.

This increase resulted primarily from the proceeds of borrowings under the Paycheck Protection Program of $15.0 million offset by the recognition of $6,222,000 of current operating lease liabilities in connection with the adoption of ASC 842 on September 29, 2019.

Cash Flows for 39 Weeks Ended June 27, 2020 and June 29, 2019

Net cash used in operating activities for the 39 weeks ended June 27, 2020 decreased to ($251,000) as compared to $6,752,000 provided by operations in the same period of last year.

This decrease was attributable to the impacts of government mandated closures of our restaurants in March 2020 and changes in net working capital primarily related to accounts receivable, inventory and accounts payable and accrued expenses.

Net cash used in investing activities for the 39 weeks ended June 27, 2020 and June 29, 2019 was $(1,986,000) and $(2,575,000), respectively, and resulted primarily from purchases of fixed assets at existing restaurants.

Net cash provided by (used in) financing activities for the 39 weeks ended June 27, 2020 and June 29, 2019 of $18,044,000 and $(3,613,000), respectively, resulted primarily from the payment of dividends, principal payments on notes payable and distributions to non-controlling interests and in the current period borrowings under our credit facility and the proceeds from PPP Loans.

On November 26, 2019, the Board of Directors declared a quarterly dividend of $0.25 per share on the Company’s common stock which was paid on January 7, 2020, to shareholders of record at the close of business on December 16, 2019.

On March 13, 2020, the Company announced that, in light of the unprecedented circumstances and rapidly changing situation with respect to the coronavirus disease (COVID-19), as part of an overall plan to preserve cash flow, the Board of Directors determined that it was appropriate for the Company to defer payment of the dividend that was declared on March 2, 2020.

Payment of such dividend, which was scheduled for April 6, 2020 to shareholders of record on March 16, 2020, has been deferred until such time as the Board of Directors determines that payment is appropriate.

As of March 28, 2020, the Company reduced retained earnings for the accrual of $876,000 relating to this dividend.

On March 13, 2020, the Company announced that, in light of the unprecedented circumstances and rapidly changing situation with respect to COVID-19, as part of an overall plan to preserve cash flow, the Board of Directors determined that it was appropriate for the Company to defer payment of the dividend that was declared on March 2, 2020.

Payment of such dividend, which was scheduled for April 6, 2020 to shareholders of record on March 16, 2020, was canceled on July 1, 2020.

The payment of future dividends is at the discretion of the Company’s Board of Directors and is based on future earnings, cash flow, financial condition, capital requirements, changes in U.S.

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Upon adoption of ASC 842, the unamortized Hollywood and Tampa balances were reclassified as ROU assets in the net amount of $1,071,000 and are being amortized to lease expense on a straight-line basis over the remaining terms of the respective leases.

The Company is in the process of developing three restaurants in Eastern, OH in partnership with the landlord of the facility.

The Company is in the process of developing three restaurants in Easton, Ohio in partnership with the landlord of the facility.

Included in fixed assets are costs of approximately $500,000 in connection with the project.

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As of December 29, 2018, the Company determined that it would not be able to operate Durgin-Park profitably due to decreased traffic at the Faneuil Hall Marketplace in Boston, MA, where it is located, and rising labor costs.

As a result, included in the Statements of Operations for the 13 and 26 weeks ended March 30, 2019 are losses on closure in the amounts of $39,000 and $1,106,000, respectively, consisting of:

As a result, included in the Statements of Operations for the 13 and 39 weeks ended June 29, 2019 are losses on closure in the amounts of $39,000 and $1,106,000, respectively, consisting of:

(i) impairment of trademarks in the amount of $721,000, (ii) accelerated depreciation of fixed assets in the amount of $333,000, and (iii) write-offs of prepaid and other expenses in the amount of $52,000.

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Other Recent Events

Reliance on SEC Relief from Filing Requirements

On March 25, 2020, the SEC issued an Order under Section 36 of the Securities Exchange Act of 1934 Modifying Exemptions From the Reporting and Proxy Delivery Requirements for Public Companies, (Release No.

34-88465) (the “Order”), which provides conditional relief to registrants subject to the reporting requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that are unable to meet a filing deadline due to circumstances related to COVID-19.

We have experienced significant disruptions to our business and operations.

In particular, COVID-19 restrictions have limited access to our corporate offices and required our corporate personnel, including our legal and accounting staff, as well as the staff of our independent registered public accounting firm to work remotely.

The restrictions have resulted in limited access to the Company's financial records and data and disrupted interactions among the personnel involved in the completion of the Form 10-Q as of March 28, 2020 and for the quarter then ended and slowing the Company's completion of its quarterly financial preparation of the Form 10-Q.

We have experienced significant disruptions to our business and operations.

The restrictions have resulted in limited access to the Company’s financial records and data and disrupted interactions among the personnel involved in the completion of the Form 10-Q as of March 28, 2020 and for the quarter then ended and slowing the Company’s completion of its quarterly financial preparation of the Form 10-Q.

As a result of the above, we filed a Form 8-K on May 5, 2020 taking advantage of this relief and extended the deadline for the filing of this Form 10-Q by 45 days.

Paycheck Protection Program Loans

During May and June, subsidiaries (the “Borrowers”) of the Company received loan proceeds from several banks (the “Lenders”) in the aggregate amount of approximately $14.9 million (the “PPP Loans”) under the Paycheck Protection Program (the “PPP”) of the CARES Act, which was enacted March 27, 2020.

The PPL Loans are evidenced by individual promissory notes of each of the Borrowers (together, the “Notes”) in favor of the Lender, which Notes bear interest at the rate of 1.00% per annum.

No payments of principal or interest are due under the Notes until the date on which the amount of loan forgiveness (if any) under the CARES Act for each respective Note is remitted to the lender, which can be up to 10 months after the end of the related notes covered period (which is defined as 24 weeks after the date of the loan) (the “Deferral Period”).

Each Note may be prepaid by the respective Borrower at any time prior to maturity with no prepayment penalties.

Funds from the PPP Loans may be used only for payroll and related costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations that were incurred by a Borrower prior to February 15, 2020 (the “Qualifying Expenses”).

Under the terms of the PPP Loans, certain amounts thereunder may be forgiven if they are used for Qualifying Expenses as described in and in compliance with the CARES Act.

While the Company and each Borrower intends to use the PPP Loan proceeds exclusively for Qualifying Expenses, it is unclear and uncertain whether the conditions for forgiveness of the PPP Loans will be met under the current guidelines of the CARES Act.

Accordingly, we cannot make any assurance that the Company, or any of the Borrowers, will be eligible for forgiveness of the PPP Loans, in whole or in part.

To the extent, if any, that any or all of the PPP loans are not forgiven, beginning one month following expiration of the Deferral Period, and continuing monthly until 24 months from the date of each applicable Note (the “Maturity Date”), each respective Borrower is obligated to make monthly payments of principal and interest to the Lender with respect to any unforgiven portion of the Notes, in such equal amounts required to fully amortize the principal amount outstanding on such Notes as of the last day of the applicable Deferral Period by the applicable Maturity Date.

Each Borrower is permitted to prepay its respective Note at any time without payment of any premium.

Revolver Drawdown

On June 9, 2020, the Company drew down the remaining balance of our Revolving Facility in the amount of $3,396,000 .

Suspension of Dividend

On June 15, 2020, the Board of Directors unanimously approved the suspension of the quarterly dividend as a result of the disruption to the Company's operations from the COVID-19 pandemic.

Restaurant Openings

As a result of state and local governments lifting stay at home orders and mandatory shut-down requirements, as of June 22, 2020, the Company has reopened:

(i) all of its properties located in Florida and Alabama, (ii) it operations in the New York-New York Hotel & Casino Resort in Las Vegas, (iii) Sequoia in Washington DC, (iv) The Porch at Bryant Park in New York, NY, and (v) Bryant Park Grill and Café in New York, NY, at varying levels of limited capacity as allowed by federal, state and local governments.

Cancellation of Dividend

As a result of disruption to the Company's operations from the COVID-19 pandemic, on July 1, the Board of Directors unanimously approved the cancellation of the divided that was declared on March 2, 2020.

Critical Accounting Policies

1 unchanged sentence

In the process of preparing its consolidated condensed financial statements, the Company estimates the appropriate carrying value of certain assets and liabilities, which are not readily apparent from other sources.

The primary estimates underlying the Company’s consolidated condensed financial statements include allowances for potential bad debts on accounts and notes receivable, assumptions regarding discount rates related to lease accounting, the useful lives and recoverability of its assets, such as property and intangibles, fair values of financial instruments, the realizable value of its tax assets and other matters.

The primary estimates underlying the Company’s consolidated condensed financial statements include allowances for potential bad

debts on accounts and notes receivable, assumptions regarding discount rates related to lease accounting, the useful lives and recoverability of its assets, such as property and intangibles, fair values of financial instruments, the realizable value of its tax assets and other matters.

Management bases its estimates on certain assumptions, which it believes are reasonable in the circumstances, and actual results could differ from those estimates.

7 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis