What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-18 compared with 2021-02-16 · 86 added, 96 removed, 154 unchanged (54% of the section changed)

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All forward-looking statements are expressly qualified in their entirety by these cautionary statements.

The following discussion and analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended October 3, 2020 and the condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this Form 10-Q.

The following discussion and analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended October 3, 2020 and the consolidated condensed financial statements and notes thereto included in Part I, Item 1 of this Form 10-Q.

All information presented herein is based on our fiscal calendar.

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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 had 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.

However, indoor dining in New York City was again shut down indefinitely starting on December 14, 2020 (which was amended on January 29, 2021 to allow indoor dining at 25% maximum capacity starting on February 12, 2021) and Washington, D.C.

and Las Vegas rolled back indoor dining from 50% to 25% of capacity in mid-December as well.

In addition to government mandated shut-downs and capacity restrictions, the Company temporarily closed several restaurants, typically for three to ten days due to a high rate of positive COVD-19 tests of our employees.

These closures and capacity rollbacks have had and will continue to have a material adverse impact on our operations.

The Company is subject to continued risks and uncertainties as a result of the outbreak of, and local, state and federal governmental responses to, the COVID-19 pandemic which was declared a National Public Health Emergency in March 2020.

We experienced significant disruptions to our business as suggested and mandated social distancing and shelter-in-place orders led to the temporary closure of all of our restaurants.

In the third quarter of fiscal 2020, certain jurisdictions began allowing the reopening of indoor dining at varying capacities.

However, restrictions on indoor dining capacity and social distancing protocols continue to change.

As of April 3, 2021, the Company had reopened all of its properties, with the exception of Thunder Grill in Washington, D.C., at varying levels of capacity as allowed by local, state and federal governments.

In addition to government mandated shut-downs and capacity restrictions, during the 26 weeks ended April 3, 2021, the Company temporarily closed several restaurants, typically for three to ten days due to a high rate of positive COVD-19 tests of our employees.

These closures, capacity restrictions and social distancing protocols have had and will continue to have a material adverse impact on our operations.

The pandemic has caused and continues to cause unprecedented business disruptions, especially in the hospitality industry.

Although we have experienced some recovery from the initial impact of COVID-19 in our Florida and Alabama locations, 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.

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

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 $(1,560,000) as of January 2, 2021, 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 and actions taken by management, set out below and otherwise, will be sufficient to meet our liquidity and capital spending requirements through February 17, 2022.

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 January 2, 2021, corporate salaries continue to be at 50-65% of pre-pandemic levels.

In addition, members of the Board waived their director fees through December 31, 2020.

• Extended the maturity date of all outstanding revolver borrowings under our credit agreement in the amount of $9,666,000 to February 17, 2022.

In addition, the bank agreed to modified financial covenants through fiscal Q2 2022.

• 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 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, file carryback claims and defer a portion of our 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.

As of January 2, 2021, the Company owned and operated 18 restaurants and bars, 17 fast food concepts and catering operations, exclusively in the United States, that have similar economic characteristics, nature of products and service, class of customer and distribution methods.

Although we have experienced some recovery from the impact of COVID-19 in our Florida, Las Vegas and Alabama locations, 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.

Further, we cannot predict how long the COVID-19 pandemic will last or whether it will reoccur, what additional restrictions may be enacted, or if individuals will be comfortable returning to our restaurants during or following social distancing protocols and what long-lasting effects the COVID-19 pandemic may have on the restaurant industry as a whole.

The extent of the reopening process, along with the potential impact of the COVID-19 pandemic on consumer spending behavior, will determine the continued significance of the impact of the COVID-19 pandemic to our operating results and financial position.

As a result of these developments, the Company experienced a significant negative impact on its revenues, results of operations and cash flows, and has a working capital deficiency of $(3,561,000) as of April 3, 2021, 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 will be sufficient to meet our liquidity and capital spending requirements through May 18, 2022.

As of April 3, 2021, the Company owned and operated 18 restaurants and bars, 17 fast food concepts and catering operations, exclusively in the United States, that have similar economic characteristics, nature of products and service, class of customer and distribution methods.

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

The consolidated condensed statements of operations for the 13 weeks ended January 2, 2021 include revenues and income of approximately $478,000 and $7,000, respectively, related to Blue Moon Fish Company , which was acquired on December 1, 2020.

The consolidated condensed statements of operations for the 13 and 26 weeks ended April 3, 2021 include revenues and income of approximately $1,962,000 and $2,441,000 and $448,000 and $455,000, respectively, related to Blue Moon Fish Company , which was acquired on December 1, 2020.

Accounting Period

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Under this method certain years will contain 53 weeks.

The periods ended January 2, 2021 and December 28, 2019 each included 13 weeks.

The periods ended April 3, 2021 and March 28, 2020 each included 13 and 26 weeks.

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

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Results of Operations

The Company’s operating loss for the 13 weeks ended January 2, 2021 was $(3,307,000), as compared to operating income of $2,436,000 for the 13 weeks ended December 28, 2019.

This decrease resulted primarily from the government mandated closures and/or capacity restrictions (discussed above) at all of our restaurants in the current period in connection with the COVID-19 pandemic.

In addition to the decrease in restaurant revenue from the mandatory closures and operating at varying levels of limited capacity, the Company estimates that it incurred approximately $150,000 of costs directly related to COVID-19 during the 13 weeks ended January 2, 2021 consisting primarily of payments to employees for paid-time off during restaurant closures or while they are out due to illness.

Further, 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.

The following table summarizes the significant components of the Company’s operating results for the 13-week periods ended January 2, 2021 and December 28, 2019:

13 Weeks Ended Variance

2021 December 28,

(in thousands)

The Company’s operating loss for the 13-weeks ended April 3, 2021 was $(1,497,000), as compared to $(1,936,000) for the 13-weeks ended March 28, 2020.

This increase resulted primarily from strong performance of our Florida and Alabama operations in the current period partially offset by the government mandated closures of all our restaurants in March 2020 in connection with the COVID-19 pandemic.

The Company’s operating loss for the 26-weeks ended April 3, 2021 was $(4,803,000), as compared to operating income of $500,000 for the 26-weeks ended March 28, 2020.

This decrease resulted primarily from the severe impacts of the government mandated closures and/or capacity restrictions at all of our restaurants in the first quarter of fiscal 2021, particularly on our event business in New York and Washington, D.C.

as compared to the same period of the prior year, which was prior to the COVID-19 pandemic.

Although all of our restaurants are currently, or will be operating, indoor dining at what state and local governments are calling 100% capacity, they are still subject to indoor dining social distancing protocols which still limits their capacity.

We cannot predict when these social distancing protocols will be lifted or whether we will be required to limit capacity or 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, as 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.

The following table summarizes the significant components of the Company’s operating results for the 13- and 26- week periods ended April 3, 2021 and March 28, 2020:

13 Weeks Ended Variance 26 Weeks Ended Variance

2021 March 28,

2020 $ % April 3,

2021 March 28,

(in thousands) (in thousands)

Food and beverage sales $ 25,181 $ 33,114 $ (7,933) -24.0 % $ 45,070 $ 75,943 $ (30,873) -40.7 %

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Other operating costs and expenses

3,529 5,654 (2,125) -37.6 % 6,339 10,982 (4,643) -42.3 %

General and administrative expenses

3,036 2,397 639 26.7 % 4,824 5,451 (627) -11.5 %

Loss on termination of lease — 364 (364) N/A — 364 (364) N/A

Depreciation and amortization 1,021 1,012 9 0.9 % 1,963 2,208 (245) -11.1 %

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OPERATING INCOME (LOSS) $ (1,497) $ (1,936) $ 439 -22.7 % $ (4,803) $ 500 $ (5,303) -1060.6 %

During the Company’s 13-week period ended January 2, 2021, revenues decreased 53.4% as compared to revenues in the 13-week period ended December 28, 2019.

This decrease resulted primarily from the government mandated closures and/or capacity restrictions at all of our restaurants in the current period in connection with the COVID-19 pandemic.

During the 13-week period ended April 3, 2021, revenues decreased 24.2% as compared to revenues in the 13-week period ended March 28, 2020.

This decrease resulted primarily from the impacts of COVID-19 pandemic on our business.

Food and Beverage Same-Store Sales

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13 Weeks Ended Variance

2021 December 28,

2021 March 28,

(in thousands)

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Food and beverage sales $ 25,181 $ 33,114

A discussion of same-store sales has not been presented for the 13-week period ended January 2, 2021 as it is not meaningful as a result of the government mandated closures and/or capacity restrictions at all of our restaurants in the current period in connection with the COVID-19 pandemic.

With the exception of Florida and Alabama, where COVID-19 restrictions were lifted in Q4 2020, the decreases in same-store sales for the 13-week period ended April 3, 2021 as compared to the same period of the prior year, are result of the impact of the COVID-19 pandemic on our business.

Costs and Expenses

Costs and expenses for the 13 weeks ended January 2, 2021 and December 28, 2019 were as follows (in thousands):

Costs and expenses for the 13 and 26 weeks ended April 3, 2021 and March 28, 2020 were as follows (in thousands):

13 Weeks Ended

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Revenues Increase

(Decrease) 26 Weeks

Revenues 26 Weeks

Revenues Increase

Food and beverage cost of sales $ 7,764 30.1 % $ 9,578 28.2 % (1,814) -18.9 % $ 13,705 29.8 % $ 20,518 26.5 % (6,813) -33.2 %

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General and administrative expenses 3,036 11.8 % 2,397 7.0 % 639 26.7 % 4,824 10.5 % 5,451 7.0 % (627) -11.5 %

Loss on termination of lease — — % 364 1.1 % (364) N/A — — % 364 0.5 % (364) N/A

Depreciation and amortization 1,021 4.0 % 1,012 3.0 % 9 0.9 % 1,963 4.3 % 2,208 2.8 % (245) -11.1 %

Total costs and expenses $ 27,264 $ 35,938 $ (8,674) $ 50,869 $ 77,016 $ (26,147)

Food and beverage costs as a percentage of total revenues for the 13 weeks ended January 2, 2021 increased as compared with the same period of last year primarily as a result of increases in costs of seafood and other high volume items.

Payroll expenses as a percentage of total revenues for the 13 weeks ended January 2, 2021 increased as compared with the same period of last year primarily as a result of retaining key restaurant management personnel with lower corresponding revenues in the current period as a result of the government mandated closures and/or capacity restrictions at all of our restaurants in connection with the COVID-19 pandemic.

Occupancy expenses as a percentage of total revenues for the 13 weeks ended January 2, 2021 increased as compared with the same period of last year primarily as a result of accrued rents where we have not finalized abatement agreements and lower sales in the current period as a result of the government mandated closures and/or capacity restrictions at all of our restaurants in connection with the COVID-19 pandemic.

Other operating costs and expenses as a percentage of total revenues for the 13 weeks ended January 2, 2021 as compared to the same period of last year increased primarily as a result of the fixed nature of some of the expenses.

General and administrative expenses (which relate solely to the corporate office in New York City) for the 13 weeks ended January 2, 2021 decreased as compared with the same period of last year primarily as a result of headcount and continued salary reductions of corporate personnel as a result of the impacts on our business from COVID-19 pandemic.

Depreciation and amortization expense for the 13 weeks ended January 2, 2021 decreased as compared to the same period of last year primarily as a result of lower charges in the current period as a result of asset impairments in the first quarter of 2020.

Food and beverage costs as a percentage of total revenues for the 13- and 26-weeks ended April 3, 2021 increased as compared with the same period of last year primarily as a result of increases in costs of seafood and other high-volume items.

Payroll expenses as a percentage of total revenues for the 13-weeks ended April 3, 2021 decreased as compared with the same period of last year primarily as a result of retaining key restaurant management personnel with lower corresponding revenues in the prior period as a result of the government mandated closures and/or capacity restrictions at all of our restaurants in connection with the COVID-19 pandemic.

Payroll expenses as a percentage of total revenues for the 26-weeks ended April 3, 2021 increased as compared with the same period of last year primarily as a result of increased labor costs in connection with ongoing COVID-related labor challenges created by the high level of government stimulus offset by retaining key restaurant management personnel with lower corresponding revenues in the prior period as a result of the government mandated closures and/or capacity restrictions at all of our restaurants in connection with the COVID-19 pandemic.

Occupancy expenses as a percentage of total revenues for the 13- and 26-weeks ended April 3, 2021 increased as compared with the same period of last year primarily as a result of accrued rents where we have not finalized abatement agreements and lower sales in the current period as a result of the COVID-19 pandemic.

Other operating costs and expenses as a percentage of total revenues for the 13- and 26-weeks ended April 3, 2021 as compared to the same period of last year decreased primarily as a result of decreased maintenance at properties where we are experiencing lower traffic combined with increased professional fees at the restaurant-level in the prior periods.

General and administrative expenses (which relate solely to the corporate office in New York City) for the 13- and 26-weeks ended April 3, 2021 increased as compared with the same period of last year primarily as a result of headcount and salary reductions of corporate personnel in the prior period as a result of the impacts on our business from the COVID-19 pandemic.

Depreciation and amortization expense for the 13-weeks ended April 3, 2021 increased marginally as compared to the same period of last year primarily as a result of assets placed in service in the current period.

Depreciation and amortization expense for the 26-weeks ended April 3, 2021 decreased as compared to the same period of last year primarily as a result of lower charges in the current period as a result of asset impairments in the first quarter of 2020.

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

At the end of each interim period, we estimate the annual effective tax rate and apply that rate to our ordinary year to date earnings.

The related tax expense or benefit is recognized in the interim period in which it occurs.

In addition, the effect of changes in enacted tax laws, rates or tax status is recognized in the interim period in which the change occurs.

The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including the expected operating (loss) income for the year, permanent and temporary differences as a result of differences between amounts measured and recognized in accordance with tax laws and financial accounting standards, and the likelihood of recovering deferred tax assets generated in the current fiscal year.

In addition, the tax effects of unusual or infrequently occurring items including changes in judgement about valuation allowances and effects of changes in enacted tax laws are recognized discretely in the interim period in which the change occurs.

The computation of the annual estimated effective tax rate at each interim period requires certain

estimates and significant judgment including the expected operating (loss) income for the year, permanent and temporary differences as a result of differences between amounts measured and recognized in accordance with tax laws and financial accounting standards, and the likelihood of recovering deferred tax assets generated in the current fiscal year.

The accounting estimates used to compute income tax expense may change as new events occur, additional information is obtained, or the tax environment changes.

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On December 27, 2020, the Consolidated Appropriations Act of 2021 (“CAA”) was enacted and provided clarification on the tax deductibility of expenses funded with PPP loans as fully deductible for tax purposes.

During the period ended April 3, 2021 the Company recorded income for financial reporting purposes related to the forgiveness of some of its PPP loans.

The forgiveness of these PPP loans is not taxable.

The income recorded for financial reporting purposes was considered an unusual or infrequent event and the tax effect was recorded discretely in the quarter ended April 3, 2021.

As a result of the CARES Act and the CAA, the Company carried back taxable losses from fiscal year 2020 and is expected to carryback taxable losses from fiscal 2021 to generate a refund of previously paid income taxes.

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The adjustment to the fiscal 2020 carryback was recorded as a discrete item.

The income tax benefit for the 13-week period ended January 2, 2021 was $(2,919,000).

The effective tax rate for the 13-week period ended January 2, 2021 of 80.67% differed from the statutory rate of 21% primarily as a result of the tax benefits related to the generation of FICA tax credits, the carryback of fiscal 2021 taxable losses to prior years when the Federal corporate tax rate was 34% and operating income attributable to non-controlling interests that is not taxable to the Company.

The effective tax rate also includes a discrete benefit of $(352,000) primarily related to an adjustment of the estimated fiscal year 2020 carryback claim.

The income tax provision for the 13-week period ended December 28, 2019 was $319,000.

The effective tax rate for the 13 week period ended December 28, 2019 was 15.2% and differed from the statutory rate of 21% as a result of the tax benefits related to the generation of FICA tax credits and operating income attributable to non-controlling interests that is not taxable to the Company.

The income tax benefit for the 26-week period ended April 3, 2021 was $(4,839,000).

The effective tax rate for the 26-week period ended April 3, 2021 of 376.56% differed from the statutory rate of 21% primarily related to the discrete tax benefit attributable to the income related to the PPP loan forgiveness which is not taxable for tax purposes.

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

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

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

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

As of January 2, 2021, we had a cash and cash equivalents balance of $10,813,000.

The Company had a working capital deficiency of $(1,560,000) at January 3, 2021 as compared with a deficiency of $(3,234,000) at October 3, 2020.

As of April 3, 2021, we had a cash and cash equivalents balance of $11,398,000.

The Company had a working capital deficiency of $(3,561,000) at April 3, 2021 as compared with a deficiency of $(3,234,000) at October 3, 2020.

This increase resulted primarily from the change in our debt maturities in connection with an amendment to our credit agreement.

We believe that our existing cash balances combined with measures taken due to COVID-19 pandemic described above, will be sufficient to meet our liquidity and capital spending requirements and finance our operating activities for at least the next 12 months.

We believe that our existing cash balances combined with measures taken due to the COVID-19 pandemic described above, will be sufficient to meet our liquidity and capital spending requirements and finance our operating activities for at least the next 12 months.

Our liquidity has been adversely affected primarily by decreased customer traffic as a result the government mandated closures and capacity restrictions at all our of restaurants in connection with the COVID-19 pandemic.

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In addition, we cannot predict how soon we will be able to reopen any or all of our restaurants at full capacity, without social distancing restrictions 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.

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

In response to the uncertain market conditions resulting from the COVID-19 pandemic, we have enhanced our liquidity position through the following measures:

• Fully drew down our Revolving Facility as of June 9, 2020.

• Extended the maturity date of all outstanding revolver borrowings under our credit agreement in the amount of $9,666,000 to February 17, 2022.

• Although we were in compliance with all of our financial covenants under our Revolving Facility, our lender agreed to modified financial covenants through fiscal Q2 2022.

• 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.

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 approximately $15.0 million of loans under the Paycheck Protection Program of the CARES Act, which was enacted March 27, 2020.

• Utilized additional provisions of the CARES Act to obtain tax savings, file carryback claims and defer a portion of our social security taxes to future years.

Cash Flows for 13 Weeks Ended January 2, 2021 and December 28, 2019

Net cash used in operating activities for the 13 weeks ended January 2, 2021 decreased to $(2,985,000) as compared to $2,452,000 provided by operations in the same period of last year.

This decrease was attributable to a decrease in net income as a result of the impacts of the COVID-19 pandemic on our operations and changes in net working capital primarily related to accounts receivable, inventory and accounts payable and accrued expenses.

Net cash used in investing activities for the 13 weeks ended January 2, 2021 and December 28, 2019 was $(2,413,000) and $(796,000), respectively, and resulted primarily from purchases of fixed assets at existing restaurants and, in the current period, the cash portion of the purchase price of the Blue Moon Fish Company acquisition.

Net cash used in financing activities for the 13 weeks ended January 2, 2021 and December 28, 2019 of $(675,000) and $(1,622,000), respectively, resulted primarily from principal payments on notes payable and in the prior period the payment of dividends and distributions to non-controlling interests.

Cash Flows for 26 Weeks Ended April 3, 2021 and March 28, 2020

Net cash used in operating activities for the 26-weeks ended April 3, 2021 decreased to $(1,644,000) as compared to $2,110,000 provided by operations in the same period of last year.

This decrease was attributable to a decrease in operating income as a result of the impacts of the COVID-19 pandemic on our operations and changes in net working capital primarily related to accounts receivable, inventory and accounts payable and accrued expenses.

Net cash used in investing activities for the 26-weeks ended April 3, 2021 and March 28, 2020 was $(2,926,000) and $(1,769,000), respectively, and resulted primarily from purchases of fixed assets at existing restaurants and, in the current period, the cash portion of the purchase price of the Blue Moon Fish Company acquisition.

Net cash used in financing activities for the 26-weeks ended April 3, 2021 and March 28, 2020 of $(918,000) and $(188,000), respectively, resulted primarily from principal payments on notes payable and in the prior period the payment of dividends, distributions to non-controlling interests partially offset borrowings under our credit facility.

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.

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

On January 26, 2021, the Company exercised its right-of-first-refusal to acquire the land, building and parking lot associated with J B’s on the Beach and immediately contributed such rights and interest to an unrelated entity ("Newco") that purchased the properties on March 22, 2021.

In exchange, the Company expects to receive an interest in Newco, which plans future development of the sites.

In addition, all rights and privileges under the current lease were assigned to Newco, as landlord and the lease terms will remain unchanged.

The Company is still in the process of negotiating the final details of the above with the managing member of Newco.

Our restaurants generally do not achieve substantial increases in revenue from year to year, which we consider to be typical of the restaurant industry.

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Investment in and Receivable from New Meadowlands Racetrack

On March 12, 2013, the Company made a $4,200,000 investment in the New Meadowlands Racetrack LLC (“NMR”) through its purchase of a membership interest in Meadowlands Newmark, LLC, an existing member of NMR.

On November 19, 2013, the Company invested an additional $464,000 in NMR through a purchase of an additional membership interest in Meadowlands Newmark, LLC resulting in a total ownership of 11.6% of Meadowlands Newmark, LLC, and an effective ownership interest in NMR of 7.4%, subject to dilution.

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

The principal and accrued interest related to this note in the amounts of $1,780,000 and $1,766,000 are included in Investment In and Receivable From New Meadowlands Racetrack in the consolidated condensed balance sheets at January 2, 2021 and October 3, 2020, respectively.

The principal and accrued interest related to this note in the amounts of $1,793,000 and $1,766,000 are included in Investment In and Receivable From New Meadowlands Racetrack in the consolidated condensed balance sheets at April 3, 2021 and October 3, 2020, respectively.

On June 7, 2018, the New Jersey State Legislature voted to legalize sports betting at casinos and racetracks in the state.

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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 expect the discontinuation of LIBOR as a reference rate in our debt agreements to have a material adverse effect on our financial position or materially affect our interest expense.

As a result of the impacts to our business from the COVID-19 pandemic, on February 15, 2021, BHBM agreed to extend the maturity date of our Revolving Facility including all outstanding borrowings thereunder, in the amount of $9,666,000 (including $6,300,000 which were due on July 31, 2021), to February 17, 2022.

Borrowings under the Revolving Facility, which include the promissory notes as discussed in Note 8 of the consolidated financial statements, 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.

We do not expect the

discontinuation of LIBOR as a reference rate in our debt agreements to have a material adverse effect on our financial position or materially affect our interest expense.

Borrowings under the Revolving Facility, which include the promissory notes as discussed in Note 8 of the consolidated condensed financial statements, 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.

The Revolving Facility also requires, among other things, that the Company meet minimum quarterly tangible net worth amounts, maintain a minimum fixed charge coverage ratio and meet minimum annual net income amounts.

The Revolving Facility contains customary representations, warranties and affirmative covenants as well as 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.

As of January 2, 2021 and October 3, 2020, borrowings of $9,666,000 were outstanding under the Revolving Facility and had a weighted average interest rate of 3.6% and 3.0%, respectively.

As of April 3, 2021 and October 3, 2020, borrowings of $9,666,000 were outstanding under the Revolving Facility and had a weighted average interest rate of 3.6% and 3.0%, respectively.

As a result of the impacts to our business from the COVID-19 pandemic, on May 11, 2021, BHBM agreed to extend the maturity date of our Revolving Facility including all outstanding borrowings thereunder, in the amount of $9,666,000 to May 19, 2022.

On June 12, 2020 and again on February 15, 2021, as a result of the impact of the COVID-19 pandemic on our business, BHBM agreed to modified financial covenants through fiscal Q2 2022.

The Company was in compliance with all of its financial covenants under the Revolving Facility as of January 2, 2021.

The Company was in compliance with all of its financial covenants under the Revolving Facility as of April 3, 2021.

Paycheck Protection Program Loans

During the year ended October 3, 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.

In addition, during the 13-weeks ended April 3, 2021, one of our consolidated VIEs received a second draw PPP Loan in the amount of $111,000.

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.

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

During the 13 weeks ended April 3, 2021, $4,124,000 of PPP Loans (including $27,000 of accrued interest) were forgiven.

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.

Recent Events

See Note 13 - Subsequent Events to the consolidated condensed financial statements for a description of recent events.

Critical Accounting Policies

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

Although management does not believe that any change in those assumptions in the near term would have a material effect on the Company’s consolidated financial position or the results of operations, differences in actual results could be material to the consolidated condensed financial statements.

Although management does not believe that any change in those assumptions in the near term would have a material effect on the Company’s consolidated condensed financial position or the results of operations, differences in actual results could be material to the consolidated condensed financial statements.

The Company’s critical accounting policies are described in the Company’s Form 10-K for the year ended October 3, 2020.

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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-Q

Item 2. Management’s Discussion and Analysis