What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2021-01-15 compared with 2019-12-20 · 825 added, 690 removed, 783 unchanged (66% of the section changed)

CONTROLS AND PROCEDURES .

Evaluation of Disclosure Controls and

Based on evaluations as of the end of the period covered by this report, our Chief Executive Officer and Chief Financial Officer,

with the participation of our management team, have concluded that our disclosure controls and procedures (as defined in Rules

13a-15(e) and 15d-15(e) to the Securities Exchange Act of 1934, as amended (the "Exchange Act")) were effective to ensure that

information the Company is required to disclose in reports that it files or submits under the Securities Exchange Act is accumulated

and communicated to management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure

and is recorded, processed, summarized, and reported within the time periods specified in the SEC's rules and forms.

Evaluation of Disclosure Controls and Procedures

Based on evaluations as

of the end of the period covered by this report, our Chief Executive Officer and Chief Financial Officer, with the participation

of our management team, have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e)

to the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) were effective to ensure that information

the Company is required to disclose in reports that it files or submits under the Securities Exchange Act is accumulated and communicated

to management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure and is recorded,

processed, summarized, and reported within the time periods specified in the SEC’s rules and forms.

Management’s Assessment on Internal

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Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the Company's internal control over financial

This evaluation was based on criteria established in Internal Control - Integrated Framework issued by the Committee

of Sponsoring Organizations of the Treadway Commission in 2013 ("COSO").

Based on that evaluation, our Chief Executive Officer

and Chief Financial Officer have concluded that as of September 28, 2019, our internal control over financial reporting was effective.

This evaluation was based on criteria established in Internal Control –

Integrated Framework issued

by the Committee of Sponsoring Organizations of the Treadway Commission in 2013 (“COSO”).

Based on that evaluation, our

Chief Executive Officer and Chief Financial Officer have concluded that as of October 3, 2020, our internal control over financial

reporting was effective.

Limitations on the Effectiveness of Controls

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to rules of the SEC that permit us to provide only management’s report in this Annual Report on Form 10-K.

Changes in Internal Control Over Financial

During the second quarter

of our fiscal year 2019, based upon information contained in an email we received which we later became aware was fraudulent, we

erroneously sent amounts via wire transfer to an incorrect recipient.

We were able to retrieve the funds, however, and did not

incur any financial loss.

This occurred because of a lack of controls which allowed for the incorrect wire transfer information

to be processed and a wire transfer to be sent to an incorrect recipient.

We analyzed our internal procedures regarding wire transfers

and adopted new procedures designed to mitigate our exposure to material weaknesses resulting from fraudulent wire transfer transactions,

including, confirming all wire transfer recipient addresses via telephone and other means, requiring written and verbal approval

of any changes to existing wire transfer information and intermittent prophylactic testing of wire transfers.

As of September 28,

2019, we remediated our exposure to material weaknesses resulting from fraudulent wire transfer transactions, but otherwise did

not make any change to our internal control over financial reporting that has materially affected, or is likely to materially affect,

our internal control over financial reporting.

OTHER INFORMATION.

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with the Securities and Exchange Commission no later than 120 days from the end of our 2020 fiscal year.

SECURITY OWNERSHIP OF CERTAIN

BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The information required

by Item 12 is incorporated by reference to our Proxy Statement for our 2020 Annual Meeting of Shareholders, which will be filed

with the Securities and Exchange Commission no later than 120 days from the end of our 2019 fiscal year.

CERTAIN RELATIONSHIPS AND RELATED

TRANSACTIONS AND DIRECTOR INDEPENDENCE.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

The information required by Item 12 is incorporated

by reference to our Proxy Statement for our 2021 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange

Commission no later than 120 days from the end of our 2020 fiscal year.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE.

The information required

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with the Securities and Exchange Commission no later than 120 days from the end of our 2020 fiscal year.

PRINCIPAL ACCOUNTANT FEES AND

PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information required

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with the Securities and Exchange Commission no later than 120 days from the end of our 2020 fiscal year.

EXHIBITS AND FINANCIAL STATEMENT

EXHIBITS AND FINANCIAL STATEMENT SCHEDULES .

(a)(1) Financial Statements

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Exhibit Description

Filed Herewith

Plan of Reorganization, Amended Disclosure Statement, Amended Plan of Reorganization, Modification of Amended Plan of Reorganization, Second Modification of Amended Plan of Reorganization, Order Confirming Plan of Reorganization

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as limited partner owning forty eight percent of the limited partnership.

Limited Partnership Agreement of CIC Investors

#90, Ltd., dated January 18, 2012, between Flanigan’s Enterprises, Inc., as General Partner, Flanigan’s Management

Services, Inc.

Limited Partnership Agreement of CIC Investors #90, Ltd., dated January 18, 2012, between Flanigan’s Enterprises, Inc., as General Partner, Flanigan’s Management Services, Inc.

and numerous limited partners, including Flanigan’s Enterprises, Inc.

as limited partner owning five percent

of the limited partnership.

as limited partner owning five percent of the limited partnership.

Registrant's Form 10-K constitutes the Annual

Report to Shareholders for the fiscal year ended September 28, 2019.

Report to Shareholders for the fiscal year ended October 3, 2020.

Company's subsidiaries are set forth in this Annual Report on Form 10-K.

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Compensatory plan or arrangement.

List of XBRL documents as exhibits 101

of XBRL documents as exhibits 101

FORM 10-K SUMMARY

Pursuant to the requirements

of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed

on its behalf by the undersigned thereunto

duly authorized.

of Section 13 or 15(d) of the Securities Exchange Act of 1934 the registrant has duly caused this report to be signed on its behalf

by the undersigned thereunto duly authorized.

FLANIGAN'S ENTERPRISES, INC.

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CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 28, 2019 AND SEPTEMBER 29, 2018

OCTOBER 3, 2020 AND SEPTEMBER 28, 2019

F LANIGAN’S

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Notes to Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING

REPORT OF INDEPENDENT REGISTERED PUBLIC

ACCOUNTING FIRM

To the Shareholders and Board of Directors

Flanigan’s Enterprises, Inc.

Opinion on the Financial

We have audited the accompanying

consolidated balance sheets of Flanigan’s Enterprises, Inc.

and Subsidiaries (the “Company”) as of September

28, 2019 and September 29, 2018, the related consolidated statements of income, stockholders’

equity and cash flows for each

of the 2 years in the period ended September 28, 2019, and the related notes (collectively referred to as the “financial

statements”).

In our opinion, the 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

2 years in the period ended September 28, 2019, in conformity with accounting principles generally accepted in the United States

Opinion on the Financial Statements

We have audited the accompanying consolidated

balance sheets of Flanigan’s Enterprises, Inc.

(the “Company”) as of October 3, 2020 and September 28, 2019,

the related consolidated statements of income, stockholders’

equity and cash flows for each of the two years in the period

ended October 3, 2020 and September 28, 2019, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the 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 cash flows for each of the two years in the period

ended October 3, 2020, in conformity with accounting principles generally accepted in the United States of America.

Adoption of New Accounting Standard

As discussed in Note 1 to the consolidated

financial statements, the Company changed its method of accounting for leases due to the adoption of ASU No.

2016-02, Leases (Topic

842), as amended, effective September 29, 2019, using the modified retrospective approach.

Basis for Opinion

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of the Company's management.

Our responsibility is to express an opinion on the Company's financial statements based on our audit [s] .

Our responsibility is to express an opinion on the Company's financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB")

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As part of our audits, we are required

to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the

effectiveness of the Company's internal control over financial reporting.

to obtain an understanding of internal control over financial reporting but not for expressing an opinion on the effectiveness

of the Company's internal control over financial reporting.

Accordingly, we express no such opinion.

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/s/ Marcum llp

We have served as the Company’s auditor since 1999.

Fort Lauderdale, Florida

December 20, 2019

We have served as the Company’s auditor

Fort Lauderdale, FL

January 15, 2021

F LANIGAN’S ENTERPRISES, INC.

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CONSOLIDATED BALANCE SHEETS

SEPTEMBER 28, 2019 AND SEPTEMBER 29, 2018

OCTOBER 3, 2020 AND SEPTEMBER 28, 2019

(rounded to the nearest thousandth, except share amounts)

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Construction in progress

Investment in Limited Partnership

Right-of-use asset, finance leases

Right-of-use asset, operating leases

Investment in Limited Partnerships

Other Assets:

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Total other assets

$ 112,484,000

LIABILITIES AND STOCKHOLDERS' EQUITY

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Current portion of long-term debt

Finance lease liability, current

Operating lease liability, current

Deferred rent

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Long-Term Debt, Net of Current Portion

Operating lease liability, non current

Total liabilities

Commitments and Contingencies

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Total liabilities and equity

F LANIGAN’S

ENTERPRISES, INC.

$ 112,484,000

F LANIGAN’S ENTERPRISES, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS

Years Ended September 28, 2019 and September 29, 2018

CONSOLIDATED STATEMENTS OF INCOME

Years Ended October 3, 2020 and September 28, 2019

(rounded to the nearest thousandth, except share and per share amounts)

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Income Before Provision for Income Taxes

Provision for Income Taxes

Benefit (Provision) for Income Taxes

Net Income Attributable to Noncontrolling Interests

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

YEARS ENDED SEPTEMBER 28, 2019 AND SEPTEMBER 29, 2018

YEARS ENDED OCTOBER 3, 2020 AND SEPTEMBER 28, 2019

(rounded to nearest

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Balance, September 28, 2019

$ (6,077,000 )

Year Ended September 29, 2018:

Distributions to noncontrolling interests

Dividends paid

Purchase of noncontrolling interests

Balance, October 3, 2020

Balance September 29, 2018:

Year Ended September 28, 2019:

Distributions to noncontrolling interests

Dividends paid

Purchase of noncontrolling interests

Dividends paid

Balance, September 28, 2019

$ (6,077,000 )

F LANIGAN’S ENTERPRISES, INC.

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CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED SEPTEMBER 28, 2019 AND SEPTEMBER 29, 2018

YEARS ENDED OCTOBER 3, 2020 AND SEPTEMBER 28, 2019

(rounded to nearest

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Amortization of leasehold interests

Amortization of operating lease right-of-use asset

Gain/loss on sale/abandonment of property and equipment

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Accounts payable and accrued expenses

Lease liabilities

Due to franchisees

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Distributions from unconsolidated limited partnership

Investment in limited partnership

Net cash and cash equivalents used in investing activities

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Purchase of noncontrolling interests

Net cash and cash equivalents used in financing activities

Net cash and cash equivalents provided by (used in)

financing activities

Net Increase in Cash and Cash Equivalents

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Insurance recovery receivable

Purchase of vehicles in exchange for debt

Construction in progress included in accruals

Finance lease liabilities arising from right-of-use

Operating lease liabilities arising from right-of-use asset

F LANIGAN’S

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED SEPTEMBER 28, 2019 AND SEPTEMBER

YEARS ENDED OCTOBER 3, 2020 AND SEPTEMBER 28,

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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make up the majority of our total revenue.

As of September 28, 2019, we (i) operated 26 units, (excluding the adult entertainment

club that we owned but did not operate and was permanently closed on September 20, 2018 due to local legislation which prohibited

the operation of the club as it was then operated), consisting of restaurants, package liquor stores and combination restaurants/package

liquor stores that we either own or have operational control over and partial ownership in;

and (ii) franchise an additional five

units, consisting of two restaurants, (one of which we operate) and three combination restaurants/package liquor stores.

With the exception of one restaurant we operate

under the name “The Whale’s Rib”, and in which we do not have an ownership interest, all of the restaurants operate

under our service mark “Flanigan’s Seafood Bar and Grill”

and all of the package liquor stores operate under

our service mark “Big Daddy’s Liquors”.

As of October 3, 2020, we (i) operated 27 units consisting of restaurants, package liquor

stores and combination restaurants/package liquor stores that we either own or have operational control over and partial ownership

and (ii) franchise an additional five units, consisting of two restaurants, (one of which we operate) and three combination

restaurants/package liquor stores.

With the exception of one restaurant we operate under the name “The Whale’s Rib”,

and in which we do not have an ownership interest, all of the restaurants operate under our service mark “Flanigan’s

Seafood Bar and Grill”

and all of the package liquor stores operate under our service mark “Big Daddy’s Liquors”.

The Company’s Articles of

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ending the Saturday closest to September 30.

Our fiscal years 2019 and 2018 are each comprised of a 52-week period.

Our fiscal year 2020 is comprised of a 53-week period and our fiscal year 2019 is

comprised of a 52-week period.

Principles of Consolidation

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(loss) attributable to each of the Company and the noncontrolling interests.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Use of Estimates

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We are required

to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets

to make estimates and assumptions that affect the reported amounts of assets and liabilities, the

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Use of Estimates (Continued)

disclosure of contingent assets

and liabilities at the date of the financial statements, and revenue and expenses during the period reported.

These estimates

include assessing the estimated useful lives of tangible assets and the recognition of deferred tax assets and liabilities.

and assumptions are reviewed periodically and the effects of revisions are reflected in our consolidated financial statements in

the period they are determined to be necessary.

Although these estimates are based on our knowledge of current events and actions

we may undertake in the future, they may ultimately differ from actual results.

estimates include assessing the estimated useful lives of tangible assets, the recognition of deferred tax assets and

liabilities and estimates relating to the calculation of incremental borrowing rates and length of leases associated with

right-of-use assets and corresponding liabilities.

Estimates and assumptions are reviewed periodically and the effects of

revisions are reflected in our consolidated financial statements in the period they are determined to be necessary.

these estimates are based on our knowledge of current events and actions we may undertake in the future, they may ultimately

differ from actual results.

Cash and Cash Equivalents

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Property and Equipment

Our property and equipment are stated

We capitalize expenditures for major improvements and depreciation commences when the assets are placed in service.

record depreciation on a straight-line basis over the estimated useful lives of the respective assets.

We charge maintenance and

repairs, which do not improve or extend the life of the respective assets, to expense as incurred.

When we dispose of assets, the

cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in income.

Our estimated useful

lives range from three to five years for vehicles, and three to seven years for furniture and equipment.

improvements are currently being amortized over the shorter of the life of the lease or the life of the asset up to a maximum

Buildings which we own are being depreciated over forty years and our building improvements are being depreciated

over twenty years.

and equipment are stated at cost.

We capitalize expenditures for major improvements and depreciation commences when the assets

are placed in service.

We record depreciation on a straight-line basis over the estimated useful lives of the respective assets.

We charge maintenance and repairs, which do not improve or extend the life of the respective assets, to expense as incurred.

we dispose of assets, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included

Our estimated

useful lives range from three to five years for vehicles and three to seven years for furniture and equipment.

Leasehold improvements

are currently being amortized over the shorter of the life of the lease or the life of the asset up to a maximum of 20 years.

building and building improvements of our corporate offices in Fort Lauderdale, Florida;

our building and building improvements

of our construction office/warehouse in Fort Lauderdale, Florida;

our combination restaurant and package liquor store in Hallandale,

our restaurants in N.

Miami and Fort Lauderdale, Florida;

our package store in N.

Miami, Florida, our shopping center

in Miami, Florida and property in Fort Lauderdale, Florida, all of which we own, are being depreciated over forty years.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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Investment in Limited Partnerships

We use the consolidation method of

accounting when we have a controlling interest in other companies and limited partnerships.

We use the equity method of accounting

when we have an interest between twenty to fifty percent in other companies and limited partnerships, but do not exercise control.

Under the equity method, our original investments are recorded at cost and are adjusted for our share of undistributed earnings

We use the consolidation method

of accounting when we have a controlling interest in other companies and limited partnerships.

We use the equity method of

accounting when we have significant influence and an interest between twenty to fifty percent in other companies and limited

partnerships, but do not exercise control.

Under the equity method, our original investments are recorded at cost and are

adjusted for our share of undistributed earnings or losses.

All significant intercompany profits are eliminated.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

We record revenues from

normal recurring sales upon the sale of food and beverages and the sale of package liquor products.

We report our sales net

of sales tax.

Continuing royalties, which are a percentage of net sales of franchised stores, are accrued as income when

See “Note 16 - Segment Information”

for revenues disaggregated by type as required by ASC Topic 606.

Due to the nature of

our revenue from contracts with customers, the Company does not have material contract assets or liabilities that fall under

the Scope of ASC Topic 606.

Our revenues accounted for under ASC Topic 606, generally, do not require significant estimates

or judgments based on the nature of the Company’s revenue streams.

The sales prices are generally fixed at the point

of sale and all consideration from contracts is included in the transaction price.

The Company’s contracts do not

include multiple performance obligations or material variable consideration.

As new restaurants and package

liquor stores open, our income from operations will be adversely affected due to our obligation to fund.

Pre-opening costs are those

typically associated with the opening of a new restaurant or package liquor store and generally include payroll costs associated

with the new restaurant or package liquor store opening, rent and promotional costs.

Revenue related to food, bar

and package sale are recorded at the point of sale.

Royalty-related revenues, which are 1% of package sales and 3% of

restaurant sales, are recorded as income on a weekly basis, in arrears.

We report our sales net of sales tax.

As new restaurants open, our income

from operations will be adversely affected due to our obligation to fund pre-opening costs are those typically associated with

the opening of a new restaurant and generally include payroll costs associated with the new restaurant opening, rent and promotional

We expense pre-opening costs as incurred.

During our fiscal years 2019 and 2018, we reported none.

Our advertising costs are expensed

Advertising costs incurred during our fiscal years ended September 28, 2019 and September 29, 2018 were approximately

$97,000 and $433,000 respectively.

advertising costs are expensed as incurred.

Advertising costs incurred during our fiscal years ended October 3, 2020 and September

28, 2019 were approximately ($113,000) and $97,000 respectively.

Advertising costs incurred

during our fiscal year ended October 3, 2020 were a credit as a result of lower advertising costs during the fiscal year due to

COVID-19 and advertising allowances.

General Liability Insurance

We have general

liability insurance which incorporates a semi-self-insured plan under which we assume the full risk of the first $50,000 of exposure

per occurrence, while the limited partnerships assume the full risk of the first $10,000 of exposure per occurrence.

liability insurance which incorporates a deductible of $10,000 per occurrence for both us and the limited partnerships.

Our insurance

carrier is responsible for $1,000,000 coverage per occurrence above our self-insured deductible, up to a maximum aggregate of $2,000,000

During our fiscal years ended September 28, 2019 and September 29, 2018, we were able to purchase excess liability insurance,

whereby our excess insurance carrier is responsible for $6,000,000 coverage above our primary general liability insurance coverage.

With the exception of one (1) limited partnership which has higher general liability insurance coverage to comply with the terms

of its lease for the business premises, we are un-insured against liability claims in excess of $7,000,000 per occurrence and in

the aggregate.

carrier is responsible for $1,000,000 coverage per occurrence above our deductible, up to a maximum aggregate of $2,000,000 per

During our fiscal year ended October 3, 2020, we were able to purchase excess liability insurance, whereby our excess insurance

carrier is responsible for $10,000,000 coverage above our primary general liability insurance coverage.

We are un-insured against

liability claims in excess of $11,000,000 per occurrence and in the aggregate.

Our general policy

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Under our current liability insurance policy, any expense incurred by us in defending a claim,

including adjusters and attorney's fees, are a part of our $50,000 or $10,000, as applicable, self-insured retention.

including attorney's fees, are a part of our $10,000 deductible.

Value of Financial Instruments

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all changes in fair value through earnings unless the derivative is determined to be an effective hedge.

We currently have three

We currently have two

derivatives which we have designated as effective hedges (See Note 14).

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tax authority.

We applied these changes to tax positions for our fiscal years ending September 28, 2019 and September 29, 2018.

We had no material unrecognized tax benefits and no adjustments to our financial position, results of operations or cash flows

were required.

Generally, federal, state and local authorities may examine the Company’s tax returns for three years from

the date of filing and the current and prior three years remain subject to examination as of September 28, 2019.

We do not expect

that unrecognized tax benefits will increase within the next twelve months.

We recognize accrued interest and penalties related

to uncertain tax positions as income tax expense.

We applied these changes to tax positions for our fiscal years ending October 3, 2020 and September 28, 2019.

had no material unrecognized tax benefits and no adjustments to our financial position, results of operations or cash flows were

Generally, federal, state and local authorities may examine the Company’s tax returns for three years from the

date of filing and the current and prior three years remain subject to examination as of October 3, 2020.

We do not expect that

unrecognized tax benefits will increase within the next twelve months.

We recognize accrued interest and penalties related to uncertain

tax positions as income tax expense.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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Recently Issued Accounting Pronouncements

May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No.

2014-09, “Revenue

from Contracts with Customers,”

(ASU 2014-09), which requires an entity to recognize the amount of revenue to which

it expects to be entitled for the transfer of promised goods or services to customers.

The new standard was effective for

interim and annual periods in fiscal years beginning after December 15, 2017.

The standard permits the use of either the

retrospective or cumulative effect transition method.

The adoption of this new guidance did not impact our recognition

of sales, rental revenues or royalties from franchisees, nor did it have a material impact on our consolidated

financial statements.

August 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-15 “Classification

of Certain Cash Receipts and Cash Payments”

, which addresses how certain cash receipts and cash payments are presented

and classified in the statement of cash flows under Topic 230, “Statement of Cash Flows”, and other Topics.

new standard was effective for interim and annual periods in fiscal years beginning after December 15, 2017.

of this new guidance did not have a material impact on our consolidated financial statements.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recently Adopted and

Recently Issued Accounting Pronouncements (Continued)

In February 2016, the FASB issued

ASU 2016-02, Leases (Topic 842) .

ASU 2016-02 requires a lessee to recognize on the balance sheet a liability to make lease

payments and a corresponding right-of-use asset for virtually all leases, other than leases with a term of 12 months or less.

update also requires additional disclosures about the amount, timing and uncertainty of cash flows arising from leases.

is effective for annual and interim periods beginning after December 15, 2018, which will require us to adopt these provisions

in the first quarter of our fiscal year 2020.

Early adoption is permitted for financial statements that have not been previously

issued and we intend to adopt these provisions in the first quarter of our fiscal year 2020.

ASU 2016-02 will be applied on a modified

retrospective basis to each prior reporting period presented with various optional practical expedients.

The discounted minimum

remaining rental payments is the starting point for determining the right-of-use asset and lease liability.

The adoption of the

new guidance will have a material impact on our consolidated financial statements as we will be recording material right-of-use

assets and lease liabilities of $27,822,000 each, at the adoption date related to certain of our current equipment, office and

operating leases.

The adoption of this standard will have no impact on our cash flows.

Effective September 29, 2019,

we adopted Accounting Standards Codification 842, Leases (“ASC 842”).

The new guidance requires that lease

arrangements be presented on the lessee’s balance sheet by recording a right-of-use asset and a lease liability equal

to the present value of the related future minimum lease payments.

We adopted the standard in the first quarter of fiscal

2020, using the modified retrospective approach.

Upon adoption, the Company recorded a right-of-use asset of $27.8 million

and a lease liability of $27.8 million.

At October 1, 2020 the Company decreased the operating lease right-of-use asset by

$2.6 million and the operating lease right-of-use liability by $2.6 million with the reclassification of an operating lease

to a finance lease due to the exercise of a purchase option subsequent to the end of our fiscal year 2020.

recorded a finance lease right-of-use asset of $4.8 million and a finance lease liability of $4.8 million.

We elected the transition package

of practical expedients, under which the Company does not have to reassess (1) whether any expired or existing contracts are leases,

or contain leases, (2) the lease classification for any expired or existing leases, and (3) initial direct costs for any existing

In addition, we made an accounting policy election to exclude leases with an initial term of 12 months or less from the

balance sheet.

This standard had a material impact on the Condensed Consolidated Statements of Income due to the escalations of

rent in the extensions but did not have a material impact on the Condensed Consolidated Statement of Cash Flows.

There are no recently issued accounting

pronouncements that we have not yet adopted that we believe will have a material effect on our financial statements.

PROPERTY AND EQUIPMENT

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Less accumulated depreciation and amortization

(34,112,000 )

(31,311,000 )

Construction in progress

Depreciation and amortization expense

for the fiscal years ended September 28, 2019 and September 29, 2018 was approximately $2,919,000 and $2,682,000, respectively.

for the fiscal years ended October 3, 2020 and September 28, 2019 was approximately $3,144,000 and $2,919,000, respectively.

LEASEHOLD INTERESTS

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Less accumulated amortization

Future leasehold amortization as of September 28, 2019

Future leasehold amortization as of October 3, 2020

is as follows:

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In addition to being

a limited partner in these limited partnerships, we are the sole general partner of all of these

a limited partner in these limited partnerships, we are the sole general partner of eight of these

limited partnerships and manage and control the operations of the restaurants except for the restaurant located in Fort Lauderdale,

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by us) is returned in full, the limited partnership distributes to the investors annually out of available cash from the operation

of the restaurant, as a return of capital, up to 25% of the cash invested in the limited partnership, with no management fee paid

Any available cash in excess of the 25% of the cash invested in the limited partnership distributed to the investors annually,

is paid one-half (½) to us as a management fee and one-half (1/2) to the investors (including us) prorata based upon the

investors’

of the restaurant, as a return of capital, up to 25% of the cash invested in the limited

INVESTMENTS IN LIMITED PARTNERSHIPS (Continued)

partnership, with no management fee

Any available cash in excess of the 25% of the cash invested in the limited partnership distributed to the investors

annually, is paid one-half (½) to us as a management fee and one-half (1/2) to the investors (including us) prorata based

upon the investors’

investment, as a return of capital.

Once all of the investors (including us) have received, in full, amounts equal

to their cash invested, an annual management fee becomes payable to us equal to one-half (½) of cash available to be distributed,

with the other one half (½) of available cash distributed to the investors (including us) as a profit distribution, pro-rata

based upon the investors’

of September 28, 2019, all eight (8) limited partnerships where we are the general partner and are eligible to receive a management

fee, have returned all cash invested and we receive an annual management fee equal to one-half (½) of the cash available

for distribution by the limited partnership.

In addition to our receipt of distributable amounts from the limited partnerships,

we receive a fee equal to 3% of gross sales for use of our “Flanigan’s Seafood Bar and Grill”

service mark, which

use is authorized only while we act as general partner.

Once all of the investors (including us) have received, in full,

amounts equal to their cash invested, an annual management fee becomes payable to us equal to one-half (½) of cash available

to be distributed, with the other one half (½) of available cash distributed to the investors (including us) as a profit

distribution, pro-rata based upon the investors’

of October 3, 2020, limited partnerships owning eight (8) restaurants, (Surfside, Florida, Kendall, Florida, West Miami, Florida,

Pinecrest, Florida, Wellington, Florida, Miami, Florida, Pembroke Pines, Florida and Davie, Florida locations), have returned all

cash invested and we receive an annual management fee equal to one-half (½) of the cash available for distribution by the

limited partnership.

In addition to our receipt of distributable amounts from the limited partnerships, we receive a fee

equal to 3% of gross sales for use of our “Flanigan’s Seafood Bar and Grill”

service mark, which use is authorized

only while we act as general partner.

This 3% fee is “earned”

when sales are made by the limited

partnerships and is paid weekly, in arrears.

when sales are made by the limited partnerships and is

paid weekly, in arrears.

We are the sole general partner and

2 unchanged sentences

service mark since March 6, 1998.

33.3% of the remaining limited partnership interest

INVESTMENTS IN LIMITED PARTNERSHIPS (Continued)

Surfside, Florida

is owned by persons who are either

our officers, directors or their family members.

This limited partnership has returned to its investors all of their initial cash

invested and we receive an annual management fee equal to one-half (½) of the cash available for distribution by the limited

33.3% of the remaining limited partnership interest is owned by

persons who are either our officers, directors or their family members.

This limited partnership has returned to its investors

all of their initial cash invested and we receive an annual management fee equal to one-half (½) of the cash available for

distribution by the limited partnership.

This entity is consolidated in the accompanying financial statements.

Kendall, Florida

We are the sole general

partner and a 41% limited partner in this limited partnership which has owned and operated a restaurant in Kendall, Florida

under our “Flanigan’s Seafood Bar and Grill”

We are the sole general partner and

a 41% limited partner in this limited partnership which has owned and operated a restaurant in Kendall, Florida under our “Flanigan’s

Seafood Bar and Grill”

service mark since April 4, 2000.

28.3% of the remaining

limited partnership interest is owned by persons who are either our officers, directors or their family members.

partnership has returned to its investors all of their initial cash invested and we receive an annual management fee equal to

one-half (½) of the cash available for distribution by the limited partnership.

This entity is consolidated in the

accompanying financial statements.

28.3% of the remaining limited partnership interest is owned by

persons who are either our officers, directors or their family members.

This limited partnership has returned to its investors

all of their initial cash invested and we receive an annual management fee equal to one-half (½) of the cash available for

distribution by the limited partnership.

This entity is consolidated in the accompanying financial statements.

West Miami, Florida

6 unchanged sentences

This limited partnership has returned to its investors

all of their initial cash invested and we receive an annual management fee equal to one-half (½) of the cash available for

distribution by the limited partnership.

This entity is consolidated in the accompanying financial statements.

all of their initial cash invested and we

INVESTMENTS IN LIMITED PARTNERSHIPS (Continued)

West Miami, Florida

receive an annual management fee

equal to one-half (½) of the cash available for distribution by the limited partnership.

This entity is consolidated in

the accompanying financial statements.

Wellington, Florida

are the sole general partner and a 28% limited partner in this limited partnership which has owned and operated a restaurant

in Wellington, Florida under our “Flanigan’s Seafood Bar and Grill”

We are the sole general partner

and a 28% limited partner in this limited partnership which has owned and operated a restaurant in Wellington, Florida under our

“Flanigan’s Seafood Bar and Grill”

service mark since May 27, 2005.

22.4% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their

family members.

This limited partnership has returned to its investors all of their initial cash invested and we receive an

annual management fee equal to one-half (½) of the cash available for distribution by the limited partnership.

entity is consolidated in the accompanying financial statements.

22.4% of the remaining limited partnership

interest is owned by persons who are either our officers, directors or their family members.

This limited partnership has returned

to its investors all of their initial cash invested and we receive an annual management fee equal to one-half (½) of the

cash available for distribution by the limited partnership.

This entity is consolidated in the accompanying financial statements.

Pinecrest, Florida

7 unchanged sentences

all of their initial cash invested and we receive an annual management fee equal to one-half (1/2) of the cash available for distribution

INVESTMENTS IN LIMITED PARTNERSHIPS (Continued)

Pinecrest, Florida

by this limited partnership.

1 unchanged sentence

Pembroke Pines, Florida

are the sole general partner and a 24% limited partner in this limited partnership which has owned and operated a restaurant

in Pembroke Pines, Florida under our “Flanigan’s Seafood Bar and Grill”

the sole general partner and a 24% limited partner in this limited partnership which has owned and operated a restaurant in Pembroke

Pines, Florida under our “Flanigan’s Seafood Bar and Grill”

service mark since October 29, 2007.

23.8% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their

family members.

This limited partnership has returned to its investors all of their initial cash invested and we receive an

annual management fee equal to one-half (1/2) of the cash available for distribution by this limited partnership.

is consolidated in the accompanying financial statements.

the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members.

This limited partnership has returned to its investors all of their initial cash invested and we receive an annual management fee

equal to one-half (1/2) of the cash available for distribution by this limited partnership.

This entity is consolidated in the

accompanying financial statements.

Davie, Florida

5 unchanged sentences

partnership interest is owned by persons who are either our officers, directors or their family members.

As of the end of our fiscal

year 2019, this limited partnership has returned to its investors all of their initial cash invested and we receive an annual management

This limited partnership

has returned to its investors all of their initial cash invested and we receive an

INVESTMENTS IN LIMITED PARTNERSHIPS (Continued)

Davie, Florida (continued)

annual management

fee equal to one-half (1/2) of the cash available for distribution by this limited partnership.

10 unchanged sentences

all of their initial cash invested and we receive an annual management fee equal to one-half (½) of the cash available for

by this limited partnership.

entity is consolidated in the accompanying financial statements.

distribution by this limited partnership.

This entity is consolidated in the accompanying financial statements.

During the second quarter of our

fiscal year 2019, we entered into a Lease Agreement (the “Sunrise Lease Agreement”) with a non-affiliated third party

to rent approximately 6,900 square feet of commercial space in Sunrise, Florida where, subject to certain conditions, we anticipate

opening a new restaurant location under our “Flanigan’s Seafood Bar and Grill”

service mark.

During the third

quarter of our fiscal year 2019, we assigned the Sunrise Lease Agreement to a newly formed limited partnership in which we currently

are (i) the sole general partner;

and (ii) our wholly owned subsidiary is the sole limited partner.

While there can be no assurances

that we will be successful in doing so, we intend to sell limited partnership interests to third parties as well as affiliates

of the Company in order to raise net proceeds, in the amount of $5,000,000, which proceeds will be used to renovate this potential

restaurant location.

We anticipate that the new restaurant location’s ownership and operating structure will be substantially

similar to that of our other restaurants owned by limited partnerships.

Fort Lauderdale, Florida

A corporation, owned by a

member of our Board of Directors, acts as sole general partner of a limited partnership which has owned and operated a

restaurant in Fort Lauderdale, Florida under our “Flanigan’s Seafood Bar and Grill”

service mark since

April 1, 1997.

We have a 25% limited partnership interest in this limited partnership.

31.9% of the remaining limited

partnership interest is owned by persons who are either our officers, directors or their family members.

We have a franchise

arrangement with this limited partnership.

For accounting

INVESTMENTS IN LIMITED PARTNERSHIPS (Continued)

Fort Lauderdale,

Florida (continued)

purposes, we do not consolidate the

operations of this limited partnership into our operations.

This entity is reported using the equity method in the accompanying

consolidated financial statements.

The following is a summary of condensed unaudited financial information pertaining to our limited

partnership investment in Fort Lauderdale, Florida:

A corporation, owned by a member

of our Board of Directors, acts as sole general partner of a limited partnership which has owned and operated a restaurant in Fort

Lauderdale, Florida under our “Flanigan’s Seafood Bar and Grill”

service mark since April 1, 1997.

25% limited partnership interest in this limited partnership.

31.9% of the remaining limited partnership interest is owned by persons

who are either our officers, directors or their family members.

We have a franchise arrangement with this limited partnership.

For accounting purposes, we do not consolidate the operations of this limited partnership into our operations.

This entity is reported

using the equity method in the accompanying consolidated financial statements.

The following is a summary of condensed unaudited

financial information pertaining to our limited partnership investment in Fort Lauderdale, Florida:

Financial Position:

6 unchanged sentences

Pompano Beach, Florida

During the second quarter of

our fiscal year 2019, we purchased from an unrelated third party the vacant real property (the “Property”),

located at 2119 S.E.

During the second quarter of our

fiscal year 2019, we purchased from an unrelated third party the vacant real property (the “Property”), located at

9 th Street, Pompano Beach, Florida for $1,300,000 cash at closing.

The Property is adjacent

to property owned by a third party unaffiliated with us and leased to another third party unaffiliated with us for use as a

restaurant (the “Adjacent Property”).

As a condition to closing on the Property, we executed an Option to Lease

Agreement for the Adjacent Property, to lease the Adjacent Property for a 50 year term commencing November 30, 2022.

renovate the building on the Adjacent Property for operation as a “Flanigan’s Seafood Bar and Grill”

The Property is adjacent to property owned

by a third party unaffiliated with us and leased to another third party unaffiliated with us for use as a restaurant (the “Adjacent

Property”).

At closing, we executed an Option to Lease Agreement to lease the Adjacent Property for a 50 year term commencing

in November, 2022.

We will either (i) sublease the building on the Adjacent Property to a related franchisee for operation as a

“Flanigan’s Seafood Bar and Grill”

restaurant and use the Property as parking;

To fund the cash at closing, we used cash on hand.

We plan to raise funds to

renovate this new restaurant location using our limited partnership ownership model.

or (ii) renovate the building

on the Adjacent Property for operation as a “Flanigan’s Seafood Bar and Grill”

restaurant and use the Property

If we renovate this new restaurant location on the Adjacent Property, we plan to raise funds using our limited partnership

ownership model.

EXECUTION OF LEASES FOR NEW LOCATIONS:

Sunrise, Florida

(“Flanigan’s Seafood Bar and Grill”)

During the second quarter of our

fiscal year 2019, we entered into a Lease Agreement (the “Sunrise Lease Agreement”) with a non-affiliated third party

to rent approximately 6,900 square feet of commercial space in Sunrise, Florida where, subject to certain conditions, we anticipate

opening a new restaurant location.

During the third quarter of our fiscal year 2019, we assigned the Sunrise Lease Agreement to

a newly formed limited partnership in which we currently are (i) the sole general partner;

and (ii) our wholly owned subsidiary

is the sole limited partner.

While there can be no assurances that we will be successful in doing so, we intend to sell limited

partnership interests to third parties as well as affiliates of the Company in order to raise net proceeds, in an amount to be

determined, which proceeds will be used to renovate this potential restaurant location.

We anticipate that the new restaurant location’s

ownership and operating structure will be substantially similar to that of our other restaurants owned by limited partnerships.

Any amounts we advance to the limited partnership will be applied as a credit to limited partnership equity in the limited partnership

we may acquire (which equity shall be purchased at the same price and upon the same terms as other equity investors).

not acquire equity in the limited partnership for at least $250,000, any excess amounts advanced by us will be reimbursed to us

by the limited partnership without interest.

Through September 28, 2019, we have advanced $337,000 to the limited partnership.

Miramar, Florida

2 unchanged sentences

year 2019, we entered into a Lease Agreement for a non-affiliated restaurant location in a shopping center in Miramar, Florida.

The shopping center is currently in the developmental stage and the Lease Agreement is contingent upon our approval of the final

We plan to assign the Lease Agreement to a limited partnership in which (i) we will be the sole general partner;

(ii) a wholly owned subsidiary will be the limited partner.

While there can be no assurances that we will be successful in doing

so, we intend to sell limited partnership interests to third parties as well as affiliates of the Company in order to raise net

proceeds, in an amount to be determined, which proceeds will be used to renovate this potential restaurant location.

We anticipate

that the new restaurant location’s ownership and operating structure will be substantially similar to that of our other restaurants

owned by limited partnerships.

Any amounts we advance to the limited partnership will be applied as a credit to limited partnership

equity in the limited partnership we may acquire (which equity shall be purchased at the same price and upon the same terms as

other equity investors).

If we do not acquire equity in the limited partnership for at least $250,000, any excess amounts advanced

by us will be reimbursed to us by the limited partnership without interest.

Through September 28, 2019, we have no advances to

the limited partnership.

The shopping center is currently in the developmental stage and the Lease Agreement is still contingent upon our receipt of delivery

of the leased premises by August 28, 2021.

We plan to assign the Lease Agreement to a limited partnership in which (i) we will

be the sole general partner;

and (ii) a wholly owned subsidiary will be the limited partner.

While there can be no assurances that

we will be successful in doing so, we intend to sell limited partnership interests to third parties as well as affiliates of the

Company in order to raise net proceeds, in an amount to be determined, which proceeds will be used to renovate this potential restaurant

We anticipate that the new restaurant location’s ownership and operating structure will be substantially similar

to that of our other restaurants owned by limited partnerships.

Any amounts we advance to the limited partnership will be applied

as a credit to limited partnership equity in the limited partnership we may acquire (which equity shall be purchased at the same

price and upon the same terms as other equity investors).

If we do not acquire equity in the limited partnership for at least $250,000,

any excess amounts advanced by us will be reimbursed to us by the limited partnership without interest.

Through October 3, 2020,

we have no advances to the limited partnership.

Miramar, Florida

4 unchanged sentences

The shopping center is currently in the developmental

stage and the Lease Agreement is contingent upon our approval of the final site plan.

The new package liquor store location will

be Company owned.

stage and the Lease Agreement is still contingent upon our receipt of delivery of the leased premises by August 28, 2021.

package liquor store location will be Company owned.

MORTGAGE / FINANCED INSURANCE PREMIUMS:

(a) Mortgage on Real

During the first

quarter of our fiscal year 2019, we borrowed the sum of $250,000 from a related third party lender (the “$250,000 Loan”).

The proceeds of the $250,000 Loan are being used as working capital.

Our repayment obligations under the $250,000 Loan are secured

by a first mortgage on our quadraplex located at 1420 N.E.

50th Court, Fort Lauderdale, Florida 33334.

The $250,000 Loan bears

interest at the fixed rate of 4.00% per annum and is amortizable over an eight (8) year period, with our current monthly payment

of principal and interest totaling $3,047.

The entire principal balance and all accrued but unpaid interest are due on November

On November 27, 2019,

our wholly owned subsidiary, Flanigan’s Calusa Center, LLC, re-financed its mortgage loan with an unrelated third party lender,

increasing the principal amount borrowed from $2.72 million to $7.21 million.

The principal balance and all accrued interest of

the mortgage loan that had been outstanding matured November 30, 2019.

The re-financed mortgage loan earns interest at the fixed

annual rate of 3.86%, is amortized over twenty (20) years, requires us to pay monthly payments of principal and interest in the

amount of $43,373 with the entire principal balance and all accrued interest due in November 2026.

We intend to use the excess

funds we received from the re-financing of this mortgage loan (approximately $4.4 million) for working capital.

(b) Financed Insurance

During our fiscal year 2019, we financed

the premiums on the following three (3) property and general liability insurance policies, totaling approximately $1.65 million,

which property and general liability insurance includes coverage for our franchises which are not included in our consolidated

financial statements:

During our fiscal year 2020, we

bound and financed through an unrelated third party lender the premiums on the following property, general liability, excess liability

and terrorism insurance policies:

the policy year beginning December 30, 2019, our general liability insurance, excluding limited partnerships, is a one (1) year

policy with our insurance carriers, including automobile and excess liability coverage.

The one (1) year general liability insurance

premiums, including automobile and excess liability coverage, total, in the aggregate $620,000, of which $494,000 is financed through

an unaffiliated third party lender (the “Third Party Lender”).

The finance agreement obligates us to repay the amounts

financed together with interest at the rate of 3.85% per annum, over 10 months, with monthly payments of principal and interest,

each in the amount of $39,000.

The finance agreement is secured by a first priority security interest in all insurance policies,

all unearned premium, return premiums, dividend payments and loss payments thereof.

policy, including automobile and excess liability coverage.

The annual premium for this insurance coverage is $418,000;

the policy year beginning December 30, 2019, our general liability insurance for our limited partnerships is a one (1) year policy,

with our insurance carriers, including excess liability coverage.

The one (1) year general liability insurance premiums, including

excess liability coverage, total, in the aggregate $521,000, of which $416,000 is financed through the Third Party Lender.

finance agreement obligates us to repay the amounts financed, together with interest at the rate of 3.85% per annum, over 10 months,

with monthly payments of principal and interest, each in the amount of $51,000.

The finance agreement is secured by a first priority

security interest in all insurance policies, all unearned premium, return premiums, dividend payments and loss payments thereof.

the policy year beginning December 30, 2018, our property insurance is a one (1) year policy.

The one (1) year property insurance

premium is in the amount of $506,000, of which $385,000 is financed through the Third Party Lender.

The finance agreement provides

that we are obligated to repay the amounts financed, together with interest at the rate of 3.85% per annum, over 10 months, with

monthly payments of principal and interest, each in the amount of approximately $42,000.

The finance agreement is secured by a

first priority security interest in all insurance policies, all unearned premium, return premiums, dividend payments and loss payments

As of September 28, 2019, the aggregate

principal balance owed from the financing of our property and general liability insurance policies is $208,000.

including excess liability coverage.

The annual premium for this insurance coverage is $459,000;

the policy year beginning December 30, 2019, our property insurance is a one (1) year policy and the annual premium for this insurance

coverage is $561,000 ;

the policy year beginning December 30, 2019, our excess liability insurance is a one (1) year policy and the annual premium for

this insurance coverage is $360,000;

the policy year beginning December 30, 2019, our terrorism insurance is a one (1) year policy and the annual premium for this insurance

coverage is $12,000.

Of the $1,810,000 annual premium

amounts, which includes coverage for our franchises which are not included in our consolidated financial statements, we financed

$1,656,000 through an unaffiliated third party lender.

The finance agreement obligates us to repay the amounts financed together

with interest at the rate of 2.55% per annum, over 11 months, with monthly payments of principal and interest, each in the amount

of $153,000 .

The finance agreement is secured by a first priority security interest in all insurance policies, all unearned

premium, return premiums, dividend payments and loss payments thereof.

As of October 3, 2020, the aggregate

principal balance owed to the third party lender from the financing of our insurance policies is $365,000, excluding amounts which

are reimbursed by our franchises for insurances covering their operations, but including the annual premiums for boiler insurance

($2,000) and directors and officers liability insurance ($34,000), which were added to the finance agreement during the third quarter

of our fiscal year 2020 and are financed over the balance of the term of the same.

During the third quarter of our fiscal

year 2020, we, certain of the entities owning the limited partnership stores (the “LP’s”), franchised stores

(the “Franchisees”), as well as the store we manage but do not own (the “Managed Store”) (collectively,

the “Borrowers”), applied for and received loans from an unrelated third party lender pursuant to the Paycheck Protection

Program (the “PPP”) under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) enacted

March 27, 2020, in the aggregate principal amount of approximately $13.1 million, (the “PPP Loans”), of which approximately:

(i) $5.9 million was loaned to us;

(ii) $4.1 million was loaned to 8 of the LP’s ;

(iii) $2.6 million was loaned to 5 of

the Franchisees;

and (iv) $0.5 million was loaned to the Managed Store.

The PPP Loans to the Franchisees and the Managed Store

are not included in our consolidated financial statements.

The PPP Loans, which are in

the form of Notes issued by each of the Borrowers, mature two years from the date of funding (dates ranging from May 5, 2022

to May 11, 2022) and bear interest at a rate of 1.00% per annum, payable monthly commencing approximately six months from the

date of issuance of the Notes (issuance dates ranging from April 30, 2020 to May 6, 2020).

The Notes may be prepaid by the

applicable Borrower at any time prior to maturity with no prepayment penalties.

Proceeds from the PPP Loans will be available

to the respective Borrower to fund designated expenses, including certain payroll costs, group health care benefits and other

permitted expenses, including rent and interest on mortgages and other debt obligations incurred before February 15, 2020.

Under the terms of the PPP, up to the entire amount of principal and accrued interest may be forgiven to the extent the

proceeds of the PPP Loans are used for qualifying expenses as described in the CARES Act and applicable implementing guidance

issued by the U.S.

Small Business Administration under the PPP.

No assurance can be given that the Borrowers will obtain

forgiveness of the PPP Loans in whole or in part.

With respect to any portion of any

of the PPP Loans that is not forgiven under the terms of the PPP, such amounts will be subject to customary provisions for a loan

of this type, including customary events of default relating to, among other things, payment defaults, breaches of the provisions

of the applicable PPP Note and cross-defaults on any other loan with the Lender or other creditors.

CORONAVIRUS PANDEMIC:

In March 2020, a novel strain of

coronavirus was declared a global pandemic and a National Public Health Emergency.

The novel coronavirus pandemic and related “shelter-in-place”

orders and other governmental mandates relating thereto (collectively, “COVID-19”) adversely affected and will, in

all likelihood continue to adversely affect, our restaurant operations and financial results for the foreseeable future.

COVID-19, from mid-March 2020 through mid-May 2020, we ceased all dining and bar services at all of our restaurants, limiting service

to take-out and delivery only of food, and implemented reduced hours at our retail package liquor stores.

From mid-May 2020 through

the beginning of July 2020, there was a gradual elimination of restrictions on our restaurant operations, permitting us to, among

other things, provide dining for outdoor seating patrons with appropriate social distancing and provide dining for indoor patrons

at up to 50% capacity (depending on the location of the restaurant), but with no bar service and increased operating hours at our

package liquor stores.

From the beginning of July 2020 through the beginning of September 2020, we ceased dine-in service at all

of our Miami-Dade County, Florida restaurants, (two Company-owned and six limited partnership owned restaurants).

Since the beginning

of September 2020, we have been offering both food and bar options at all of our restaurants, including those located in Miami-Dade

County, Florida, with appropriate social distancing and dine-in service at up to 100% capacity, including outdoor dining.

Due to COVID-19, we implemented (i)

certain cost cutting measures including material layoffs at our restaurants and reduced corporate personnel salaries;

a number of changes to our operations such as the establishment of an in-house delivery service and an adjustment to our traditional

staffing model to meet customer demand.

We have been in regular contact with our suppliers and while to date we have not experienced

significant disruptions in our supply chain, we could see future disruptions should the impacts of COVID-19 extend for a considerable

amount of time.

To support our employees, we have implemented work from home support, increased sanitization of high touch, high

traffic areas in our restaurants, retail package liquor stores and corporate offices, provided personal protective equipment for

our employees and increased the frequency of personal hygiene practices.

From March 29, 2020 through May 9, 2020, the salaries

of all our non-executive corporate office personnel were reduced by 20%, the base salaries of our Chief Operating Officer and Chief

Financial Officer were each reduced by 50% and our Chief Executive Officer waived his base salary, representing salary savings

of approximately $135,000 during this period.

Our employee headcount as of fiscal year end 2020 was 1,804 persons reduced from

1,870 persons as of our fiscal year end 2019.

In addition and also due to COVID-19, we did not make any

quarterly distributions to our limited partners for the quarter ended March 31, 2020.

For each of the quarters ended June 30, 2020

and September 30, 2020, we made quarterly distributions to our limited partners equal to one-half (½) of the amounts that

would have been distributed for the quarter ended March 31, 2020.

During the third quarter of fiscal

year end 2020, the United States government passed a $2.0 trillion Coronavirus Aid, Relief and Economic Security Act (“CARES

Act”) designed primarily to help keep businesses running during and after the COVID-19 pandemic.

The CARES Act included provisions

for certain deductions and tax credits, filing deadline extensions, filing payment deadlines and making available certain grant

money to assist businesses.

This CARES ACT allowed us to take advantage of credits, deferments, and deductions, and PPP Loans (described

below) during the third quarter of our fiscal year 2020.

As a result, during the third and fourth quarter of 2020, we reversed

certain of our cost cutting measures, including (i) reinstating employees laid off at our restaurants in anticipation of resuming

dine-in service, (ii) restoring corporate personnel and executive salaries and (iii) paying prior salary reductions.

During the third quarter of our fiscal

year 2020, we, certain of the entities owning the limited partnership stores (the “LP’s”), franchised stores

(the “Franchisees”) as well as the store we manage but do not own (the “Managed Store”), (collectively,

the “Borrowers”), applied for and received loans from an unrelated third party lender pursuant to the Paycheck Protection

Program (the “PPP”) under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) enacted

March 27, 2020, in the aggregate principal amount of approximately $13.1 million, (the “PPP Loans”), of which approximately:

(i) $5.9 million was loaned to us;

(ii) $4.1 million was loaned to 8 of the LP’s;

(iii) $2.6 million was loaned to 5 of the

and (iv) $0.5 million was loaned to the Managed Store.

The PPP Loans to the Franchisees and the Managed Store are

not included in our consolidated financial statements.

Due to our receipt of the PPP Loans, we reversed certain cost cutting measures,

including reinstating employees laid off at our restaurants in anticipation of resuming dine-in service and restoring corporate

personnel salaries.

The PPP Loans, which are in

the form of Notes issued by each of the Borrowers, mature two years from the date of funding (dates ranging from May 5, 2022

to May 11, 2022) and bear interest at a rate of 1.00% per annum, payable monthly commencing approximately six months from the

date of issuance of the Notes (issuance dates ranging from April 30, 2020 to May 6, 2020).

The Notes may be prepaid by the

applicable Borrower at any time prior to maturity with no prepayment penalties.

Proceeds from the PPP Loans have been used

and are available to the respective Borrower to fund designated expenses, including certain payroll costs, group health care

benefits and other permitted expenses, including rent and interest on mortgages and other debt obligations incurred before

February 15, 2020.

Under the terms of the PPP, up to the entire amount of principal and accrued interest may be forgiven to

the extent the proceeds of the PPP Loans are used for qualifying expenses as described in the CARES Act and applicable

implementing guidance issued by the U.S.

Small Business Administration under the PPP.

No assurance can be given that the

Borrowers will obtain forgiveness of the PPP Loans in whole or in part.

With respect to any portion of any

of the PPP Loans that is not forgiven under the terms of the PPP, such amounts will be subject to customary provisions for a loan

of this type, including customary events of default relating to, among other things, payment defaults, breaches of the provisions

of the applicable PPP Note and cross-defaults on any other loan with the Lender or other creditors.

We do not believe COVID-19 has had

a material adverse effect on our access to supplies or labor, although there can be no assurance that there will not be a significant

adverse impact on our supply chain or access to labor in the future.

We are actively monitoring our food suppliers to assess how

they are managing their operations to mitigate supply flow and food safety risks.

To ensure we mitigate potential supply availability

risk, we are building additional inventory back stock levels when appropriate and we have also identified alternative supply sources

in key product categories including but not limited to food, sanitation and safety supplies.

Prior to obtaining the PPP Loans,

we were in compliance with the financial covenants contained in our loans with our unrelated third party institutional lender (the

“Institutional Lender”) under which as of October 3, 2020, we owe in the aggregate, approximately $12,209,000 (the

“Institutional Loans”).

We determined that as of the end of the third quarter of our fiscal year 2020, we were not

in compliance with our financial covenants contained in the Institutional Loans related to the Rent Adjusted Funded Debt to EBITDA

Ratio because our consolidated debt during the third quarter of our fiscal year 2020 increased due to our repayment obligations

under the PPP Loans (the “Covenant Breach’).

Pursuant to the terms of the Institutional Loans, the Covenant Breach,

grants the Institutional Lender the right to exercise certain remedies under the Institutional Loans, including the right to accelerate

the indebtedness owed by us to the Institutional Lender thereunder.

On August 10, 2020, we received a written waiver of the Covenant

Breach from the Institutional Lender, which, among other things, waives the Covenant Breach through June 30, 2021.

As of October

3, 2020, we are in compliance with the financial covenants contained in our loans with our Institutional Lender.

There can be no assurances that we

will be in compliance with our financial covenants thereafter due to, among other things, that our results of operations will likely

continue to be materially impacted by the COVID-19 pandemic.

Absent a waiver, failure to be in compliance with our financial covenants

would constitute a default under the Institutional Loans with our Institutional Lender when reported.

Such a default, if not cured

or waived, would allow the Institutional Lender to accelerate the maturity of the indebtedness we owe under the Institutional Loans,

making it due and payable at the time.

If maturity of the Institutional Loans were accelerated, it would have a material adverse

impact on our consolidated financial statements and results of operations.

CASUALTY LOSS:

4 unchanged sentences

Due to the damage caused by the fire, we determined that Store #19 should be demolished

and rebuilt and as a result, the package liquor store and restaurant were closed for at least our fiscal year 2019.

We have insurance

coverage of $1,975,000, in the aggregate, which our insurance carrier agreed to pay.

We sustained a loss of $1,373,000 on our building

and business personal property, against which we received insurance proceeds of $1,200,000 resulting in a loss of $173,000.

had a gain of $775,000 on our business interruption coverage, which when netted against our loss of $173,000 on our building and

business personal property produced a gain of $602,000.

During the first quarter of our fiscal year 2019, we received an advance

of $600,000 against our insurance recovery and during the second quarter of our fiscal year 2019, we received the balance of our

insurance recovery, less only $132,000 as depreciation against our business personal property until such time as it is replaced.

FLANIGAN’S FISH COMPANY, LLC:

During the fourth quarter of our

fiscal year 2018, we (as a 51% member control person) and a third party unaffiliated with us, experienced in the business of importing

fresh fish into the United States (as a 49% member), formed Flanigan’s Fish Company, LLC, a Florida limited liability company

(“FFC”).

The current purpose of FFC is to acquire and sell only to our restaurants imported fresh fish at competitive

prices to what we are currently paying outside fresh fish purveyors.

Commencing with the third quarter of our fiscal year 2019,

FCC began to supply fish and as of September 28, 2019, FFC supplies certain of the fish to thirteen (13) of our restaurants.

we hold the controlling interest of FFC, the balance sheet and operating results of this entity are consolidated into the accompanying

financial statements of the Company.

All intercompany transactions are eliminated on consolidation.

Sales and purchases of fish

are recognized in restaurant food sales and restaurant and lounges (cost of merchandise sold), respectively, in the consolidated

statements of income at the time of sale to the restaurant.

In addition, the 49% of FFC owned by the unrelated third party is recognized

as noncontrolling interest in our consolidated financial statements.

and rebuilt and as a result, the package liquor store and restaurant were closed for at least our fiscal years 2020 and 2019.

had insurance coverage of $1,975,000, in the aggregate, which our insurance carrier paid.

We sustained a loss of $1,373,000 on

our building and business personal property, against which we received insurance proceeds of $1,200,000 resulting in a loss of

We had a gain of $775,000 on our business interruption coverage, which when netted against our loss of $173,000 on our

building and business personal property produced a gain of $602,000 during our fiscal year 2019.

LIQUOR LICENSES

2 unchanged sentences

The fair value of liquor

licenses at September 28, 2019, exceeded the carrying amount;

licenses at October 3, 2020, exceeded the carrying amount;

therefore, we recognized no impairment loss.

The fair value of the

liquor licenses was evaluated by comparing the carrying value to recent sales for similar liquor licenses in the County issued.

At September 28, 2019 and September 29, 2018, the total carrying amount of our liquor licenses was $630,000.

We acquired no liquor

licenses in our fiscal year 2019.

The fair value of the liquor

licenses was evaluated by comparing the carrying value to recent sales for similar liquor licenses in the County issued.

3, 2020 and September 28, 2019, the total carrying amount of our liquor licenses was $630,000.

We acquired no liquor licenses in

our fiscal year 2020.

The components of our provision for

18 unchanged sentences

The components of our deferred tax

assets at September 28, 2019 and September 29, 2018 were as follows:

assets at October 3, 2020 and September 28, 2019 were as follows:

Reversal of aged payables

4 unchanged sentences

Book/tax differences in property and equipment

Book/tax differences in operating leases

Limited partnership investments

2 unchanged sentences

Long-Term Debt

Mortgage payable to lender, secured by a first mortgage on

real property and improvements, bearing interest at BBA LIBOR –

1 Month +2.25%, (4.339% at September 28, 2019), but

with $2,297,000 of the principal amount fixed at 4.51% pursuant to a swap agreement, amortized over 20 years, payable in

monthly installments of principal and interest of approximately $29,000, and our current monthly payment of principal and

interest as to that portion of the principal amount not fixed by the interest rate swap agreement, ($459,000), is payable at

BBA LIBOR –

1 Month + 2.25% interest rate, (4.339% as of September 28, 2019).

The entire principal balance

and all accrued but unpaid interest matured on November 30, 2019 and was re-financed on November 27, 2019.

Subsequent Events on page 35.

Mortgage payable to unrelated third party, secured by first mortgage on real property and improvements, bearing interest at 7½%, amortized over 20 years, payable in monthly installments of principal and interest of approximately $15,700, with a balloon payment of approximately $1,331,000 in December, 2022.

Mortgage payable to unrelated third party, secured by a first mortgage on real

property and improvements, bearing interest at 3.86%, amortized over twenty (20) years, payable in monthly installments of

principal and interest of approximately $43,000, with a balloon payment of approximately $5,373,000 due on November 27, 2026.

As of October 3, 2020, the net book value of the collateral securing this mortgage was $5,596,000.

Mortgage payable to unrelated third party, secured by first mortgage on real property and improvements, bearing interest at 7½%, amortized over twenty (20) years, payable in monthly installments of principal and interest of approximately $15,700, with a balloon payment of approximately $1,331,000 in December, 2022.

As of October 3, 2020, the net book value of the collateral securing this mortgage was $2,499,000.

Mortgage payable to lender, secured by a first mortgage on real property and improvements, bearing interest at BBA LIBOR –

1 Month +2.25%, (4.296% at September 28, 2019), but with the interest fixed at 4.35% pursuant to a swap agreement, amortized over 20 years, payable in monthly installments of principal and interest of approximately $8,775, with a balloon payment of approximately $858,000 on January 22, 2023.

Revolving credit line/term loan payable to lender,

which entitled the Company to borrow, from time to time through December 28, 2017,

up to $5,500,000, (the “Credit Line”), secured by a blanket lien on all

Company assets, bearing interest through December 28, 2017 at LIBOR –

Floating Rate + 2.25%, (4.390% at September 28, 2019).

Effective December 28,

2017, an interest rate swap agreement requires us to pay interest for a five (5) year

period at a fixed rate of 4.61% on an initial amortizing notional principal amount

of $5,500,000, while receiving interest for the same period at LIBOR, Daily Floating

Rate, plus 2.25%, per annum (4.390% at September 28, 2019) on the same notional

principal amount, with a final payment on December 28, 2022.

On December 21,

2017, we borrowed the remaining $3,500,000 and on December 28, 2017 the entire principal

balance under the Credit Line ($5,500,000) converted to the Term Loan.

1 Month +2.25%, (2.39% at October 3, 2020), but with the interest fixed at 4.35% pursuant to a swap agreement, amortized over twenty (20) years, payable in monthly installments of principal and interest of approximately $8,775, with a balloon payment of approximately $858,000 on January 22, 2023.

As of October 3, 2020, the net book value of the collateral securing this mortgage was $3,516,000.

Revolving credit line/term loan payable to lender, which entitled the Company to borrow, from time to time through December 28, 2017, up to $5,500,000, (the “Credit Line”), secured by a blanket lien on all Company assets, bearing interest through December 28, 2017 at LIBOR –

Daily Floating Rate + 2.25%, (2.39% at October 3, 2020).

Effective December 28, 2017, an interest rate swap agreement requires us to pay interest for a five (5) year period at a fixed rate of 4.61% on an initial amortizing notional principal amount of $5,500,000, while receiving interest for the same period at LIBOR, Daily Floating Rate, plus 2.25%, per annum (2.39% at October 3, 2020) on the same notional principal amount, with a final payment on December 28, 2022.

On December 21, 2017, we borrowed the remaining $3,500,000 and on December 28, 2017 the entire principal balance under the Credit Line ($5,500,000) converted to the Term Loan.

Mortgage payable to lender, secured by a first mortgage on real property and improvements, bearing interest at the fixed rate of 4.65% per annum, fully amortized over fifteen (15) years, payable in monthly installments of principal and interest of approximately $6,384, with a final payment on December 28, 2031.

Mortgage payable to a related party, an entity the owners of which include persons who are either our officers, directors or their family members, secured by first mortgage on real property and improvements, bearing interest at 5%, amortized over 15 years, payable in monthly installments of principal and interest of approximately $5,700, with a balloon payment of approximately $457,000 due in March, 2021.

Re-financed mortgage in the original principal amount of $840,000, payable to lender, secured by a first mortgage on real property and improvements, bearing interest at the fixed rate of 4.65% per annum, fully amortized over fifteen (15) years, payable in monthly installments of principal and interest of approximately $6,519, with a final payment on December 28, 2031.

Mortgage payable to related party, an entity the owners of which include persons who are either our officers, directors or their family members, secured by first mortgage on real property and improvements, bearing interest at 5%, amortized over 15 years, payable in monthly installments of principal and interest of approximately $4,900, with a balloon payment of approximately $391,000 in May, 2021.

Financed insurance premiums, secured by all insurance policies, bearing interest at 3.85% payable in monthly installments of principal and interest in the aggregate amount of $132,000 a month through October 30, 2019.

Mortgage payable to related party, an entity the owners of which include persons who are either our officers, directors or their family members, secured by first mortgage on real property and improvements, bearing interest at 5%, amortized over 15 years, payable in monthly installments of principal and interest of approximately $6,000, with a balloon payment of approximately $476,000 due in April, 2021.

Mortgage payable to related third party, in the original principal amount of $250,000, secured by first mortgage on real property and improvements, bearing interest at 4%, amortized over 8 years, payable in monthly installments of principal and interest of approximately $3,000, with a final payment due in November, 2026.

As of October 3, 2020, the net book value of the collateral securing this mortgage was $843,000.

Mortgage payable to a related party, an entity the owners of which include persons who are either our officers, directors or their family members, secured by first mortgage on real property and improvements, bearing interest at 5%, amortized over fifteen (15) years, payable in monthly installments of principal and interest of approximately $5,700, with a balloon payment of approximately $465,000 due in March, 2021.

As of October 3, 2020, the net book value of the collateral securing this mortgage was $1,549,000.

As of October 3, 2020, the net book value of the collateral securing this mortgage was $946,000.

Mortgage payable to related party, an entity the owners of which include persons who are either our officers, directors or their family members, secured by first mortgage on real property and improvements, bearing interest at 5%, amortized over fifteen (15) years, payable in monthly installments of principal and interest of approximately $4,900, with a balloon payment of approximately $398,000 in May, 2021.

As of October 3, 2020, the net book value of the collateral securing this mortgage was $2,384,000.

Mortgage payable to related party, an entity the owners of which include persons who are either our officers, directors or their family members, secured by first mortgage on real property and improvements, bearing interest at 5%, amortized over fifteen (15) years, payable in monthly installments of principal and interest of approximately $6,000, with a balloon payment of approximately $484,000 due in April, 2021.

As of October 3, 2020, the net book value of the collateral securing this mortgage was $1,599,000.

As of October 3, 2020, the net book value of the collateral securing this mortgage was $1,123,000.

Mortgage payable to related third party, secured by first mortgage on real property and improvements, bearing interest at 4%, amortized over eight (8) years, payable in monthly installments of principal and interest of approximately $3,000, with a final payment due in November, 2026.

As of October 3, 2020, the net book value of the collateral securing this mortgage was $524,000.

Loans from an unrelated third party lender pursuant to the Paycheck

Protection Program (the “PPP”) under the Coronavirus Aid, Relief and Economic Security Act (the “CARES

Act”) enacted March 27, 2020, in the aggregate principal amount of approximately $10.0 million, (the “PPP

Loans”), of which approximately $5.9 million was loaned to us and $4.1 million was loaned to 8 of the limited

partnerships.

The PPP Loans, which are in the form of Notes issued by each of the Borrowers, mature two years from the date

of funding (dates ranging from May 5, 2022 to May 11, 2022) and bear interest at a rate of 1.00% per annum, payable monthly

commencing approximately six months from the date of issuance of the Notes (issuance dates ranging from April 30, 2020 to May

Less unamortized loan costs

1 unchanged sentence

Long-term debt

at September 28, 2019 matures as follows:

at October 3, 2020 matures as follows:

Less unamortized loan costs

As of September 28, 2019, we are in compliance with the covenants

of all loans with our lender.

Prior to obtaining the PPP Loans,

we were in compliance with the financial covenants contained in our loans with our unrelated third party institutional lender (the

“Institutional Lender”) under which as of October 3, 2020, we owe in the aggregate, approximately $12,209,000 (the

“Institutional Loans”).

We determined that as of the end of the third quarter of our fiscal year 2020, we were not

in compliance with our financial covenants contained in the Institutional Loans related to the Rent Adjusted Funded Debt to EBITDA

Ratio because our consolidated debt during the third quarter of our fiscal year 2020 increased due to our repayment obligations

under the PPP Loans (the “Covenant Breach’).

Pursuant to the terms of the Institutional Loans, the Covenant Breach,

grants the Institutional Lender the right to exercise certain remedies under the Institutional Loans, including the right to accelerate

the indebtedness owed by us to the Institutional Lender thereunder.

On August 10, 2020, we received a written waiver of the Covenant

Breach from the Institutional Lender, which, among other things, waives the Covenant Breach through June 30, 2021.

As of October

3, 2020, we are in compliance with the financial covenants contained in our loans with our Institutional Lender.

There can be no assurances that we

will be in compliance with our financial covenants thereafter due to, among other things, that our results of operations will likely

continue to be materially impacted by the COVID-19 pandemic.

Absent a waiver, failure to be in compliance with our financial covenants

would constitute a default under the Institutional Loans with our Institutional Lender when reported.

Such a default, if not cured

or waived, would allow the Institutional Lender to accelerate the maturity of the indebtedness we owe under the Institutional Loans,

making it due and payable at the time.

If maturity of the Institutional Loans were accelerated, it would have a material adverse

impact on our consolidated financial statements and results of operations.

COMMITMENTS, CONTINGENCIES AND OTHER MATTERS

Construction Contracts

13205 Biscayne Boulevard, North Miami,

Florida (Store #20)

On June 14, 2017, we entered into

an agreement with a third party unaffiliated general contractor to renovate our restaurant located at 13205 Biscayne Boulevard,

North Miami, Florida, (Store #20) for a total contract price of $880,000.

The renovations include, but are not limited to the construction

of a new kitchen and the expansion of the restaurant into our former package liquor store location.

During the term of the agreement,

we agreed to change

COMMITMENTS, CONTINGENCIES

AND OTHER MATTERS (Continued)

Construction Contracts (Continued)

orders which had the effect of increasing

the total contract price for the renovations to $1,177,000.

During our fiscal year 2019, the unaffiliated general contractor completed

its work under the agreement and the total contract was paid in full.

During our fiscal year 2018, we entered

into an agreement with a third party unaffiliated general contractor to renovate and add an outdoor patio area to the front of

our restaurant located at 13205 Biscayne Boulevard, North Miami, Florida (Store #20) for a total contract price of $912,000.

the term of the agreement, we agreed to change orders which had the effect of decreasing the total contract price for the renovation

During our fiscal year 2019, the unaffiliated general contractor completed its work under the agreement and the total

contract was paid in full.

Drive, Hollywood, Florida (Store #19)

During our fiscal

year 2018 and prior to its being closed in the first quarter of our fiscal year 2019 due to damages caused by a fire, we entered

into two agreements with a third party unaffiliated general contractor for design and development services for a total contract

price of $127,000 (the “$127,000 Contract”) and $174,000 (the “$174,000 Contract”).

The $127,000 Contract

provided for design and development services for the construction of a new building (the “New Building”) on a parcel

of real property which we own and which is adjacent to the real property where our combination package liquor store and restaurant

located at 2505 N.

University Drive, Hollywood, Florida, (Store #19) operated until it was closed in October 2018 due to damages

caused by a fire.

The $174,000 Contract provided for design and development services for the renovation of the existing building

which housed the combination package liquor store and restaurant until it was closed in October 2018 due to damages caused by a

If we complete the construction of the New Building and as a result of the fire, the rebuild of the existing building, (the

“Rebuilt Building”), we plan to re-locate our package liquor store located at the property to the New Building and

to operate the restaurant located at the property in the Rebuilt Building.

During the term of the $127,000 Contract, we agreed

to change orders which had the effect of increasing the total contract price of the same to $138,000, and during the second quarter

of our fiscal year 2019, we paid the balance of the total contract price of the $127,000 Contract, in the amount of $25,000.

to the end of our fiscal year 2019, we agreed upon changes to the $127,000 Contract for additional design and development services

for the construction of the New Building which had the effect of increasing the total contract price of the same by $10,000 to

$148,000, of which $6,000 has been paid.

During the term of the $174,000 Contract, we also agreed to change orders which had the

effect of increasing the total contract price of the same to $187,000, and during the second quarter of our fiscal year 2019, we

paid $46,000 as the final payment of the contract price of the $174,000 Contract, (of which a total of $157,000 was paid), which

we cancelled during the first quarter of our fiscal year 2019 due to the building being damaged by fire.

During the third

quarter of our fiscal year 2019, we entered into an agreement with a third party unaffiliated architect for design and development

University Drive,

Hollywood, Florida (Store #19)

During the third quarter of

our fiscal year 2019, we entered into an agreement with a third party unaffiliated architect for design and development

services totaling $77,000 for the re-build of our restaurant located at 2505 N.

University Drive, Hollywood, Florida (Store

COMMITMENTS, CONTINGENCIES

AND OTHER MATTERS (Continued)

Construction Contracts (Continued)

which has been closed since October

2018 due to damages caused by a fire.

Additionally, during the third quarter of our fiscal year 2019, we entered into an agreement

with a third party unaffiliated general contractor for site work totaling $1,618,000, (i) to connect the real property where this

restaurant operated (Store #19) to city sewer and (ii) to construct a new building on the adjacent parcel of real property for

the operation of a package liquor store.

As of September 28, 2019, we paid $-0- on account of the contract.

Federal Highway,

Hallandale Beach, Florida (Store #31)

During the first

quarter of our fiscal year 2019, we entered into an agreement with a third party unaffiliated design group for design and development

services for a contract price of $356,000 (the “$356,000 Contract”), providing for design and development services

for the construction of two (2) new buildings on the real property which we own and where our combination package liquor store

and restaurant located at 4 N.

Federal Highway, Hallandale Beach, Florida, (Store #31) operates.

Our plan for the real property

was to (i) demolish the building which currently houses our combination package liquor store and restaurant, (ii) build two new

buildings, one of which will house our package liquor store and the other of which will house our restaurant;

and (iii) enter into

a ground lease with an existing retail tenant for a parcel of land which will not be improved by the two buildings.

second quarter of our fiscal year 2019, we learned that our planned development of Store #31 would cause the loss of too many parking

spaces, so we abandoned our development plans and terminated the $356,000 Contract.

We paid $130,000 on account of the $356,000

Contract and owe no further amounts under it.

#19) which has been closed since October 2018 due to damages caused by a fire, of which $62,000 has been paid.

Additionally,

during the third quarter of our fiscal year 2019, we entered into an agreement with a third party unaffiliated general

contractor for site work at this location totaling $1,618,000, (i) to connect the real property where this restaurant

operated (Store #19) to city sewer and (ii) to construct a new building on the adjacent parcel of real property for the

operation of a package liquor store.

During our fiscal year 2020, we agreed to change orders to the agreement for additional

construction services increasing the total contract price by $112,000 to $1,730,000, of which $-0- has been paid through

October 3, 2020.

Subsequent to the end of our fiscal year 2020, we agreed to additional change orders to the agreement for

additional price by $28,000 to $1,757,000, of which $64,000 has been paid.

Boulevard, Sunrise, Florida (Store #85)

During the third

quarter of our fiscal year 2019, we entered into an agreement with a third party unaffiliated design group for design and development

During the third quarter of our

fiscal year 2019, we entered into an agreement with a third party unaffiliated design group for design and development

services of our new location at 14301 W.

Sunrise Boulevard, Sunrise, Florida 33323 (Store #85) for a total contract price of

of which we paid $77,000 through September 28, 2019.

Subsequent to the end of our fiscal year 2019, we agreed upon changes to the

agreement for additional design and development services which had the effect of increasing the total contract price of the same

by $18,000 to $140,000, of which an additional $19,000 has been paid.

During the first quarter of our fiscal year 2020, we agreed upon changes to the agreement for additional design and

development services which had the effect of increasing the total contract price of the same by $18,000 to $140,000, of which

$106,000 has been paid.

Additionally, during the fourth quarter of our fiscal year 2020, we entered into an agreement with a

third party unaffiliated general contractor for interior renovations at this location totaling $1,236,000, of which $-0- has

been paid through October 3, 2020.

Subsequent to October 3, 2020, $111,000 has been paid.

COMMITMENTS, CONTINGENCIES

AND OTHER MATTERS (Continued)

Our sale of alcoholic

5 unchanged sentences

and adversely affected.

We currently have one “dram shop”

claim which we are defending vigorously.

We currently have no “dram shop”

claims pending.

party to various other claims, legal actions and complaints arising in the ordinary course of our business.

opinion, after consulting with legal counsel, that all such matters are without merit or involve such

COMMITMENTS, CONTINGENCIES

AND OTHER MATTERS (Continued)

Legal Matters (Continued)

amounts that an

unfavorable disposition would not have a material adverse effect on our financial position or results of operations.

We lease a substantial portion

of the land and buildings used in our operations under leases with initial terms expiring between 2020 and 2027.

Renewal options

are available on many of our leases.

Most of our leases are fixed rent agreements.

For one Company-owned restaurant/package liquor

store combination unit, lease rental is subject to sales overrides ranging from 3% to 4% of annual sales in excess of established

For another Company-owned restaurant, lease rental is subject to sales overrides of 7.3% of annual sales in excess of

the base rent paid and another Company-owned restaurant, lease rental is subject to sales overrides of 3.5% of annual sales.

four limited partnership restaurants, lease rentals are subject to sales overrides ranging from 2% to 5.5% of annual sales in excess

of the base rent paid.

We recognize rent expense on a straight line basis over the term of the lease and percentage rent as incurred.

We have a ground lease for an out

parcel in Hollywood, Florida where we constructed a 4,120 square foot stand-alone building, one-half (1/2) of which is used by

us for the operation of our Company-owned package liquor store and the other one-half (1/2) of which is subleased to an unrelated

third party as retail space.

Rent for the retail space commenced January 1, 2005, and we generated approximately $66,000 and $66,000

of revenue from this source during our fiscal years ended September 28, 2019 and September 29, 2018, respectively.

minimum sublease payments under the non-cancelable sublease are $116,000, including Florida sales tax (currently 6.7%) through

December 31, 2020.

Future minimum

lease payments, including Florida sales tax (currently 6.2% to 6.7%) under our non-cancelable operating leases as of

September 28, 2019, excluding future minimum lease payments for Store #45 and Store #70 which are eliminated in consolidation,

are as follows:

Total rent expense for all of our

operating leases was approximately $3,963,000 and $3,805,000 in our fiscal years 2019 and 2018, respectively, and is included in

“Occupancy Costs”

It is our opinion

that all such matters are without merit or involve such amounts that an unfavorable disposition would not have a material

adverse effect on our financial position or results of operations.

To conduct certain

of our operations, we lease restaurant and package liquor store space in South Florida from unrelated third parties.

have remaining lease terms of up to 10 years, some of which include options to renew and extend the lease terms for up to an additional

We presently intend to renew some of the extension options available to us and for purposes of computing the right-of-use

assets and lease liabilities required by ASC 842, we have incorporated into all lease terms which may be extended, an additional

term of the lesser of (i) the amount of years the lease may be extended;

or (ii) 15 years.

Following adoption

of ASC 842, common area maintenance and property taxes are not considered to be lease components.

The components

of lease expense are as follows:

October 3, 2020

Operating Lease Expense, which is included in occupancy costs

Supplemental balance sheet information related to leases as follows:

Classification on the Condensed Consolidated Balance Sheet

October 3, 2020

Finance lease assets

Operating lease assets

Finance current liabilities

Operating current liabilities

Operating lease non-current liabilities

Weighted Average Remaining Lease Term:

Finance leases

Operating leases

Weighted Average Discount:

Finance leases

Operating leases

The following table outlines the minimum future lease

payments for the next five years and thereafter:

For fiscal year

Operating Leases

Finance Leases

Total lease payments (Undiscounted cash flows)

Less imputed interest

Total rent expense

for all of our operating leases was approximately $3,963,000 in our fiscal year 2019 and is included in “Occupancy Costs”

in our accompanying consolidated statements of income.

This total rent expense is comprised of the

The total rent expense is comprised of the following:

Minimum Base Rent

Contingent Percentage Rent

COMMITMENTS, CONTINGENCIES

AND OTHER MATTERS (Continued)

Purchase Commitments

3 unchanged sentences

year 2021 from this vendor at a fixed cost.

While we anticipate purchasing

all of our rib supply from this vendor, we believe that several other alternative vendors are available, if necessary.

While we anticipate purchasing all

of our rib supply from this vendor, we believe that several other alternative vendors are available, if necessary.

During the third quarter of our

fiscal year 2020, we temporarily suspended the operation of the Flanigan’s Fish Company, LLC, a Florida limited

liability company (“FFC”) due to the decrease in demand for imported fresh fish caused by restrictions placed

upon the operation of our restaurants due to COVID-19, relying instead on outside fresh fish purveyors.

The suspension of

operations lasted approximately 5 ½

weeks, after which we resumed operations.

As of October 3, 2020, FFC supplies

certain of the fish to all of our restaurants.

Since we hold the controlling interest of FFC, the balance sheet and operating

results of this entity are consolidated into the accompanying financial statements of the Company, but eliminated upon consolidation.

Sales and purchases of fish are recognized in restaurant food sales and restaurant and lounges (cost of merchandise sold),

respectively, in the consolidated statements of income at the time of sale to the restaurant.

In addition, the 49% of FFC

owned by the unrelated third party is recognized as noncontrolling interest in our consolidated financial statements.

COMMITMENTS, CONTINGENCIES

AND OTHER MATTERS (Continued)

Purchase of Limited Partnership Interests

During our fiscal year 2019, we purchased

from one limited partner (who is not an officer, director or family member of officers or directors) a limited partnership interest

of 0.63% in a limited partnership which owns a restaurant, for a purchase price of $4,800.

During our fiscal year 2018, we purchased

from one limited partner (who is not an officer, director or family member of officers or directors) a limited partnership interest

of 0.21% in a limited partnership which owns a restaurant, for a purchase price of $1,600.

During our fiscal year 2020, we did

not purchase any limited partnership interests.

During our fiscal year 2019, we purchased from one limited partner (who is not

an officer, director or family member of officers or directors) a limited partnership interest of 0.63% in a limited partnership

which owns a restaurant, for a purchase price of $4,800.

Franchise Program

September 28, 2019 and September 29, 2018, we were the franchisor of five units under franchise agreements.

October 3, 2020 and September 28, 2019, we were the franchisor of five units under franchise agreements.

Of the five franchised

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Flanigan’s brother, are each a 35.24% owner of a company which has a franchise

arrangement with us for the operation of a restaurant and package liquor store located in Coconut Grove, Florida (Store #18).

COMMITMENTS, CONTINGENCIES

AND OTHER MATTERS (Continued)

Franchise Program (Continued)

arrangement with us for the operation of a restaurant and adjacent package liquor store located in Coconut Grove, Florida (Store

Flanigan, brother to both James G.

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all revenues and pay all expenses and distributions.

We also, from time to time, advance funds on behalf of the franchisees for

the cost of renovations.

The resulting amounts receivable from and payable to these franchisees are reflected in the accompanying

consolidated balance sheet as either an asset or a liability.

We also agree to sponsor and manage cooperative buying groups on

behalf of the franchisees for the purchase of inventory.

The franchise agreements provide for royalties to us of approximately

3% of gross restaurant sales and 1% of gross package liquor sales.

During our fiscal years 2019 and 2018, we earned royalties of

$751,000 and $707,000, respectively, from our related franchises.

We also, from time to time, advance

COMMITMENTS, CONTINGENCIES

AND OTHER MATTERS (Continued)

Franchise Program (Continued)

funds on behalf of

the franchisees for the cost of renovations.

The resulting amounts receivable from and payable to these franchisees are reflected

in the accompanying consolidated balance sheet as either an asset or a liability.

We also agree to sponsor and manage cooperative

buying groups on behalf of the franchisees for the purchase of inventory.

The franchise agreements provide for royalties to us

of approximately 3% of gross restaurant sales and 1% of gross package liquor sales.

During our fiscal years 2020 and 2019, we earned

royalties of $666,000 and $751,000, respectively, from our related franchises.

We are not currently offering or accepting new franchises.

Agreements/Bonuses

As of September 28, 2019 and September

As of October 3, 2020 and September

28, 2019, we had no employment agreements.

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Bonuses for our fiscal years 2020 and 2019 amounted to approximately $933,000 and $1,444,000, respectively.

COMMITMENTS, CONTINGENCIES

AND OTHER MATTERS (Continued)

Employment Agreements/Bonuses (Continued)

Our Board of Directors also approved

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Management Agreements

Until September 20, 2018, we owned,

but did not operate, an adult entertainment nightclub located in Atlanta, Georgia which operated under the name “Mardi Gras”.

We had a management agreement with an unaffiliated third party to manage the club.

Under our management agreement, the unaffiliated

third party management firm paid us an annual amount, paid monthly, equal to the greater of $150,000 or ten (10%) percent of gross

sales from the club, offset by one-half (1/2) of any rental increases, provided our fees would never be less than $150,000 per

For our fiscal years ended September 28, 2019 and September 29, 2018, we generated $-0- and $138,000 of revenue, respectively,

from the operation of the club.

On September 20, 2018, the adult entertainment club was closed permanently after a federal court

in Georgia upheld recently enacted local legislation which prohibited the operation of the club as it was then operated and we

will no longer receive any revenue under the management agreement.

Beach, Florida

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the management agreement was extended through January 9, 2036.

For the fiscal years ended September 28, 2019 and September 29,

For the fiscal years ended October 3, 2020 and September 28, 2019,

we generated $150,000 and $375,000 of revenue respectively, from providing these management services.

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FINANCIAL INSTRUMENTS

We follow FASB

(ASC) Topic 820, “

Fair Value Measurements and Disclosures ”, for financial assets and liabilities and for non-financial

assets and liabilities that are recognized or disclosed at fair value on at least an annual basis.

Topic 820 defines fair value

as the price that would be received from selling an asset or paid to transfer a liability in an orderly

FAIR VALUE MEASUREMENTS OF FINANCIAL

INSTRUMENTS (Continued)

transaction between

market participants at the measurement date.

When determining the fair value measurements for assets and liabilities required or

permitted to be recorded at fair value, we consider the principal or most advantageous market in which it would transact and consider

assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions

and risk of non-performance.

Topic 820 establishes a fair market hierarchy that requires an entity to maximize the use of observable

inputs and minimize the use of unobservable inputs when measuring fair value.

Topic 820 establishes three levels of inputs that

may be used to measure fair value:

FASB (ASC) Topic 820, “

Fair Value Measurements and Disclosures ”, for financial assets and liabilities and

for non-financial assets and liabilities that are recognized or disclosed at fair value on at least an annual basis.

820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an

orderly transaction between market participants at the measurement date.

When determining the fair value measurements for

assets and liabilities required or permitted to be recorded at fair value, we consider the principal or most advantageous

market in which it would transact and consider assumptions that market participants would use when pricing the asset or

liability, such as inherent risk, transfer restrictions and risk of non-performance.

Topic 820 establishes a fair market

hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when

measuring fair value.

Topic 820 establishes three levels of inputs that may be used to measure fair value:

Level 1 Inputs –

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Interest Rate Swap Agreements

At September 28, 2019, we had three

variable rate debt instruments outstanding that are impacted by changes in interest rates.

The interest rate of all three variable

rate debt instruments is equal to the lender’s LIBOR Rate plus two and one-quarter percent (2.25%) per annum.

At October 3, 2020, we had two variable

rate debt instruments outstanding that are impacted by changes in interest rates.

The interest rate of both variable rate debt

instruments is equal to the lender’s LIBOR Rate plus two and one-quarter percent (2.25%) per annum.

The debt instruments

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successor thereto approved by the lender if the British Bankers Association is no longer making a LIBOR rate available.

2011, we financed our purchase of the real property and two building shopping center in Miami, Florida, with a $4,500,000 mortgage

loan (the “$4.5M Mortgage Loan”).

In January, 2013, we refinanced the mortgage loan encumbering the property where

our combination package liquor store and restaurant located at 4 N.

Federal Highway, Hallandale, Florida, (Store #31) operates,

which mortgage loan is held by an unaffiliated third party lender (the “$1.405M Loan”).

In December, 2016, we closed

on a secured revolving line of credit which entitled us to borrow, from time to time through December 28, 2017, up to $5,500,000

(the “Credit Line”), which on December 28, 2017 converted to the term loan (the “Term Loan”).

As a means of managing our interest

rate risk on these debt instruments, we entered into interest rate swap agreements with our unrelated third party lender to convert

these variable

MEASUREMENTS OF FINANCIAL INSTRUMENTS

2013, we refinanced the mortgage loan encumbering the property where our combination package liquor store and restaurant located

Federal Highway, Hallandale, Florida, (Store #31) operates, which mortgage loan is held by an unaffiliated third party

lender (the “$1.405M Loan”).

In December, 2016, we closed on a secured revolving line of credit which entitled us to

borrow, from time to time through December 28, 2017, up to $5,500,000 (the “Credit Line”), which on December 28, 2017

converted to the term loan (the “Term Loan”).

FAIR VALUE MEASUREMENTS

OF FINANCIAL INSTRUMENTS

Interest Rate Swap

Agreements ( Continued)

rate debt obligations to fixed rates.

We are currently party to the following three (3) interest rate swap agreements:

(i) One (1) interest rate swap

agreement entered into in November, 2011 by our wholly owned subsidiary, Flanigan’s Calusa Center, LLC, relates to the

$4.5 Mortgage Loan (the “$4.5M Mortgage Loan Swap”).

The $4.5M Mortgage Loan Swap requires us to pay interest for

an eight (8) year period at a fixed rate of 4.51% on an initial amortizing notional principal amount of $3,750,000, while

receiving interest for the same period at LIBOR –

1 Month, plus 2.25%, on the same amortizing notional principal

We determined that at September 28, 2019, the interest rate swap agreement is an effective hedging agreement and the

fair value was not material;

As a means of managing our interest

rate risk on these debt instruments, we entered into interest rate swap agreements with our unrelated third party lender to convert

these variable rate debt obligations to fixed rates.

We are currently party to the following two (2) interest rate swap agreements:

(i) One (1) interest rate swap agreement

entered into in January, 2013 relates to the $1.405M Loan (the “$1.405M Term Loan Swap”).

The $1.405M Term Loan Swap

requires us to pay interest for a twenty (20) year period at a fixed rate of 4.35% on an initial amortizing notional principal

amount of $1,405,000, while receiving interest for the same period at LIBOR –

1 Month, plus 2.25%, on the same amortizing

notional principal amount.

We determined that at October 3, 2020, the interest rate swap agreement is an effective hedging agreement

and the fair value was not material;

(ii) The second interest rate swap

agreement entered into in January, 2013 relates to the $1.405M Loan (the “$1.405M Term Loan Swap”).

The $1.405M Term

Loan Swap requires us to pay interest for a twenty (20) year period at a fixed rate of 4.35% on an initial amortizing notional

principal amount of $1,405,000, while receiving interest for the same period at LIBOR –

1 Month, plus 2.25%, on the same

amortizing notional principal amount.

We determined that at September 28, 2019, the interest rate swap agreement is an effective

hedging agreement and the fair value was not material;

(iii) The third interest rate swap

agreement entered into in December, 2016, which becomes effective December 28, 2017, relates to the Credit Line (the “Line

agreement entered into in December, 2016, which became effective December 28, 2017, relates to the Credit Line (the “Line

of Credit Swap”).

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1 Month, plus 2.25%, on the same amortizing notional principal amount.

We determined that at September

We determined that at October

3, 2020, the interest rate swap agreement is an effective hedging agreement and the fair value was not material.

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years 2020 and 2019, we did not purchase any shares of our common stock.

As of September 28, 2019, we still have authority to purchase

As of October 3, 2020, we still have authority to purchase

65,414 shares of our common stock under the discretionary plan approved by the Board of Directors on May 17, 2007.

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not have any operations outside of the United States and transactions between restaurants and package liquor stores are not

BUSINESS SEGMENTS (Continued )

Operating Revenues:

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Income before provision for income taxes

Provision for Income Taxes

Benefit (Provision) for Income Taxes

Net Income Attributable to Noncontrolling Interests

Net Income Attributable to Flanigan’s Enterprises, Inc, Stockholders

Income Attributable to Flanigan’s Enterprises, Inc,

Identifiable Assets:

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Consolidated Totals

$ 112,484,000

Capital Expenditures

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Income from operations

Net income attributable to

Net income per share –

Net income (loss) attributable to stockholders

Net income (loss) per share –

basic and diluted

Weighted average common

stock outstanding –

Weighted average common stock

outstanding –

basic and diluted

Quarter Ended

Income from operations

Net income attributable to

Net income attributable to stockholders

Net income per share –

Weighted average common stock

outstanding –

basic and diluted

Weighted average common

stock outstanding –

Quarterly operating

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contributions of $81,000 and $74,000, respectively.

Subsequent to the end of our fiscal

year 2019, our wholly owned subsidiary, Flanigan’s Calusa Center, LLC, re-financed its mortgage with our unrelated third

party lender, increasing the principal amount from $2.72 million to $7.21 million.

The principal balance and all accrued interest

of our existing mortgage matured November 30, 2019.

The re-financed mortgage earns interest at the fixed annual rate of 3.86%,

is amortized over twenty (20) years, with equal monthly payments of principal and interest each in the amount of $43,373 and the

entire principal balance and all accrued interest due in seven (7) years.

The funds we received from the re-financing of this mortgage

(approximately $4.5 million) will be used as working capital.

The interest rate swap agreement

entered into in November, 2011 by our wholly owned subsidiary, Flanigan’s Calusa Center, LLC, relating to its mortgage with

our unrelated third party lender also matured November 30, 2019 and was not needed as a part of the re-financing.

Except as otherwise

provided herein, subsequent events have been evaluated through the date these consolidated financial statements were issued and

no other events required disclosure.

Menu Price Increases

Effective November 29, 2020 we increased

menu prices for our bar offerings to target an increase to our bar revenues of approximately 1.83% annually and effective December

6, 2020 we increased menu prices for our food offerings to target an increase to our food revenues of approximately 2.45% annually

to offset higher food costs and higher overall expenses.

Prior to these increases, we previously raised menu prices in the third

quarter of our fiscal year 2019.

Exercise of Options to Purchase

North Lauderdale, Florida (“Flanigan’s

Seafood Bar and Grill”/”Big Daddy’s Liquors”)

On October 7, 2014, we entered into

an Amendment to Lease Agreement (the “Lease Amendment”) with a non-affiliated third party from whom we rent approximately

4,600 square feet of commercial space located at 5450 N.

State Road 7, North Lauderdale, Florida where we operate a combination

“Flanigan’s Seafood Bar and Grill”

restaurant and “Big Daddy’s Liquors”

package liquor store

The Lease Amendment extended the term of the Lease Agreement until December 31, 2020 and granted us the option to purchase,

(the “Option to Purchase”), the real property and improvements on December 31, 2020 for $1,200,000.

During the fourth

quarter of our fiscal year 2020 we exercised the Option to Purchase and closed on December 31, 2020.

all cash at closing.

Sunrise, Florida (“Flanigan’s

Seafood Bar and Grill”)

During the second quarter of our

fiscal year 2019, we entered into a Lease Agreement (the “Sunrise Lease Agreement”) with a non-affiliated third party

to rent approximately 6,900 square feet of commercial space located at 14301 W.

Sunrise Boulevard, Sunrise, Florida where, subject

to certain conditions, we anticipate opening a new restaurant location.

The Sunrise Lease Agreement grants us an option to purchase,

(the “Option to Purchase”) the real property and improvements by February 28, 2021.

During the third quarter of our

fiscal year 2019, we assigned the Sunrise Lease Agreement, excluding the Option to Purchase, to a newly formed limited partnership.

Subsequent to the end of our fiscal year 2020, we exercised the Option to Purchase and anticipate closing during the second quarter

of our fiscal year 2021.

We intend to pay all cash at closing.

General Liability Insurance;

Excess Insurance

For the policy

year beginning December 30, 2020, we bound general liability insurance with an unrelated third party insurance carrier which incorporates

a deductible of $10,000 per occurrence for both us and the limited partnerships.

Our insurance carrier is responsible for $1,000,000

coverage per occurrence above our deductible, up to a maximum aggregate of $2,000,000 per year.

We were also able to bind excess

liability insurance at a reasonable premium, whereby our excess insurance carrier is responsible for $10,000,000 coverage above

our primary general liability insurance coverage.

We are uninsured against liability claims in excess of $11,000,000 per occurrence

and in the aggregate.

Certain expenses incurred in defending a claim, including attorney's fees, are a part of our $10,000 deductible.

Property Insurance;

Windstorm Insurance;

For the policy

year beginning December 30, 2020, our property insurance is a one (1) year policy with an unaffiliated third party insurance carrier,

including coverage for properties leased by us and our consolidated limited partnerships, and provides for full insurance coverage

for property losses, including those caused by windstorm, such as a hurricane.

For property losses caused by windstorm, the property

insurance has a fixed deductible of $100,000, plus 5% of all insured losses, per occurrence.

For all other property losses, the

property insurance has deductibles of $10,000 per location, per occurrence.

Financed Insurance Premiums

policy year commencing December 30, 2020, we financed the premiums on the following property, general liability, excess

liability and terrorist policies, totaling approximately $1.94 million, which property, general liability, excess liability

and terrorist insurance includes coverage for our franchises which are not included in our consolidated financial statements:

the policy year beginning December 30, 2020, our general liability insurance, excluding limited partnerships, is a one (1) year

policy with our insurance carriers.

The one (1) year general liability insurance premium is in the amount of $340,000;

the policy year beginning December 30, 2020, our general liability insurance for our limited partnerships is a one (1) year policy

with our insurance carriers.

The one (1) year general liability insurance premium is in the amount of $426,000;

the policy year beginning December 30, 2020, our automobile insurance is a one (1) year policy.

The one (1) year automobile insurance

premium is in the amount of $93,000;

the policy year beginning December 30, 2020, our property insurance is a one (1) year policy.

The one (1) year property insurance

premium is in the amount of $627,000;

the policy year beginning December 30, 2020, our excess liability insurance is a one (1) year policy.

The one (1) year excess liability

insurance premium is in the amount of $443,000;

the policy year beginning December 30, 2020, our terrorist insurance is a one (1) year policy.

The one (1) year terrorist insurance

premium is in the amount of $5,000;

(vii) For the policy year beginning

December 30, 2020, our equipment breakdown insurance is a one (1) year policy.

The one (1) year equipment breakdown insurance premium

is in the amount of $6,000.

Of the $1,940,000

annual premium amounts, which includes coverage for our franchises which are not included in our consolidated financial statements,

we financed $1,776,000 through an unaffiliated third party lender.

The finance agreement obligates us to repay the amounts financed

together with interest at the rate of 2.45% per annum, over 11 months, with monthly payments of principal and interest, each in

the amount of $164,000.

The finance agreement is secured by a first priority security interest in all insurance policies, all

unearned premium, return premiums, dividend payments and loss payments thereof.

Except as otherwise provided herein, subsequent

events have been evaluated through the date these consolidated financial statements were issued and no other events required disclosure.

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