What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2020-12-22 compared with 2019-12-17 · 352 added, 253 removed, 675 unchanged (47% of the section changed)

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Evaluation of Disclosure Controls and Procedures

As of September 28, 2019 (the end of the period covered by this report), management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended).

As of October 3, 2020 (the end of the period covered by this report), management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended).

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, at the end of such period, our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

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Management’s Annual Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rule 13a-15(f), and for performing an assessment of the effectiveness of internal control over financial reporting as of September 28, 2019.

Internal control over financial reporting is a process designed by, or under the supervision of, our principal executive and principal financial officers, or persons performing similar functions, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S.

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Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Management performed an assessment of the effectiveness of our internal control over financial reporting as of September 28, 2019 based upon the criteria set forth in Internal Control — Integrated Framework issued by the 2013 Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

Based on our assessment, management determined that our internal control over financial reporting was effective as of September 28, 2019.

Management performed an assessment of the effectiveness of our internal control over financial reporting as of October 3, 2020 based upon the criteria set forth in Internal Control — Integrated Framework issued by the 2013 Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

Based on our assessment, management determined that our internal control over financial reporting was effective as of October 3, 2020.

This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting as management’s report was not subject to attestation by our independent registered public accounting firm pursuant to the permanent exemption of the SEC that permits us to provide only management’s report in this annual report.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting during the most recent fiscal quarter and year ended September 28, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

As a result of governmental imposed closures of all of our facilities due to the COVID-19 pandemic, we have had to make changes to the operating methods of some of our internal controls.

For example, moving from manual sign-offs / in-person meetings to electronic sign-offs and electronic communications such as email and telephonic / or video conference due to out-of-office working arrangements.

However, the design of our internal control framework/objectives over financial reporting is unchanged and the Company does not believe that these changes have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

Limitations of the Effectiveness of Internal Control

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the internal control system are met.

Because of the inherent limitations of any internal control system, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected.

Other Information

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Executive Compensation

The information required by this item is incorporated herein by reference to the Proxy Statement which will be filed no later than 120 days after September 28, 2019..

The information required by this item is incorporated herein by reference to the Proxy Statement which will be filed no later than 120 days after October 3, 2020.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item is incorporated herein by reference to the Proxy Statement which will be filed no later than 120 days after September 28, 2019.

The information required by this item is incorporated herein by reference to the Proxy Statement which will be filed no later than 120 days after October 3, 2020.

Certain Relationships and Related Transactions

The information required by this item is incorporated herein by reference to the Proxy Statement which will be filed no later than 120 days after September 28, 2019.

The information required by this item is incorporated herein by reference to the Proxy Statement which will be filed no later than 120 days after October 3, 2020.

Principal Accountant Fees and Services

The information required by this item is incorporated herein by reference to the Proxy Statement which will be filed no later than 120 days after September 28, 2019.

The information required by this item is incorporated herein by reference to the Proxy Statement which will be filed no later than 120 days after October 3, 2020.

Exhibits and Financial Statement Schedules

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Consolidated Balance Sheets --

at September 2 8 , 201 9 and September 2 9 , 201 8

Consolidated Statements of Income –

years ended September 2 8 , 201 9 and September 29 , 201 8

at October 3, 2020 and September 28, 2019

Consolidated Statements of Operations –

years ended October 3, 2020 and September 28, 2019

Consolidated Statements of Changes in Equity --

years ended September 2 8 , 201 9 and September 29 , 201 8

years ended October 3, 2020 and September 28, 2019

Consolidated Statements of Cash Flows --

years ended September 2 8 , 201 9 and September 29 , 201 8

years ended October 3, 2020 and September 28, 2019

Notes to Consolidated Financial Statements

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We have audited the accompanying consolidated balance sheets of Ark Restaurants Corp.

and Subsidiaries (the “Company”) as of September 28, 2019 and September 29, 2018, and the related consolidated statements of income, changes in shareholders’ equity, and cash flows for each of the years in the two-year period ended September 28, 2019, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of September 28, 2019 and September 29, 2018, and the results of its operations and its cash flows for each of the years in the two-year period ended September 28, 2019, in conformity with accounting principles generally accepted in the United States of America.

and Subsidiaries (the “Company”) as of October 3, 2020 and September 28, 2019, and the related consolidated statements of operations, changes in equity, and cash flows for each of the years in the two-year period ended October 3, 2020, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of October 3, 2020 and September 28, 2019, and the results of its operations and its cash flows for each of the years in the two-year period ended October 3, 2020, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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2020 September 28,

2019 September 29,

CURRENT ASSETS:

Cash and cash equivalents (includes $ 170 at September 28, 2019 and $ 181 at September 29,

Cash and cash equivalents (includes $ 567 at October 3, 2020 and $ 170 at September 28,

2019 related to VIEs)

$ 16,886 $ 7,177

Accounts receivable (includes $ 219 at September 28, 2019 and $ 354 at September 29, 2018

Accounts receivable (includes $ 162 at October 3, 2020 and $ 219 at September 28, 2019

related to VIEs)

Employee receivables 385 414

Inventories (includes $ 41 at September 28, 2019 and $ 19 at September 29, 2018 related to

Prepaid and refundable income taxes (includes $ 254 at September 28, 2019 and $ 241 at

Inventories (includes $ 27 at October 3, 2020 and $ 41 at September 28, 2019 related to

Prepaid and refundable income taxes (includes $ 274 at October 3, 2020 and $ 254 at

September 28, 2019 related to VIEs)

Prepaid expenses and other current assets (includes $ 12 at September 28, 2019 and $ 51 at

Prepaid expenses and other current assets (includes $ 13 at October 3, 2020 and $ 12 at

September 28, 2019 related to VIEs)

Total current assets 26,901 13,709

FIXED ASSETS - Net (includes $ 236 at September 28, 2019 and $ 0 at September 29, 2018

FIXED ASSETS - Net (includes $ 241 at October 3, 2020 and $ 236 at September 28, 2019

related to VIEs)

37,682 47,781

OPERATING LEASE RIGHT-OF-USE ASSETS - Net (includes $ 2,658 at October 3, 2020

related to VIEs)

INTANGIBLE ASSETS - Net 49 303

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INVESTMENT IN AND RECEIVABLE FROM NEW MEADOWLANDS RACETRACK 6,874 6,821

OTHER ASSETS (includes $ 82 at September 28, 2019 and September 29, 2018 related to

OTHER ASSETS (includes $ 82 at October 3, 2020 and September 28, 2019 related to

TOTAL ASSETS $ 153,316 $ 94,652

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CURRENT LIABILITIES:

Accounts payable - trade (includes $ 65 at September 28, 2019 and $ 158 at September 29,

Accounts payable - trade (includes $ 119 at October 3, 2020 and $ 65 at September 28,

2019 related to VIEs)

$ 2,329 $ 3,549

Accrued expenses and other current liabilities (includes $ 440 at September 28, 2019 and

Accrued expenses and other current liabilities (includes $ 331 at October 3, 2020 and

$ 440 at September 28, 2019 related to VIEs)

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Dividend payable — 875

Current portion of operating lease liabilities (includes $ 226 at October 3, 2020 related to

Current portion of notes payable 9,001 2,701

Total current liabilities 30,135 18,082

OPERATING LEASE DEFERRED CREDIT (includes ($ 30 ) at September 28, 2019 and

($ 21 ) at September 29, 2018 related to VIEs)

NOTES PAYABLE, LESS CURRENT PORTION, net of deferred financing costs 23,786 19,860

OPERATING LEASE DEFERRED CREDIT (includes $( 30 ) at September 28, 2019 related

OPERATING LEASE LIABILITIES, LESS CURRENT PORTION (includes $ 2,442 at

October 3, 2020 related to VIEs)

NOTES PAYABLE, LESS CURRENT PORTION, net of deferred financing costs (includes

$ 723 at October 3, 2020 related to VIEs)

36,068 23,786

TOTAL LIABILITIES 116,163 51,945

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Common stock, par value $ 0.01 per share - authorized, 10,000 shares;

outstanding, 3,499 shares at September 28, 2019 and 3,470 shares at September 29, 2018

outstanding, 3,502 shares at October 3, 2020 and 3,499 shares at September 28, 2019

Additional paid-in capital 13,503 13,277

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, Except Per Share Amounts)

2020 September 28,

2019 September 29,

Food and beverage sales $ 104,062 $ 159,125

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Depreciation and amortization 4,056 5,233

Total costs and expenses 155,145 154,958

RESTAURANT OPERATING INCOME 7,209 5,032

Loss on termination of lease 364 —

Loss on closure of Durgin-Park — 1,106

Impairment loss from write-down of long-lived assets — 2,857

OPERATING INCOME 3,246 5,032

Total costs and expenses 114,286 159,108

OPERATING INCOME (LOSS) ( 7,796 ) 3,246

OTHER (INCOME) EXPENSE:

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Interest income ( 126 ) ( 61 )

Other income ( 88 ) —

Total other expense, net 1,207 1,376

INCOME BEFORE BENEFIT FOR INCOME TAXES 1,870 3,926

INCOME (LOSS) BEFORE BENEFIT FOR INCOME TAXES ( 9,003 ) 1,870

Benefit for income taxes ( 4,385 ) ( 591 )

CONSOLIDATED NET INCOME 2,461 5,073

CONSOLIDATED NET INCOME (LOSS) ( 4,618 ) 2,461

Net (income) loss attributable to non-controlling interests ( 70 ) 215

NET INCOME ATTRIBUTABLE TO ARK RESTAURANTS CORP.

NET INCOME (LOSS) ATTRIBUTABLE TO ARK RESTAURANTS CORP.

$ ( 4,688 ) $ 2,676

NET INCOME PER ARK RESTAURANTS CORP.

NET INCOME (LOSS) PER ARK RESTAURANTS CORP.

COMMON SHARE:

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CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED SEPTEMBER 28, 2019 AND SEPTEMBER 29, 2018

FOR THE YEARS ENDED OCTOBER 3, 2020 AND SEPTEMBER 28, 2019

(In Thousands, Except Per Share Amounts)

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Shares Amount

BALANCE - October 1, 2017 3,428 $ 34 $ 12,247 $ 28,163 $ 40,444 $ 1,996 $ 42,440

Net income — — — 4,655 4,655 418 5,073

BALANCE - September 29, 2018 3,470 $ 35 $ 12,897 $ 29,364 $ 42,296 $ 1,440 $ 43,736

Net income (loss) — — — 2,676 2,676 ( 215 ) 2,461

Exercise of stock options 41 — 503 — 503 — 503

Purchase and retirement of

treasury shares ( 12 ) — ( 235 ) — ( 235 ) — ( 235 )

Stock-based compensation — — 112 — 112 — 112

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Exercise of stock options 3 — 50 — 50 — 50

Purchase and retirement of

treasury shares ( 12 ) — ( 235 ) — ( 235 ) — ( 235 )

Stock-based compensation — — 176 — 176 — 176

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interests — — — — — ( 287 ) ( 287 )

Dividends paid and accrued -

$ 1.00 per share

Dividends paid - $ 0.25 per share

— — — ( 875 ) ( 875 ) — ( 875 )

BALANCE - September 28, 2019 3,499 $ 35 $ 13,277 $ 28,552 $ 41,864 $ 843 $ 42,707

BALANCE - October 3, 2020 3,502 $ 35 $ 13,503 $ 22,989 $ 36,527 $ 626 $ 37,153

See notes to consolidated financial statements.

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2020 September 28,

2019 September 29,

CASH FLOWS FROM OPERATING ACTIVITIES:

Consolidated net income $ 2,461 $ 5,073

Adjustments to reconcile consolidated net income to net cash provided by operating activities:

Consolidated net income (loss) $ ( 4,618 ) $ 2,461

Adjustments to reconcile consolidated net income (loss) to net cash provided by (used in)

operating activities:

Stock-based compensation 176 112

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Impairment loss from write-down of long-lived assets — 2,857

Loss on termination of lease 364 —

Deferred income taxes ( 1,791 ) ( 1,118 )

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Depreciation and amortization 4,056 5,233

Amortization of operating lease assets 584 —

Amortization of deferred financing costs 51 35

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Accrued expenses and other current liabilities 1,806 ( 80 )

Net cash provided by operating activities 10,615 9,575

Net cash provided by (used in) operating activities ( 4,528 ) 10,615

CASH FLOWS FROM INVESTING ACTIVITIES:

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Repayments of borrowings under credit facility — ( 650 )

Proceeds from PPP Loans 14,995 —

Payment of debt financing costs ( 63 ) ( 51 )

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Distributions to non-controlling interests ( 137 ) ( 382 )

Net cash used in financing activities ( 5,254 ) ( 919 )

Net cash provided by (used in) financing activities 16,694 ( 5,254 )

NET INCREASE IN CASH AND CASH EQUIVALENTS 9,709 2,165

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Accrued dividend $ — $ 875

Accrued distributions to non-controlling interests $ 150 $ —

See notes to consolidated financial statements.

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BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

As of September 28, 2019, Ark Restaurants Corp.

As of October 3, 2020, Ark Restaurants Corp.

and Subsidiaries (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 customers and distribution methods.

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In Alabama, the Company operates two Original Oyster Houses , one in Gulf Shores and one in Spanish Fort.

COVID-19 PANDEMIC — 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 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 from May through August 2020, the Company has reopened all of its properties, with the exception of Thunder Grill in Washington, D.C., at varying levels of limited capacity as allowed by federal, state and local governments (see Note 17 - Subsequent Events).

Due to the impact of the COVID-19 pandemic, during the year ended October 3, 2020, subsequent to reopening after initial shut-downs, the Company has temporarily closed several restaurants, typically for three to seven 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.

As a result of these developments, the Company is experiencing a significant negative impact on its revenues, results of operations and cash flows, and has a working capital deficiency of $ 3,234,000 as of October 3, 2020, all of which could negatively impact its ability to meet its obligations over the next 12 months.

However, we believe that our existing cash balances, which include the proceeds from Paycheck Protection Program loans (see Note 10 - Notes Payable) and actions taken by management, set out below and otherwise, will be sufficient to meet our liquidity and capital spending requirements through December 23, 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-opened, restaurant management salaries were restored to 70 % of pre-pandemic amounts.

If a location produced 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 %.

As of October 3, 2020, most corporate salaries have been restored to 65 % of pre-pandemic levels.

In addition, the Board waived its fees for the balance of 2020.

• Entered into a Payment Suspension Agreement with our bank which deferred aggregate principal payments of $ 675,000 due on June 1, 2020 to the respective loan maturity dates and an agreement to extend the maturity dates of our revolving credit facility (see Note 10 - Notes Payable).

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 while our restaurants were closed as a result of government mandated shutdowns, and attempted to negotiate rent concessions, abatements and deferrals with these landlords to reduce the lease payments.

While some landlords have agreed to concessions, several negotiations are still ongoing as of the date of this filing and we will attempt to obtain further concessions through April 2021 at many of our leased properties.

However, there can be no assurance that the Company will be successful in obtaining 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, 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 any or all of our restaurants at full capacity or whether they will be required to close again in the future, as these decisions will depend primarily 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.

If these disruptions continue, the Company expects a continued material negative impact on its consolidated financial position, 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.

Basis of Presentation — The accompanying consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and accounting principles generally accepted in the United States of America (“GAAP”).

The Company’s reporting currency is the United States dollar.

The Company had a working capital deficiency of $ 4,373,000 at September 28, 2019.

We believe that our existing cash balances, current banking facilities and cash provided by operations will be sufficient to meet our liquidity and capital spending requirements at least through December 18, 2020.

Reclassifications — Certain reclassifications of prior period amounts have been made to conform to the current period presentation.

The Company eliminated the presentation of restaurant operating income (loss) as a non-GAAP measure from its consolidated statements of operations.

Accounting Period — The Company’s fiscal year ends on the Saturday nearest September 30.

The fiscal years ended September 28, 2019 and September 29, 2018 included 52 weeks.

The fiscal years ended October 3, 2020 and September 28, 2019 included 53 and 52 weeks, respectively.

Use of Estimates — The preparation of financial statements in conformity with 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.

The accounting estimates that require management’s most difficult and subjective judgments include allowances for potential bad debts on receivables, the useful lives and recoverability of its assets, such as property and intangibles, fair values of financial instruments and share-based compensation, the realizable value of its tax assets and determining when investment impairments are other-than-temporary.

The accounting estimates that require management’s most difficult and subjective judgments include projected cash flow, allowances for potential bad debts on receivables, 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 and share-

based compensation, the realizable value of its tax assets and determining when investment impairments are other-than-temporary.

Because of the uncertainty in such estimates, actual results may differ from these estimates.

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Fair Value of Financial Instruments — The carrying amount of cash and cash equivalents, receivables, accounts payable and accrued expenses approximate fair value due to the immediate or short-term maturity of these financial instruments.

fair values of notes receivable and payable are determined using current applicable rates for similar instruments as of the balance sheet date and approximate the carrying value of such debt instruments.

The fair values of notes receivable and payable are determined using current applicable rates for similar instruments as of the balance sheet date and approximate the carrying value of such debt instruments.

Cash and Cash Equivalents — Cash and cash equivalents include cash on hand, deposits with banks and highly liquid investments with original maturities of three months or less.

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At times, such amounts may exceed Federally insured limits.

Accounts receivable are primarily comprised of normal business receivables such as credit card receivables that are paid off in a short period of time and amounts due from the hotel operators where the Company has a location, and are recorded when the products or services have been delivered.

The Company reviews the collectability of its receivables on an ongoing basis, and provides for an allowance when it considers the entity unable to meet its obligation.

Accounts receivable are primarily comprised of normal business receivables, such as credit card receivables, that are collected in a short period of time and amounts due from the hotel operators where the Company has a location, and are recorded upon satisfaction of the performance obligation.

The Company reviews the collectability of its receivables on an ongoing basis, and provides for an allowance when it considers the counterparty unable to meet its obligation.

The concentration of credit risk with respect to accounts receivable is generally limited due to the short payment terms extended by the Company and the number of customers comprising the Company’s customer base.

As of October 3, 2020, the Company had accounts receivable balances due from two hotel operators totaling 46 % of total accounts receivable.

As of September 28, 2019, the Company had accounts receivable balances due from one hotel operator totaling 34 % of total accounts receivable.

As of September 29, 2018, the Company had accounts receivable balances due from two hotel operators totaling 47 % of total accounts receivable.

For the years ended September 28, 2019 and September 29, 2018, the Company made purchases from one vendor that accounted for 12 % and 10 % of total purchases, respectively.

As of September 28, 2019, all debt outstanding is with one lender (see Note 9 – Notes Payable – Bank).

For the years ended October 3, 2020 and September 28, 2019, the Company made purchases from one vendor that accounted for 11 % and 12 % of total purchases, respectively.

As of October 3, 2020, all debt outstanding, other than Paycheck Protection Program loans, is with one lender (see Note 10 – Notes Payable).

Inventories — Inventories are stated at the lower of cost (first-in, first-out) or net realizable value, and consist of food and beverages, merchandise for sale and other supplies.

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Major replacements and improvements are capitalized.

Upon retirement or disposition of fixed assets, the cost and related accumulated depreciation are removed from the consolidated balance sheets and any resulting gain or loss is recognized in the consolidated statements of income.

The Company includes in construction in progress, improvements to restaurants that are under construction or are undergoing substantial renovations.

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Covenants not to compete arising from restaurant acquisitions are amortized over the contractual period, typically five years .

Long-lived Assets — Long-lived assets, such as property, plant and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Long-Lived and Right-Of-Use Assets — Long-lived assets, such as property and plant and equipment subject to amortization, and right-of-use assets ("ROU assets") are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

In the evaluation of the fair value and future benefits of long-lived assets, the Company performs an analysis of the anticipated undiscounted future net cash flows of the related long-lived assets.

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Various factors including estimated future sales growth and estimated profit margins are included in this analysis.

Based on this analysis, no

impairment charges were warranted at September 29, 2018.

See Notes 4 and 6 for information regarding impairment charges for the year ended September 28, 2019.

The Company considers a triggering event related to long-lived assets or ROU assets in a net asset position to have occurred related to a specific restaurant if the restaurant’s cash flows for the last 12 months are less than a minimum threshold or if consistent levels of undiscounted cash flows for the remaining lease period are less than the carrying value of the restaurant’s assets.

Additionally, the Company considers a triggering event related to ROU assets to have occurred related to a specific lease if the location has been subleased and future estimated sublease income is less than current lease payments.

If the Company concludes that the carrying value of certain long-lived and ROU assets will not be recovered based on expected undiscounted future cash flows, an impairment loss is recorded to reduce the long-lived or ROU assets to their estimated fair value.

The fair value is measured on a nonrecurring basis using unobservable (Level 3) inputs.

There is uncertainty in the projected undiscounted future cash flows used in the Company's impairment review analysis, which requires the use of estimates and assumptions.

If actual performance does not achieve the projections, or if the assumptions used change in the future, the Company may be required to recognize impairment charges in future periods, and such charges could be material.

Based on the results of this analysis, the Company recognized an impairment charge of $ 364,000 related to long-lived assets and ROU assets during the year ended October 3, 2020 (see Note 4 – Recent Restaurant Dispositions).

Given the inherent uncertainty in projecting results of restaurants under the current circumstances, particularly taking into account the projected impact of the COVID-19 pandemic, the Company is monitoring the recoverability of the carrying value of the assets of several restaurants on an ongoing basis.

For these restaurants, if expected performance is not realized, an impairment charge may be recognized in future periods, and such charge could be material.

Goodwill and Trademarks — Goodwill and trademarks are not amortized, but are subject to impairment analysis.

We assess the potential impairment of goodwill and trademarks annually (at the end of our fourth quarter) and on an interim basis whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

If we determine through the impairment review process that goodwill or trademarks are impaired, we record an impairment charge in our consolidated statements of income.

Such impairment analyses for goodwill requires a comparison of the fair value of the Company’s equity to the carrying amount of goodwill since the Company operates in one segment.

At September 28, 2019 and September 29, 2018, the Company performed qualitative assessments of factors to determine whether further impairment testing of goodwill was required.

Based on this assessment, no impairment losses were warranted at September 28, 2019 and September 29, 2018 as the fair value of the Company’s equity is well in excess of its carrying amount.

Qualitative factors considered in this assessment included industry and market considerations, overall financial performance and other relevant events, management expertise and stability at key positions.

Additional impairment analyses at future dates may be performed to determine if indicators of impairment are present, and if so, such amount will be determined and the associated charge will be recorded to the consolidated statements of income.

Our impairment analysis for trademarks consists of a comparison of the fair value to the carrying value of the assets.

This comparison is made based on a review of historical, current and forecasted sales and profit levels, as well as a review of any factors that may indicate potential impairment.

As of December 29, 2018, the Company recorded an impairment charge of $ 721,000 related to its Durgin-Park trademark (see Note 4).

For the years ended September 28, 2019 and September 29, 2018, our impairment analysis did not result in any other charges related to trademarks.

If we determine through the impairment review process that goodwill or trademarks are impaired, we record an impairment charge in our consolidated statements of operations.

Due to the recent impact of the COVID-19 pandemic to the global economy, including but not limited to, the volatility of the Company's stock price, temporary closure of the Company's restaurants and the challenging environment for the restaurant industry in general, the Company determined that there were indicators of potential impairment of its goodwill and trademarks during the year ended October 3, 2020.

As such, the Company performed a qualitative and quantitative assessment for both goodwill and its trademarks and concluded that the fair value of these assets exceeded their carrying values.

Accordingly, the Company did not record any impairment to its goodwill or trademarks during the year ended October 3, 2020.

The ultimate severity and longevity of the COVID-19 pandemic is unknown, and therefore, it is possible that impairments could be identified in future periods, and such amounts could be material.

As of December 29, 2018, the Company recorded an impairment charge of $ 721,000 related to its Durgin-Park trademark (see Note 4 - Recent Restaurant Dispositions).

For the years ended October 3, 2020 and September 28, 2019, our impairment analysis did not result in any other charges related to trademarks.

Investments – Each reporting period, the Company reviews its investments in equity and debt securities, except for those classified as trading, to determine whether a significant event or change in circumstances has occurred that may have an adverse effect on the fair value of such investment.

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and the Company’s intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in market value.

Leases — The Company recognizes rent expense on a straight-line basis over the expected lease term, including option periods as described below.

Within the provisions of certain leases there are escalations in payments over the base lease term, as well as renewal periods.

The effects of the escalations have been reflected in rent expense on a straight-line basis over the expected lease term, which includes option periods when it is deemed to be reasonably assured that the Company would incur an economic penalty for not exercising the option.

Tenant allowances are included in the straight-line calculations and are being deferred over the lease term and reflected as a reduction in rent expense.

Percentage rent expense is generally based upon sales levels and is expensed as incurred.

Certain leases include both base rent and percentage rent.

The Company records rent expense on these leases based upon reasonably assured sales levels.

The consolidated financial statements reflect the same lease terms for amortizing leasehold improvements as were used in calculating straight-line rent expense for each restaurant.

The judgments of the Company may produce materially different amounts of amortization and rent expense than would be reported if different lease terms were used.

Leases — We determine if an arrangement contains a lease at inception.

An arrangement contains a lease if it implicitly or explicitly identifies an asset to be used and conveys the right to control the use of the identified asset in exchange for consideration.

As a lessee, we include operating leases in Operating lease right-of-use assets and Operating lease liabilities in our consolidated balance sheet.

Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease.

Operating lease right-of-use assets and liabilities are recognized upon commencement of the lease based on the present value of the lease payments over the lease term.

As most of our leases do not provide an implicit interest rate, we use our incremental borrowing rate based on the information available at commencement date to determine the present value of lease payments.

Our lease terms may include options to extend or terminate the lease.

Options are included when it is reasonably certain that we will exercise that option.

Lease expense for lease payments is recognized on a straight-line basis over the lease term.

Amendments or modifications to lease terms are accounted for as variable lease payments.

Leases with a lease term of 12 months or less are accounted for using the practical expedient which allows for straight-line rent expense over the remaining term of the lease.

Revenue Recognition — The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a restaurant guest or other customer.

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Revenues from catered events are recognized in income upon satisfaction of the performance obligation (the date the event is held).

All customer payments, including

nonrefundable upfront deposits, are deferred as a liability until such time.

The Company recognized $ 13,817,000 and $ 12,878,000 in catering services revenue for the years ended September 28, 2019 and September 29, 2018, respectively.

Unearned revenue which is included in accrued expenses and other current liabilities on the consolidated balance sheets as of September 28, 2019 and September 29, 2018 was $ 4,549,000 and $ 4,439,000 , respectively.

All customer payments, including nonrefundable upfront deposits, are deferred as a liability until such time.

The Company recognized $ 7,358,000 and $ 13,817,000 in catering services revenue for the years ended October 3, 2020 and September 28, 2019, respectively.

Unearned revenue which is included in accrued expenses and other current liabilities on the consolidated balance sheets as of October 3, 2020 and September 28, 2019 was $ 3,661,000 and $ 4,549,000 , respectively.

Revenues from gift cards are deferred and recognized upon redemption.

Deferrals are not reduced for potential non-use as we generally have a legal obligation to remit the value of unredeemed gift cards to the relevant jurisdictions in which they are sold.

As of September 28, 2019 and September 29, 2018, the total liability for gift cards in the amounts of approximately $ 203,000 and $ 170,000 , respectively, are included in accrued expenses and other current liabilities in the consolidated balance sheets.

As of October 3, 2020 and September 28, 2019, the total liability for gift cards in the amounts of approximately $ 227,000 and $ 203,000 , respectively, are included in accrued expenses and other current liabilities in the consolidated balance sheets.

Other revenues include purchase service fees which represent commissions earned by a subsidiary of the Company for providing services to other restaurant groups, as well as license fees, property management fees and other rentals.

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Company contributions to the Plan are at the discretion of the Board of Directors.

During the years ended September 28, 2019 and September 29, 2018, the Company did not make any contributions to the Plan.

During the years ended October 3, 2020 and September 28, 2019, the Company did not make any contributions to the Plan.

Income Taxes — Income taxes are accounted for under the asset and liability method whereby deferred tax assets and liabilities are recognized for future tax consequences attributable to the temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards.

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Upon exercise of options, all excess tax benefits and tax deficiencies resulting from the difference between the deduction for tax purposes and the stock-based compensation cost recognized for financial reporting purposes are included as a component of income tax expense.

Recently Adopted Accounting Standards — In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2014-09, Revenue from Contracts with Customers, and issued subsequent amendments to the initial guidance to provide additional clarification on specific topics (“ASC 606”).

This ASU provides a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services.

The Company adopted ASC 606 using the modified retrospective method on September 30, 2018 and, based on our evaluation of our revenue streams, determined that there was not a material impact as of the date of adoption between the new

revenue standard and how we previously recognized revenue, and therefore the adoption did not have a material impact on our consolidated financial statements.

In January 2016, FASB issued ASU No.

2016-01, Financial Instruments – Overall:

Recognition and Measurement of Financial Assets and Financial Liabilities.

The guidance requires equity investments in unconsolidated entities (other than those accounted for using the equity method of accounting) to be measured at fair value with changes in fair value recognized in net income.

The amendments in this update also simplified the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment, eliminate the requirement for public business entities to disclose the method and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet and require these entities to use the exit price notion when measuring fair value of financial instruments for disclosure purposes.

This guidance also changes the presentation and disclosure requirements for financial instruments as well as clarifying the guidance related to valuation allowance assessments when recognizing deferred tax assets resulting from unrealized losses on available-for-sale debt securities.

The Company adopted this guidance in the first quarter of fiscal 2019 with respect to its investment in New Meadowlands Racetrack (see Note 5).

Such adoption did not have a material impact on our consolidated financial statements.

In August 2016, FASB issued ASU No.

2016-15, Classification of Certain Cash Receipts and Cash Payments.

This update provides clarification regarding how certain cash receipts and cash payments are presented and classified in the statement of cash flows and addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice.

The Company adopted this guidance in the first quarter of fiscal 2019.

Such adoption did not have a material impact on our consolidated financial statements.

In October 2016, the FASB issued ASU No.

2016-16, Income Taxes:

Intra-Entity Transfers of Assets Other than Inventory.

The amendments in this guidance address the income tax consequences of intra-entity transfers of assets other than inventory.

Current guidance prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party.

In addition, interpretations of this guidance have developed in practice over the years for transfers of certain intangible and tangible assets.

The amendments in the update will require recognition of current and deferred income taxes resulting from an intra-entity transfer of an asset other than inventory when the transfer occurs.

The Company adopted this guidance in the first quarter of fiscal 2019.

Such adoption did not have a material impact on our consolidated financial statements.

In January 2017, the FASB issued ASU No.

2017-01, Business Combinations:

Clarifying the Definition of a Business.

This update provides that when substantially all the fair value of the assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, the set is not a business.

The Company adopted this guidance in the first quarter of fiscal 2019.

Such adoption did not have a material impact on our consolidated financial statements.

New Accounting Standards Not Yet Adopted — In February 2016, the FASB issued ASU No.

2016-02, Leases (Topic 842), which will require lessees to recognize assets and liabilities for leases with lease terms of more than 12 months.

Consistent with current GAAP, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance or operating lease.

however, unlike current GAAP, which requires only capital leases to be recognized on the balance sheet, the new guidance will require both types of leases to be recognized on the balance sheet.

This guidance is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted.

In August 2018, the FASB issued ASU No.

2018-11, Leases (Topic 842):

Targeted Improvements, which permits adoption of the guidance in ASU 2016-02 using either a modified retrospective transition, requiring application at the beginning of the earliest comparative period presented or a transition method whereby companies could continue to apply existing lease guidance during the comparative periods and apply the new lease requirements through a cumulative-effect adjustment in the period of adoption rather than in the earliest period presented without adjusting historical financial statements.

The Company will adopt the new standard on September 29, 2019 and use the effective date of initial application.

Consequently, financial information will not be updated and the disclosures required under the new standard will not be provided for dates and periods before September 29, 2019.

The new standard provides a number of optional practical expedients in transition.

The Company expects to elect the "package of expedients", which permits the Company not to reassess under the new standard the Company's prior conclusions about lease identification and initial direct costs.

The Company does not expect to elect the use of hindsight or the practical expedient pertaining to land easements, the latter not being applicable to the Company.

The new standard also provides practical expedients for the Company's ongoing accounting.

The Company currently expect to elect the short-term lease recognition exemption for all leases that qualify.

This means, for those leases that qualify, the Company will not recognize right-of-use assets or lease liabilities, and this includes not recognizing right-of-use assets or lease liabilities for existing short-term leases of those assets in transition.

The Company expects the most significant change will be related to the recognition of right-of-use assets and lease liabilities on the Company's balance sheet for real estate operating leases.

As a result of the adoption of this guidance, the Company

anticipates that it will record right-of-use assets and lease liabilities ranging from $ 52,000,000 to $ 56,000,000 primarily related to its real estate operating leases.

The Company also expects that the adoption of this guidance will result in additional lease-related disclosures in the footnotes to its consolidated financial statements.

Recently Adopted Accounting Standards — In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No.

2016-02, Leases (Topic 842), which amends the existing accounting standards for lease accounting, including requiring lessees to recognize assets and liabilities for leases with lease terms of more than 12 months.

The new guidance also requires additional disclosures about leases.

The Company adopted the new standard on September 29, 2019 (the first day of fiscal year 2020) using the modified retrospective approach, without restating comparative periods for those lease contracts for which we have taken possession of the property as of September 28, 2019.

Accordingly, prior period amounts were not revised and continue to be reported in accordance with ASC Topic 840 (“ASC 840”), the accounting standard then in effect.

As part of our adoption we elected the "package of practical expedients", as well as the hindsight practical expedient, permitted under the new guidance, which, among other things, allowed the Company to continue utilizing historical classifications of leases as well as allowing us to combine lease and non-lease components of our real estate leases.

We also elected to adopt the short-term lease exception for all leases with terms of 12 months or less and account for them using straight-line rent expense over the remaining life of the lease.

As a result of the adoption of this guidance, we recorded ROU assets of $ 62,330,000 and lease liabilities related to our real estate operating leases of $ 63,943,000 .

The adoption of this standard did not materially impact retained earnings or our consolidated statement of operations and had no impact on cash flows.

In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718):

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Under this ASU, the guidance on share-based payments to non-employees would be aligned with the requirements for share-based payments granted to employees, with certain exceptions.

This ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within those years.

The adoption of this standard is not expected to result in a material impact to the Company’s consolidated financial statements.

The Company adopted this guidance in the first quarter of fiscal 2020.

Such adoption did not have a material impact on our consolidated financial statements.

New Accounting Standards Not Yet Adopted — In January 2017, the FASB issued ASU No.

2017-04, Intangibles—Goodwill and Other (Topic 350)—Simplifying the Test for Goodwill Impairment (“ASU 2017-04”).

ASU 2017-04 simplifies the accounting for goodwill impairments by eliminating the requirement to compare the implied fair value of goodwill with its carrying amount as part of step two of the goodwill impairment test referenced in Accounting Standards Codification (“ASC”) 350, Intangibles - Goodwill and Other (“ASC 350”).

As a result, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.

An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value.

However, the impairment loss recognized should not exceed the total amount of goodwill allocated to that reporting unit.

ASU 2017-04 is effective for annual reporting periods beginning after December 15, 2019, including any interim impairment tests within those annual periods, with early application permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

The Company will adopt this guidance in the first quarter of fiscal 2021 does not expect it to have a material impact on our consolidated financial statements.

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes, which modifies Topic 740 to simplify the accounting for income taxes.

ASU 2019-12 is effective for financial statements issued for annual periods beginning after December 15, 2020, and for the interim periods therein.

The Company is currently evaluating the effect of adopting ASU 2019-12 to determine the impact on the Company’s consolidated financial position and results of operations.

CONSOLIDATION OF VARIABLE INTEREST ENTITIES

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2020 September 28,

2019 September 29,

(in thousands)

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Fixed assets - net 241 236

Operating lease right-of-use assets - net 2,658 —

Other assets 82 82

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Accrued expenses and other current liabilities 331 440

Current portion of operating lease liabilities 226 —

Operating lease deferred credit — ( 30 )

Operating lease liabilities, less current portion 2,442 —

Notes payable, less current portion 723 —

Total liabilities 3,841 475

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RECENT RESTAURANT EXPANSION AND OTHER DEVELOPMENTS

On May 15, 2019, the Company, through a newly formed, wholly-owned subsidiary, acquired the assets of JB's on the Beach , a restaurant and bar located in Deerfield Beach, Florida for $ 7,036,000 .

The acquisition is accounted for as a business combination and was financed with a bank loan from the Company’s existing lender in the amount of $ 7,000,000 and cash

from operations.

On May 15, 2019, the Company, through a newly formed, wholly-owned subsidiary, acquired the assets of JB's on the Beach , a restaurant and bar located in Deerfield Beach, Florida for $ 7,036,000 as set out below.

The acquisition is accounted for as a business combination and was financed with a bank loan from the Company’s existing lender in the amount of $ 7,000,000 and cash from operations.

The fair values of the assets acquired, none of which are amortizable, were allocated as follows (amounts in thousands):

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Rent payments under the lease are $ 600,000 per year with 10 % increases every five years .

The consolidated statements of income for the year ended September 28, 2019 includes revenues and operating losses of approximately $ 3,380,000 and ($ 122,000 ), respectively, related to JB's on the Beach .

The unaudited pro forma financial information set forth below is based upon the Company's historical consolidated statements of income for the years ended September 28, 2019 and September 29, 2018 and includes the results of operations for JB's on the Beach for the periods prior to acquisition.

The consolidated statements of operations for the year ended October 3, 2020 includes revenues and operating income of approximately $ 7,489,000 and $ 169,000 , respectively, related to JB's on the Beach .

The unaudited pro forma financial information set forth below is based upon the Company's historical consolidated statements of operations for the year ended September 28, 2019 and includes the results of operations for JB's on the Beach for the period prior to acquisition.

The unaudited pro forma financial information, which has been adjusted for rent payments under the lease discussed above as well as interest expense of the term loan, is presented for informational purposes only and may not be indicative of what actual results of operations would have been had the acquisition of JB's on the Beach occurred on the dates indicated, nor does it purport to represent the results of operations for future periods (amounts in thousands, except per share amounts).

Year Ended Year Ended

September 28,

2019 September 29,

(unaudited) (unaudited)

Total revenues $ 170,132

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Net income per share - diluted $ 0.94

Weighted average number of common shares outstanding:

Diluted 3,531

During 2019, the Company was advised by the landlord of our food court at the Hard Rock Casino and Hotel in Hollywood, Florida that they were exercising their right to relocate our space, at their sole cost, as contractually agreed to in the original lease.

The new facilities were completed on September 16, 2019 on which date we closed our existing location and opened the new facilities.

The Company recorded the value of the renovations made by the landlord, which includes leasehold improvements and furniture, fixtures and equipment, in the amount of $ 5,474,000 with a corresponding increase in deferred rent.

The Company recorded the value of the renovations made by the landlord, which includes leasehold

improvements and furniture, fixtures and equipment, in the amount of $ 5,474,000 with a corresponding increase in deferred rent.

The net book value of the existing leasehold improvements relating to the original location in the amount of $ 918,000 is being reflected as a reduction of deferred rent on a straight-line basis over the remaining lease term.

During 2019, the Company was advised by the landlord of our food court at the Hard Rock Casino and Hotel in Tampa, Florida that they were exercising their right to renovate the front of the house space, at their sole cost, as contractually agreed to in the original lease.

In connection with this renovation we closed our existing facilities on June 2, 2019 and re-opened the renovated facilities on September 28, 2019.

In connection with this renovation we closed our existing facilities on June 2, 2019 and re-opened the renovated facilities on October 3, 2020.

The Company recorded the value of the renovations made by the landlord, which includes leasehold improvements and furniture, fixtures and equipment, in the amount of $ 3,179,000 with a corresponding increase in deferred rent.

The net book value of the existing leasehold improvements relating to the original location in the amount of $ 459,000 is being reflected as a reduction of deferred rent on a straight-line basis over the remaining lease term.

On September 29, 2019, upon the adoption of ASC 842, the unamortized Hollywood and Tampa balances of leasehold improvements and deferred rent in the amounts of $ 8,269,000 and $ 7,198,000 , respectively, 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.

Prior to the COVID-19 pandemic, the Company was in the process of developing three restaurants at a large outdoor mall in Easton, Ohio in partnership with the landlord.

In connection therewith, the Company had capitalized costs of approximately $ 400,000 , of which $ 200,000 was reimbursed by the landlord in October 2020.

The Company does not expect this project to continue.

Accordingly, the balance of these unreimbursed costs have been expensed to general and administrative expense as of October 3, 2020.

On October 2, 2020, the Company, through a newly formed, wholly-owned subsidiary, entered into an agreement to acquire the assets of Bear Ice, Inc.

and File Gumbo Inc., which collectively operate a restaurant and bar named Blue Moon Fish Company located in Lauderdale by the Sea, FL.

The transaction closed on December 1, 2020 with the total purchase price being $ 2,750,000 plus inventory and was paid with cash in the amount of $ 1,750,000 and a four year note held by the sellers in the amount of $ 1,000,000 payable monthly with 5 % interest.

The acquisition will be accounted for as a business combination.

Concurrent with the acquisition, the Company assumed the related lease which expires in 2026 and has four , five-year extension options.

Rent payments under the lease are approximately $ 360,000 per year and increase by approximately 15 % as each option is exercised.

RECENT RESTAURANT DISPOSITIONS

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.

included in the consolidated statement of income for the year ended September 28, 2019 are losses on closure in the amount of $ 1,106,000 consisting of:

As a result, included in the consolidated statement of operation for the year ended September 28, 2019 are losses on closure in the amount 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 .

The restaurant closed on January 12, 2019.

On April 2, 2020, the Company advised the landlord of a catering space in New York, NY that we would be terminating the lease.

In connection with this notification, the Company recorded a loss of $ 364,000 during the year ended October 3, 2020 consisting of (i) rent accrued in accordance with the termination provisions of the lease, (ii) the write-off of the unamortized balance of purchased leasehold rights, (iii) the write-off of our security deposit, (iv) the write-off of ROU assets and related lease liabilities, and (v) the write-off of the net book value of fixed assets.

INVESTMENT IN AND RECEIVABLE FROM NEW MEADOWLANDS RACETRACK

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In 2015, the Company invested an additional $ 222,000 in NMR and on February 7, 2017, the Company invested an additional $ 222,000 in NMR, both as a result of capital calls, bringing its total investment to $ 5,108,000 with no change in ownership.

As of September 29, 2018, this investment was accounted for based on the cost method.

As of September 30, 2018, the Company elected to account for this investment at cost, less impairment, adjusted for subsequent observable price changes in accordance with ASU No.

Such change did not affect the value of our investment in NMR as no events or changes in circumstances occurred during the year ended September 28, 2019 that would indicate impairment and there are no observable prices for this investment.

The Company accounts for this investment at cost, less impairment, adjusted for subsequent observable price changes in accordance with ASU No.

There are no observable prices for this investment.

Due to the recent impact of the COVID-19 pandemic to the global economy, including but not limited to the temporary closure of the NMR facility, the Company evaluated its investment in NMR for impairment and concluded that its fair value exceeds the carrying value.

Accordingly, the Company did not record any impairment during the year ended October 3, 2020.

The ultimate severity and longevity of the COVID-19 pandemic is unknown, and therefore, it is possible that impairments could be identified in future periods, and such amounts could be material.

Any future changes in the carrying value of our Investment in NMR will be reflected in earnings.

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The Company’s maximum exposure to loss as a result of its involvement with AM VIE is limited to a receivable from AM VIE’s primary beneficiary (NMR, a related party).

As of September 28, 2019 and September 29, 2018, no amounts were due AM VIE by NMR.

As of October 3, 2020 and September 28, 2019, no amounts were due AM VIE by NMR.

On April 25, 2014, the Company loaned $ 1,500,000 to Meadowlands Newmark, LLC.

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Such amount is subject to the same terms and conditions as the original loan discussed above.

The principal and accrued interest related to this note in the amounts of $ 1,713,000 and $ 1,928,000 , are included in Investment In and Receivable From New Meadowlands Racetrack in the consolidated balance sheets at September 28, 2019 and September 29, 2018, respectively.

The principal and accrued interest related to this note in the amounts of $ 1,766,000 and $ 1,713,000 , are included in Investment In and Receivable From New Meadowlands Racetrack in the consolidated balance sheets at October 3, 2020 and September 28, 2019, respectively.

Fixed assets consist of the following:

2020 September 28,

2019 September 29,

(in thousands)

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Fixed Assets - Net $ 37,682 $ 47,781

Depreciation and amortization expense related to fixed assets for the years ended September 28, 2019 and September 29, 2018 was $ 5,056,000 and $ 5,014,000 , respectively.

Depreciation and amortization expense related to fixed assets for the years ended October 3, 2020 and September 28, 2019 was $ 3,910,000 and $ 5,056,000 , respectively.

Management continually evaluates unfavorable cash flows, if any, related to underperforming restaurants.

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2020 September 28,

2019 September 29,

(in thousands)

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(a) Purchased leasehold rights arose from acquiring leases and subleases of various restaurants.

Amortization expense related to intangible assets for the years ended September 28, 2019 and September 29, 2018 was $ 46,000 and $ 60,000 , respectively.

Amortization expense related to intangible assets for the years ended October 3, 2020 and September 28, 2019 was $ 146,000 , which includes the write-off of the unamortized balance of leasehold rights related to a catering space in New York in the amount of $ 137,000 , and $ 46,000 , respectively.

Amortization expense for each of the next five years is expected to be $ 9,000 .

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Trademarks, which have indefinite lives, are not currently amortized and are tested for impairment annually or when facts or circumstances indicate a possible impairment as a result of a continual decline in performance or as a result of fundamental changes in a market.

The changes in the carrying amount of goodwill and trademarks for the years ended September 28, 2019 and September 29, 2018 are as follows:

The changes in the carrying amount of goodwill and trademarks for the years ended October 3, 2020 and September 28, 2019 are as follows:

Goodwill Trademarks

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Acquired during the year — —

Impairment losses (see Note 4) — ( 721 )

Balance as of September 28, 2019 $ 15,570 $ 3,720

Impairment losses — —

Balance as of October 3, 2020 $ 15,570 $ 3,720

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

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2020 September 28,

2019 September 29,

(in thousands)

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$ 12,688 $ 10,672

NOTES PAYABLE – BANK

Long-term debt consists of the following:

Other than locations where we own the underlying property, we lease our restaurant locations as well as our corporate office under various non-cancelable real-estate lease agreements that expire on various dates through 2044.

We evaluate whether we control the use of the asset, which is determined by assessing whether we obtain substantially all economic benefits from the use of the asset, and whether we have the right to direct the use of the asset.

If these criteria are met and we have identified a lease, we account for the contract under the requirements of ASC 842.

Upon taking possession of a leased asset, we determine its classification as an operating or finance lease.

All of our real estate leases are classified as operating leases.

We do not have any finance leases as of October 3, 2020.

Generally, our real estate leases have initial terms ranging from 10 to 25 years and typically include renewal options.

Renewal options are recognized as part of the ROU assets and lease liabilities if it is reasonably certain at the date of adoption that we would exercise the options to extend the lease.

Our real estate leases typically provide for fixed minimum rent payments and/or contingent rent payments based upon sales in excess of specified thresholds.

When the achievement of such sales thresholds are deemed to be probable, variable lease expense is accrued in proportion to the sales recognized during the period.

For operating leases that include rent holidays and rent escalation clauses, we recognize lease expense on a straight-line basis over the lease term from the date we take possession of the leased property.

We record the straight-line lease expense and any contingent rent, if applicable, in occupancy expenses in the consolidated statements of operations.

Many of our real estate leases also require us to pay real estate taxes, common area maintenance costs and other occupancy costs (“non-lease components”) which are included in occupancy related expenses in the consolidated statements of operations.

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

As there were no explicit rates provided in our leases, we used our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

During the third quarter of 2020, the Company suspended the vast majority of lease payments while its restaurants were closed by government mandated shutdowns as a result of the COVID-19 pandemic.

The Company was able to negotiate rent concessions, abatements and deferrals with landlords on many of our operating leases and several negotiations are still ongoing.

In July 2020, the FASB issued a clarification to accounting for lease concessions in response to the COVID-19 pandemic to reduce the operational challenges and complexity of lease accounting.

The Company used the relief provisions provided by FASB and made an election to account for the lease concessions as if they were part of the original lease agreement.

The recognition of rent concessions did not have a material impact on our consolidated financial statements.

The components of lease expense in the consolidated statements of operations are as follows:

(in thousands)

Operating lease expense - occupancy expenses (1)

Occupancy lease expense - general and administrative expenses 635

Variable lease expense 2,960

Total lease expense $ 13,044

____________________

(1) Includes short-term leases, which are immaterial.

Supplemental cash flow information related leases:

(in thousands)

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows related to operating leases $ 9,500

Non-cash investing activities:

ROU assets obtained in exchange for new operating lease liabilities $ 62,330

The weighted average remaining lease terms and discount rate as of October 3, 2020 are as follows:

Weighted Average Remaining Lease Term Weighted Average Discount Rate

Operating leases 10.7 years 5.5 %

The annual maturities of our lease liabilities as of October 3, 2020 are as follows:

Fiscal Year Ending Operating Leases

(in thousands)

October 2, 2021 $ 9,015

October 1, 2022 9,313

September 30, 2023 7,799

September 28, 2024 7,413

September 27, 2025 6,429

Thereafter 34,163

Total future lease payments 74,132

Less imputed interest ( 18,055 )

Present value of lease liabilities $ 56,077

NOTES PAYABLE

Long-term debt consists of the following:

2020 September 28,

(in thousands)

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Revolving Facility 9,666 3,366

Paycheck Protection Program Loans 14,995 —

45,242 26,648

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Long-term debt $ 36,068 $ 23,786

On June 1, 2018, the Company refinanced its then existing indebtedness with its current lender, Bank Hapoalim B.M.

(“BHBM”), by entering into an amended and restated credit agreement (the “Revolving Facility”), which expires on May 31, 2021 .

Notes Payable - Bank

On June 1, 2018, the Company refinanced (the "Refinancing") its then existing indebtedness with its current lender, Bank Hapoalim B.M.

(“BHBM”), by entering into an amended and restated credit agreement (the “Revolving Facility”), which matures on May 31, 2021 (see Note 17 - Subsequent Events).

The Revolving Facility provides for total availability of the lesser of (i) $ 10,000,000 and (ii) $ 35,000,000 less the then aggregate amount of all indebtedness and obligations to BHBM.

Borrowings under the Revolving Facility are payable upon maturity of the Revolving Facility with interest payable monthly at LIBOR plus 3.5 %, subject to adjustment based on certain ratios.

As of September 28, 2019 and September 29, 2018, borrowings of $ 3,366,000 and $ 6,568,000 , respectively, were outstanding under the Revolving Facility and had a weighted average interest rate of 4.9 % and 5.4 %, respectively.

We expect that the LIBOR rate will be discontinued at some point during 2021 and to work with BHBM to identify a suitable replacement rate and amend our debt agreements to reflect this new reference rate accordingly.

We do not believe that the discontinuation of LIBOR as a reference rate in our debt agreements will have a material adverse effect on our financial position or materially affect our interest expense.

As of October 3, 2020 and September 28, 2019, borrowings of $ 9,666,000 (of which $ 6,300,000 are due on July 31, 2021 - see Note 17 - Subsequent Events) and $ 3,366,000 , respectively, were outstanding under the Revolving Facility and had a weighted average interest rate of 3.0 % and 4.9 %, respectively and a spot rate of 2.91 % as of October 3, 2020.

In connection with the Refinancing, the Company also amended the principal amounts and payment terms of its outstanding term notes with BHBM as follows:

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• Promissory Note - JB's on the Beach purchase – On May 15, 2019, in connection with the previously discussed acquisition of JB’s on the Beach , the Company issued a promissory note under the Revolving Facility to BHBM for $ 7,000,000 which is payable in 23 equal quarterly installments of $ 250,000 , commencing on September 1, 2019 , with a balloon payment of $ 1,250,000 on June 1, 2025 and bears interest at LIBOR plus 3.5 % per annum.

• Promissory Note - Sequoia renovation – Also on May 15, 2019, the Company converted $ 3,200,000 of Revolving Facility borrowings incurred in connection with the Sequoia renovation to a promissory note which is payable in 23 equal quarterly installments of $ 114,286 , commencing on September 1, 2019 , with a balloon payment of $ 571,429 on June 1, 2025 and bears interest at LIBOR plus 3.5 % per annum.

Deferred financing costs incurred in connection with the Revolving Facility in the amount of $ 207,000 are being amortized over the life of the agreements on a straight-line basis and are included in interest expense.

Amortization expense was $ 35,000 and $ 21,000 for the years ended September 28, 2019 and September 29, 2018, respectively.

in 23 equal quarterly installments of $ 114,286 , commencing on September 1, 2019 , with a balloon payment of $ 571,429 on June 1, 2025 and bears interest at LIBOR plus 3.5 % per annum.

Borrowings under the Revolving Facility, which include all of the above promissory notes, are secured by all tangible and intangible personal property (including accounts receivable, inventory, equipment, general intangibles, documents, chattel paper, instruments, letter-of-credit rights, investment property, intellectual property and deposit accounts) and fixtures of the Company.

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The agreements also contain customary negative covenants, subject to negotiated exceptions, on liens relating to other indebtedness, capital expenditures, liens, affiliate transactions, disposal of assets and certain changes in ownership.

The Company was in compliance with all of its financial covenants under the Revolving Facility as of September 28, 2019.

As of September 28, 2019, the aggregate amounts of notes payable maturities (excluding borrowings under the Revolving Facility) are as follows:

On April 20, 2020, the Company entered into a Payment Suspension Agreement with BHBM 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.

On June 12, 2020, as a result of the impact of the COVID-19 pandemic on our business, BHBM agreed to relaxed financial covenants through fiscal Q3 2021.

In September 2020, the Company made principal payments in the amount of $ 675,000 that were due on June 1, 2020 that had been previously deferred.

The Company was in compliance with all of its financial covenants under the Revolving Facility as of October 3, 2020.

Paycheck Protection Program Loans

During the 13 weeks ended June 27, 2020, subsidiaries (the “Borrowers”) of the Company received loan proceeds from several banks (the “Lenders”) in the aggregate amount of $ 14,995,000 (the “PPP Loans”) under the Paycheck Protection Program (the “PPP”) of the CARES Act, which was enacted March 27, 2020.

The PPP 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.

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, some or all of the amounts thereunder, including accrued interest, may be forgiven if they are used for Qualifying Expenses as described in and in compliance with the CARES Act.

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

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 and a forgiveness decision is received by the Borrower.

Forgiveness applications can be submitted 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”) and the ultimate forgiveness decisions can be made by the Lenders up to 60 days after submitting the applications and possibly longer if forgiveness is fully or partially denied and the Borrower appeals the decision.

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.

Accordingly, all amounts outstanding under the PPP Loans have been classified as long-term in the consolidated balance sheet as of October 3, 2020.

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.

Debt Issue Costs

Debt issuance costs incurred in the amount of $ 271,000 are being amortized over the life of the agreements using the effective interest rate method and included in interest expense.

Amortization expense of approximately $ 51,000 and $ 35,000 is included in interest expense for the years ended October 3, 2020 and September 28, 2019, respectively.

As of October 3, 2020, the aggregate amounts of notes payable maturities (excluding borrowings under the Revolving Facility) are as follows:

BHBM PPP Loans Total

2021 $ 2,701 $ — $ 2,701

2022 2,701 6,107 8,808

2023 3,526 7,498 11,024

2024 2,229 1,390 3,619

2025 9,424 — 9,424

$ 20,581 $ 14,995 $ 35,576

COMMITMENTS AND CONTINGENCIES

Leases — The Company leases its restaurants, bar facilities, and administrative headquarters through its subsidiaries under terms expiring at various dates through 2033 .

Most of the leases provide for the payment of base rents plus real estate taxes, insurance and other expenses and, in certain instances, for the payment of a percentage of the restaurants’ sales in excess of stipulated amounts at such facility and in one instance based on profits.

As of September 28, 2019, future minimum lease payments under non-cancelable leases are as follows:

Fiscal Year (in thousands)

Thereafter 33,487

Total minimum payments $ 77,483

In connection with certain of the leases included in the table above, the Company obtained and delivered irrevocable letters of credit in the aggregate amount of approximately $ 388,000 as security deposits under such leases.

Rent expense was approximately $ 13,879,000 and $ 14,649,000 for the years ended September 28, 2019 and September 29, 2018, respectively.

Contingent rentals, included in rent expense, were approximately $ 5,336,000 and $ 5,454,000 for the years ended September 28, 2019 and September 29, 2018, respectively.

Leases — In connection with one of our leases, the Company obtained and delivered an irrevocable letter of credit in the amount of approximately $ 238,000 as a security deposit under such lease.

Legal Proceedings — In the ordinary course its business, the Company is a party to various lawsuits arising from accidents at its restaurants and workers’ compensation claims, which are generally handled by the Company’s insurance carriers.

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On May 1, 2018, two former tipped service workers (the “Plaintiffs”), individually and on behalf of all other similarly situated personnel, filed a putative class action lawsuit (the “Complaint”) against the Company and certain subsidiaries as well as certain officers of the Company (the “Defendants”).

Plaintiffs allege, on behalf of themselves and the putative class, that the Company violated certain of the New York State Labor Laws and related regulations.

The Complaint seeks unspecified money damages, together with interest, liquidated damages and attorney fees.

There has been no discovery on the merits of the Complaint and the matter is still in the initial stages of discovery concerning whether the named Plaintiffs are seeking to represent an appropriate class of tipped service workers and, if so, whether the named Plaintiffs are appropriate class representatives.

The Company's Motion to Dismiss the Complaint was denied on June 27, 2019.

The Company believes that the allegations and claims in the Complaint are without merit, and it intends to defend itself vigorously in this litigation.

However, the outcomes of legal actions are unpredictable and subject to significant uncertainties, and thus it is

inherently difficult to determine the probability or quantification of any loss.

Based on information currently available, including the Company’s assessment of the facts underlying the Complaint and advice of counsel, the amount or range of reasonably possible losses, if any, cannot be estimated.

Accordingly, the Company has not recorded any accrual related to this matter as of September 28, 2019.

Plaintiffs alleged, on behalf of themselves and the putative class, that the Company violated certain of the New York State Labor Laws and related regulations.

The Complaint sought unspecified money damages, together with interest, liquidated damages and attorney fees.

On December 14, 2020, the parties reached a settlement agreement resolving all issues alleged in the Complaint, which will be submitted to the New York State Supreme Court for approval, for approximately the amount which was previously accrued.

STOCK OPTIONS

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Options granted under both plans are exercisable at prices at least equal to the fair market value of such stock on the dates the options were granted and expire ten years after the date of grant.

On August 10, 2018, options to purchase 5,000 shares of common stock were granted at an exercise price of $ 20.36 per share and on September 4, 2018, options to purchase 20,000 shares of common stock were granted at an exercise price of $ 22.30 per share.

Both grants are exercisable as to 50 % of the shares commencing on the date of grant and as to an additional 50 % commencing on the first anniversary of the date of grant.

Such options had an aggregate grant date fair value of $ 3.46 per share and $ 3.82 per share, respectively and totaled approximately $ 94,000 .

During the year ended October 3, 2020, options to purchase 266,500 shares of common stock at an exercise price of $ 21.90 per share were granted to employees, directors of the Company and other service providers.

Such options are exercisable as to 50 % of the shares commencing on the second anniversary of the date of grant and as to the remaining 50 % commencing on the fourth anniversary of the date of grant.

The grant date fair value of these stock options was $ 3.35 per share.

During the year ended September 28, 2019, options to purchase 23,000 shares of common stock at an exercise price of $ 19.61 per share were granted to employees of the Company.

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The fair value of each of the Company’s stock options is estimated on the date of grant using a Black-Scholes option-pricing model that uses assumptions that relate to the expected volatility of the Company’s common stock, the expected dividend yield of the Company’s stock, the expected life of the options and the risk free interest rate.

The assumptions used for the 2019 grants include a risk free interest rate of 2.52 % - 2.61 %, volatility of 30.6 %, a dividend yield of 5.1 % and an expected life of 10 years.

The assumptions used for the 2020 grant include a risk free interest rate of 1.54 %, volatility of 30.3 %, a dividend yield of 5.2 % and an expected life of 10 years.

The assumptions used for the 2019 grants include a risk free interest rate of 2.52 % - 2.61 %, volatility of 30.6 %, a dividend yield of 5.1 % and an expected life of 10 years.

During the year ended September 28, 2019, options to purchase 8,750 shares of common stock at a weighted average price of $ 18.76 per share expired unexercised or were forfeited.

During the year ended September 29, 2018, options to purchase 26,050 shares of common stock at an exercise price of $ 18.60 per share expired unexercised.

The following table summarizes stock option activity under all plans:

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grant 174,500 441,000

Compensation cost charged to operations for the years ended September 28, 2019 and September 29, 2018 for share-based compensation programs was approximately $ 112,000 and $ 47,000 , respectively.

The compensation cost recognized is classified as a general and administrative expense in the consolidated statements of income.

As of September 28, 2019, there was approximately $ 53,000 of unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a period of 3.5 years.

The following table summarizes information about stock options outstanding as of September 28, 2019:

Compensation cost charged to operations for the years ended October 3, 2020 and September 28, 2019 for share-based compensation programs was approximately $ 176,000 and $ 112,000 , respectively.

The compensation cost recognized is classified as a general and administrative expense in the consolidated statements of operations.

As of October 3, 2020, there was approximately $ 772,000 of unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a period of 3.3 years.

The following table summarizes information about stock options outstanding as of October 3, 2020:

Options Outstanding Options Exercisable

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59,000 $ 20.69 8.2 50,750 $ 20.81 8.2

626,500 $ 20.41 6.1 351,750 $ 19.28 3.5

The Company also maintains a Section 162(m) Cash Bonus Plan.

Under the Section 162(m) Cash Bonus Plan, compensation paid in excess of $ 1,000,000 to any employee who is the chief executive officer, or one of the three highest paid executive officers on the last day of that tax year (other than the chief executive officer or the chief financial officer) is not tax deductible.

On December 22, 2017, the U.S.

government enacted comprehensive tax reform commonly referred to as the Tax Cuts and Jobs Act (“TCJA”).

Under Accounting Standards Codification (“ASC”) 740, the effects of changes in tax rates and laws are recognized in the period in which the new legislation is enacted.

The TCJA makes broad and complex changes to the U.S.

tax code, including, but not limited to:

(1) reducing the U.S.

federal corporate tax rate from 35% to 21% effective January 1, 2018;

(2) changing rules related to uses and limitations of net operating loss carryforwards created in tax years beginning after December 31, 2017;

(3) accelerated expensing on certain qualified property;

(4) creating a new limitation on deductible interest expense to 30% of tax adjusted EBITDA through 2021 and then 30% of tax adjusted EBIT thereafter;

(5) eliminating the corporate alternative minimum tax;

and (6) further limitations on the deductibility of executive compensation under IRC §162(m) for tax years beginning after December 31, 2017.

As the reduction in the U.S.

federal corporate tax rate is administratively effective on January 1, 2018, our blended U.S.

federal tax rate for the year ended September 29, 2018 was approximately 24 %.

In connection with the TCJA, the Company recorded an income tax benefit of $ 1,382,000 related to the re-measurement of our deferred tax assets and liabilities for the reduced U.S.

federal corporate tax rate of 21%.

The Company’s accounting for the TCJA was complete as of September 29, 2018 with no significant differences from our provisional estimates.

On March 27, 2020, the Coronavirus Aid, Relief and Economic Security Act ("CARES Act") was enacted to provide economic relief to those impacted by the COVID-19 pandemic.

The CARES Act made various tax law changes including among other things (i) modifications to the federal net operating loss rules including permitting federal net operating losses incurred in 2018, 2019, and 2020 to be carried back to the five preceding taxable years in order to generate a refund of previously paid income taxes (ii) enhanced recoverability of AMT tax credit carryforwards (iii) increased the limitation under IRC Section 163(j) for 2019 and 2020 to permit additional expensing of interest, and (iv) enacted a technical correction so that qualified improvement property can be immediately expensed under IRC Section 168(k).

As a result of the CARES Act, the Company recorded an income tax receivable of $ 2,673,000 as it is expecting to carryback its current year estimated taxable losses for fiscal year 2020 and recover prior taxes paid.

The Company recorded an income tax benefit of $ 1,022,000 related to the carryback as the Company was subject to higher federal corporate income tax rates in prior periods than the current statutory tax rate of 21%.

On November 18, 2020, the IRS issued Revenue Ruling 2020-27 that treats expenses funded by PPP loans as non-deductible for tax purposes if a business reasonably expects that a PPP loan will be forgiven in the future.

Based on this Revenue Ruling 2020-27 and the uncertainty related to the PPP loan forgiveness in future periods as discussed in Note 10 - Notes Payable, the Company has treated these expenses as deductible in fiscal 2020.

The Company will continue to evaluate the impact of this ruling on its consolidated financial statements and may be required to reverse its income tax receivable and related income tax benefits during future interim periods as each Borrower applies for forgiveness.

The provision for income taxes consists of the following:

2020 September 28,

2019 September 29,

(in thousands)

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State and local 58 267

( 2,594 ) 527

Deferred provision (benefit):

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2020 September 28,

2019 September 29,

(in thousands)

Provision at Federal statutory rate ( 21 % in 2019 and 24 % in 2018)

Provision at Federal statutory rate (21%)

$ ( 1,891 ) $ 393

State and local income taxes, net of tax benefits ( 919 ) ( 160 )

Tax credits ( 542 ) ( 1,029 )

Income attributable to non-controlling interest 45 ( 102 )

Income (loss) attributable to non-controlling interest ( 15 ) 45

Changes in tax rates ( 65 ) 2

Impact of Federal tax reform — ( 1,382 )

Net operating loss carryback Federal rate benefit ( 1,022 ) —

Change in valuation allowance 21 81

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2020 September 28,

2019 September 29,

(in thousands)

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State net operating loss carryforwards $ 5,427 $ 4,406

Operating lease deferred credits 422 513

Lease liabilities 10,729 422

Deferred compensation 358 313

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Depreciation and amortization ( 12,440 ) ( 2,049 )

Partnership investments — ( 329 )

Prepaid expenses ( 522 ) ( 194 )

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The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income.

In the assessment of the valuation allowance, appropriate consideration was given to all positive and negative evidence including recent operating profitability, forecasts of future earnings and the duration of statutory carryforward periods.

The Company recorded a valuation allowance of $ 392,000 and $ 311,000 as of September 28, 2019 and September 29, 2018, respectively, attributable to state and local net operating loss carryforwards which are not realizable on a more-likely-than-not basis.

During the year ended September 28, 2019, the Company’s valuation allowance increased by approximately $ 81,000 as the Company determined that certain state net operating losses became unrealizable on a more-likely-than-not basis.

As of September 28, 2019, the Company had General Business Credit carryforwards of approximately $ 1,117,000 which expire through fiscal 2039.

In addition, as of September 28, 2019, the Company has New York State net operating loss carryforwards of approximately $ 23,061,000 and New York City net operating loss carryforwards of approximately $ 21,576,000 that expire through fiscal 2039.

In the assessment of the valuation allowance, appropriate consideration was given to all positive and negative evidence including forecasts of future earnings and the duration of statutory carryforward periods.

The Company recorded a valuation allowance of $ 413,000 and $ 392,000 as of October 3, 2020 and September 28, 2019, respectively, attributable to state and local net operating loss carryforwards which are not realizable on a more-likely-than-not basis.

During the year ended October 3, 2020, the Company’s valuation allowance increased by approximately $ 81,000 as the Company determined that certain state net operating losses became unrealizable on a more-likely-than-not basis.

As of October 3, 2020, the Company had General Business Credit carryforwards of approximately $ 1,862,000 which expire through fiscal 2040.

In addition, as of October 3, 2020, the Company has New York State net operating loss carryforwards of approximately $ 27,373,000 and New York City net operating loss carryforwards of approximately $ 25,873,000 that expire through fiscal 2040.

A reconciliation of the beginning and ending amount of unrecognized tax benefits excluding interest and penalties is as follows:

2020 September 28,

2019 September 29,

(in thousands)

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The entire amount of unrecognized tax benefits if recognized would reduce our annual effective tax rate.

For the years ended September 28, 2019 and September 29, 2018, the Company has $ 0 and $ 38,000 , respectively, accrued for the payment of interest and penalties.

For the years ended October 3, 2020 and September 28, 2019, there are no amounts accrued for the payment of interest and penalties.

The Company does not expect a significant change to its unrecognized tax benefits within the next 12 months.

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The 2017 through 2020 fiscal years remain subject to examination by the Internal Revenue Service and most state and local tax authorities.

The Company is currently under examination by the Internal Revenue Service for tax year ended September 2017.

The examination is in its preliminary phases.

INCOME PER SHARE OF COMMON STOCK

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2020 September 28,

2019 September 29,

(in thousands)

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Diluted 3,500 3,531

For the year ended October 3, 2020, all options were excluded from diluted earnings per share as their impact would have been anti-dilutive.

For the year ended September 28, 2019, the dilutive effect of options to purchase 208,000 shares of common stock at exercise prices ranging from $ 20.18 per share to $ 22.50 per share were not included in diluted earnings per share as their impact would have been anti-dilutive.

For the year ended September 29, 2018, no options were excluded from diluted earnings per share as all were dilutive.

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 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 and other relevant factors.

The Company does not expect to pay quarterly cash dividends for the foreseeable future as a result of the disruption to its operations from the COVID-19 pandemic.

RELATED PARTY TRANSACTIONS

Employee receivables totaled approximately $ 414,000 and $ 386,000 at September 28, 2019 and September 29, 2018, respectively.

Such amounts consist of loans that are payable on demand and bear interest at the minimum statutory rate ( 1.85 % at September 28, 2019 and 1.63 % at September 29, 2018).

Prior to joining the Company on September 4, 2018, the Chief Financial Officer was a member of a firm that provided consulting services to the Company.

Total fees billed by this firm were $ 0 and $ 303,000 for the years ended September 28, 2019 and September 29, 2018, respectively.

The Company ceased utilizing the services of this firm upon hiring him as the Chief Financial Officer.

Employee receivables totaled approximately $ 385,000 and $ 414,000 at October 3, 2020 and September 28, 2019, respectively.

Such amounts consist of loans that are payable on demand, bear interest at the minimum statutory rate ( 0.38 % at October 3, 2020 and 1.85 % at September 28, 2019), and are net of reserves for collectability.

SUBSEQUENT EVENTS

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

On November 11, 2020, the landlord of the Company’s corporate office agreed to amend the related lease which was to expire on December 31, 2026.

Effective January 1, 2021, rents will be reduced by approximately $ 20,000 a month for three years at which point an independent broker will determine the fair market value of the space.

As part of the agreement, the Company agreed to spend approximately $ 200,000 on improvements to the HVAC systems and other pandemic related changes to the space.

Also included in the amendment are two additional five-year options for the space.

On November 13, 2020, the Company was advised by the landlord that it would have to vacate Gallagher’s Steakhouse and Gallagher’s Burger Bar at the Resorts Casino Hotel located in Atlantic City, NJ.

which were on a month-to-month, no rent lease.

The Company expects that the closure of this property will occur on January 4, 2021 and will not result in a material charge to the Company’s operations.

On November 19, 2020, options to purchase 110,750 shares of common stock at an exercise price of $ 10.65 per share were granted to employees and directors of the Company.

Such options are exercisable as to 50 % of the shares commencing on

the second anniversary of the date of grant and the remaining 50 % becoming exercisable on the fourth anniversary of the date of grant.

The grant date fair value of these stock options was $ 2.22 per share.

On December 11, 2020, BHBM extended the maturity date of the Revolving Facility to October 3, 2021.

In addition, BHBM extended the maturity dates of two working capital advances in the amounts of $ 3,000,000 and $ 3,300,000 from March 9, 2021 and June 8, 2021, respectively, to July 31, 2021.

These amounts are expected to be converted to term loans when due, along with the balance of the Revolving Facility of $ 3,366,000 when due.

On December 11, 2020, New York State Governor Andrew Cuomo announced the shutdown of indoor dining in New York City indefinitely starting on Monday, December 14, 2020.

We expect this will have a material adverse impact on our operations in New York, as will a shutdown of the entire City of New York, which is being considered by the Mayor of New York City as well as shut downs in any other cities where we operate.

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

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*21 Subsidiaries of the Registrant.

*23 Consent of CohnReznick LLP.

*23 Consent of CohnReznick L L P .

*31.1 Certification of Chief Executive Officer.

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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-K

Item 9A. Controls and Procedures