What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-08-17 compared with 2021-05-18 · 89 added, 97 removed, 143 unchanged (57% of the section changed)

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COVID-19 Pandemic

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 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 COVID-19 pandemic has adversely affected, and is expected to continue to adversely affect, our operations and financial results for the foreseeable future.

As of July 3, 2021, all of our restaurants have re-opened and currently, national, state and local jurisdictions have removed their capacity restrictions on businesses and therefore our restaurants are serving customers in our dining rooms without social distancing requirements.

However, we cannot predict 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.

It is possible additional outbreaks could require us to reduce our capacity, implement social distancing or further suspend our in-restaurant dining operations, and there is no guarantee that state and local jurisdictions, that have currently eased restrictions, will not reverse or roll-back the restrictions, as many have done in the past.

Additionally, our restaurant operations have been and could continue to be disrupted by employee staffing issues because of illness, fear of contracting COVID-19 or caring for family members due to COVID-19, or for other reasons.

Furthermore, we remain in regular contact with our major suppliers and while to date we have not experienced significant disruptions in our supply chain due to COVID-19, we could see significant future disruptions should the impacts of COVID-19 extend for a considerable amount of time.

As a result of the COVID-19 pandemic, the Company experienced a significant negative impact on its revenues, results of operations and cash flows, and has a working capital deficiency of $(2,134,000) as of July 3, 2021.

However, 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 through August 18, 2022.

As of July 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 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.

The consolidated condensed statements of operations for the 13 and 39 weeks ended July 3, 2021 include revenues and income of approximately $2,141,000 and $4,582,000 and $432,000 and $887,000, 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 April 3, 2021 and March 28, 2020 each included 13 and 26 weeks.

The periods ended July 3, 2021 and June 27, 2020 each included 13 and 39 weeks.

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

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Results of Operations

The Company’s 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:

The Company’s operating income for the 13 weeks ended July 3, 2021 was $5,113,000, as compared to an operating loss of $(5,623,000) for the 13 weeks ended June 27, 2020.

This increase resulted primarily from the strong performance of our Florida, Alabama and Las Vegas operations in the current period combined with the fact that all of our properties were closed for the majority of the prior period and operated at limited capacity when they reopened as a result of government mandates in connection with the COVID-19 pandemic.

The Company’s operating income for the 39 weeks ended July 3, 2021 was $309,000, as compared to an operating loss of $(5,123,000) for the 39 weeks ended June 27, 2020.

This increase also resulted primarily from the strong performance of our Florida, Alabama and Las Vegas operations in the current quarter combined with the fact that all of our properties were closed for the majority of the third quarter of the prior fiscal year and operated at limited capacity when they reopened as a result of government mandates in connection with the COVID-19 pandemic.

The following table summarizes the significant components of the Company’s operating results for the 13- and 39-week periods ended July 3, 2021 and June 27, 2020:

13 Weeks Ended Variance 39 Weeks Ended Variance

2021 March 28,

2020 $ % April 3,

2021 March 28,

2021 June 27,

2020 $ % July 3,

2021 June 27,

(in thousands) (in thousands)

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2,802 2,437 365 15.0 % 7,625 7,888 (263) -3.3 %

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

Loss on termination of lease — — — — % — 364 (364) -100.0 %

Depreciation and amortization 1,082 981 101 10.3 % 3,045 3,188 (143) -4.5 %

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OPERATING INCOME (LOSS) $ 5,113 $ (5,623) $ 10,736 190.9 % $ 309 $ (5,123) $ 5,432 106.0 %

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.

During the 13-week period ended July 3, 2021, revenues increased 496.8% as compared to revenues in the 13-week period ended June 27, 2020.

This increase resulted primarily from all of our properties operating with no capacity restrictions in the current period combined with the fact that all of our properties were closed for the majority of the prior period and operated at limited capacity when they reopened as a result of government mandates in connection with the COVID-19 pandemic.

Food and Beverage Same-Store Sales

On a Company-wide basis, same-store sales decreased 25.4% during the first fiscal quarter of 2021 as compared to the same period last year as follows:

On a Company-wide basis, same-store sales increased 455.0% during the third fiscal quarter of 2021 as compared to the same period last year as follows:

13 Weeks Ended Variance

2021 March 28,

2021 June 27,

(in thousands)

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3,192 166 3,026 1,822.9 %

Atlantic City, NJ 257 512 (255) -49.8 %

Connecticut 103 402 (299) -74.4 %

Atlantic City, NJ 554 — 554 N/A

Connecticut 103 — 103 N/A

Alabama 5,073 2,436 2,637 108.3 %

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Food and beverage sales $ 42,137 $ 6,907

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.

The increases in same-store sales for the 13-week period ended July 3, 2021 as compared to the same period of the prior year are the result of all of our properties operating with no capacity restrictions in the current period combined with the fact that all of our properties were closed for the majority of the prior period and operated at limited capacity when they reopened as a result of government mandates in connection with the COVID-19 pandemic.

Costs and Expenses

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

Costs and expenses for the 13- and 39-weeks ended July 3, 2021 and June 27, 2020 were as follows (in thousands):

13 Weeks Ended

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General and administrative expenses 2,802 6.5 % 2,437 33.9 % 365 15.0 % 7,625 8.6 % 7,888 9.3 % (263) -3.3 %

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

Loss on termination of lease — — % — — % — — % — — % 364 0.4 % (364) -100.0 %

Depreciation and amortization 1,082 2.5 % 981 13.6 % 101 10.3 % 3,045 3.4 % 3,188 3.8 % (143) -4.5 %

Total costs and expenses $ 37,852 $ 12,822 $ 25,030 $ 88,722 $ 89,839 $ (1,117)

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.

Food and beverage costs as a percentage of total revenues for the 13- and 39-weeks ended July 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- and 39-weeks ended July 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.

Occupancy expenses as a percentage of total revenues for the 13- and 39-weeks ended July 3, 2021 decreased as compared with the same period of last year primarily as a result of the fixed nature of many of these expenses and lower sales in the prior period as a result of the COVID-19 pandemic.

Other operating costs and expenses as a percentage of total revenues for the 13- and 39-weeks ended July 3, 2021 as compared to the same period of last year decreased primarily as a result of the fixed nature of some of these expenses and lower sales in the prior period as a result of the COVID-19 pandemic, decreased maintenance at properties where we are experiencing lower traffic and 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-weeks ended July 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.

General and administrative expenses for the 39-weeks ended July 3, 2021 decreased as compared with the same period of last year primarily as a result of lower legal fees in the current period partially offset by 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 July 3, 2021 increased 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 39-weeks ended July 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.

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.

In addition, the tax effects of unusual or infrequently occurring items including changes in judgment 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.

During the 13 and 39-weeks ended July 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.

The income recorded for financial reporting purposes was considered an unusual or infrequent event and the tax effect was recorded discretely in the quarter in which the loans were forgiven.

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 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.

The provision for income taxes for the 13-week period ended July 3, 2021 was $4,684,000.

The effective tax rate for the 13-week period ended July 3, 2021 of 58.5% differed from the statutory rate of 21% primarily related to changes in the annual effective tax rate as a result of updated forecasts of pre-tax earnings coupled with a discrete tax benefit attributable to the income related to the PPP loan forgiveness which is not taxable for income tax reporting purposes.

The income tax benefit for the 39-week period ended July 3, 2021 was $(155,000).

The effective tax rate for the 39-week period ended July 3, 2021 of -2.31% 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 income tax reporting purposes.

The income tax benefit for the 13- and 39-week periods ended June 27, 2020 was ($3,118,000) and $(3,213,000), respectively.

The effective tax rate for the 13 and 39-week periods ended June 27, 2020 of 52.3% and 53.1%, respectively, 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 fiscal 2020 net operating losses to prior years when the tax rate was 34%.

additional forgiveness of PPP loans 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.

The final annual tax rate cannot be determined until the end of the fiscal year;

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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 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 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.

As of July 3, 2021, we had a cash and cash equivalents balance of $18,280,000.

The Company had a working capital deficiency of $(2,134,000) at July 3, 2021 as compared with a deficiency of $(3,234,000) at October 3, 2020.

This increase resulted primarily from cash provided by operations offset by a change in our debt maturities in connection with conversion of our revolving credit borrowings to term loans.

We believe that our existing cash balances and current banking facilities 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.

Due to the rapid development and fluidity of the COVID-19 pandemic, management cannot determine the ultimate impact that it 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 COVID-19 pandemic has adversely affected, and may continue to adversely affect, our operations and financial results for the foreseeable future.

Due to the fluidity of the COVID-19 pandemic, management cannot determine the ultimate impact that it 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, 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.

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 condition, future results of operations and liquidity.

If these disruptions were to re-occur, they could have a material negative impact on our consolidated financial condition, future results of operations and liquidity.

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

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.

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

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

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

taxation 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.

Cash Flows for 39 Weeks Ended July 3, 2021 and June 27, 2020

Net cash provided by operating activities for the 39-weeks ended July 3, 2021 increased to $6,648,000 as compared to $(2,510,000) used in operations in the same period of last year.

This increase was attributable to an increase in operating income as a result of the continued recovery from the COVID-19 pandemic and changes in net working capital primarily related to accounts receivable, inventory and accounts payable and accrued expenses.

Net cash used in investing activities for the 39-weeks ended July 3, 2021 and June 27, 2020 was $(3,455,000) and $(1,986,000), 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 39-weeks ended July 3, 2021 of $(1,799,000) resulted primarily from principal payments on notes payable and the payment of distributions to non-controlling interests partially offset by proceeds from stock option exercises.

Net cash provided by financing activities for the 39-weeks ended June 27, 2020 of $18,044,000 resulted primarily from borrowings under our credit facility and proceeds from PPP loans partially offset by principal payments on notes payable and the payment of dividends.

Recent Restaurant Expansions and Other Developments

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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.

On January 26, 2021, the Company exercised its right-of-first-refusal to acquire the land, building and parking lot associated with JB’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 received a 5% interest in Newco, as defined, 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 remain unchanged.

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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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 with a then 63.7% ownership interest.

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.

In 2015, the Company invested an additional $222,000 in NMR with no change in ownership.

In February 2017, the Company funded its proportionate share ($222,000) of a $3,000,000 capital call bringing its total investment to $5,108,000 with no change in ownership.

On November 19, 2013, the Company invested an additional $464,000 in NMR through the 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.

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

In addition to the Company’s ownership interest in NMR, if casino gaming is approved at the Meadowlands and NMR is granted the right to conduct said gaming, the Company shall be granted the exclusive right to operate the food and beverage concessions in the gaming facility with the exception of one restaurant.

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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 $1,793,000 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.

The principal and accrued interest related to this note in the amounts of $1,807,000 and $1,766,000 are included in Investment In and Receivable from New Meadowlands Racetrack in the consolidated condensed balance sheets at July 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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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 October 3, 2021.

(“BHBM”), by entering into an amended and restated credit agreement (the “Revolving Facility”), which was to mature on May 19, 2022 (as extended).

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.

On July 26, 2021, all outstanding Revolver Borrowings, in the amount of $9,666,000, were converted to a promissory note with quarterly principal payments of $500,000 commencing on September 1, 2021, with a balloon payment of $2,166,000 on June 1, 2025.

Such note bears interest at LIBOR plus 3.5% per annum.

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.

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.

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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 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 April 3, 2021.

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

Paycheck Protection Program Loans

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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”).

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.

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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.

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.

While the Company and each Borrower used the PPP Loan proceeds exclusively for Qualifying Expenses, it is unclear and uncertain whether the conditions for forgiveness of the PPP Loans outstanding at July 3, 2021 will be met under the current guidelines of the CARES Act.

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

During the 13 and 39 weeks ended July 3, 2021, $3,195,000 (including $36,000 of accrued interest) and $7,318,000 of PPP Loans (including $63,000 of accrued interest), respectively, were forgiven.

To the extent, if any, that any of the remaining 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.

Recent Events

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

On August 3, 2021, New York City became the first U.S.

city to require proof of at least one dose of a COVID-19 vaccine for a variety of activities for workers and customers, including indoor dining.

The requirements are effective starting on August 16, 2021 with enforcement to begin on September 13, 2021.

As a result of these new requirements, the Company temporarily closed Clyde Frazier's Wine & Dine on August 8, 2021.

Critical Accounting Policies

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What changed 10-Q

Item 2. Management’s Discussion and Analysis