FLANIGANS ENTERPRISES INC 10-K

ITEM 2. PROPERTIES . Our operations are conducted primarily on leased property with the exception of the following: (i) a 10,000 square foot stand-alone building located in Fort Lauderdale, Florida that we purchased in December 1999, which since April 2001 has housed our corporate headquarters; (ii) a 4,600 square foot stand-alone building located in Hallandale, Florida that we purchased in July 2006 and which since September 1968 has housed our Hallandale, Florida Company-owned combination restaurant and package liquor store (Store #31); 29 Table of Contents (iii) a 4,120 square foot stand-alone building in Hollywood, Florida we constructed in November 2003, upon real property we acquired in September 2001 pursuant to a 25 year ground lease interest, (a portion of this building is leased to an unaffiliated third party), and which since November 2003 has housed our Hollywood, Florida Company-owned package liquor store (Store #4); (iv) a 4,500 square foot stand-alone building located in Hollywood, Florida that we purchased in October 2009 and which housed our Hollywood, Florida Company-owned combination restaurant and package liquor store (Store #19) from March, 1972 until it was destroyed by fire on October 2, 2018 and the vacant parcel of real property adjacent thereto which we purchased in February 2015; (v) a 4,600 square foot stand-alone building located in Fort Lauderdale, Florida that we purchased in August 2010 and which since December 1968 has housed our Fort Lauderdale, Florida Company-owned restaurant (Store #22); (vi) a 5,100 square foot stand-alone building in North Miami, Florida that we purchased in November 2010; the two parcels of real property adjacent thereto which we purchased in December 2012, one of which is contiguous to the real property and which we previously leased for non-exclusive parking and the vacant parcel of real property adjacent to the two parcels of real property which we purchased in March 2017. The stand-alone building housed our North Miami, Florida Company-owned combination restaurant and package liquor store, (Store #20), from July, 1968 until June 2017 when the package liquor store was re-located to a new building we constructed on the adjacent property; (vii) a 23,678 square foot two building shopping center in Miami, Florida that we purchased in November 2010: (A) one stand-alone building, approximately 18,828 square feet, (i) houses our recently opened (October 2019) new package liquor store and (ii) is otherwise leased to ten unaffiliated third party retailers; and (B) the second stand-alone building, approximately 4,850 square feet, has housed our Kendall, Florida based restaurant since April 4, 2000, which is owned by our affiliated limited partnership (Store #70); (viii) a 6,400 square foot building in Fort Lauderdale, Florida that we purchased in February 2014, 4,000 square feet of which has been leased to a related franchisee (Store #15) since April 1, 1997 and the balance (2,400 square feet) of which we use as storage. In August 2018 we purchased the real property and quadraplex adjacent thereto to insure adequate parking for the franchised restaurant in the future, if needed; (ix) a 6,000 square foot stand-alone building in Fort Lauderdale, Florida and the vacant real property diagonally adjacent that we purchased in October 2015, which we use as office and warehouse space, covered parking for our food truck and as a storage yard; and (x) a 6,900 square foot stand-alone building in Sunrise, Florida, which will house our Sunrise, Florida based restaurant currently being developed, which will be owned by an affiliated limited partnership (Store #85). All of our units require periodic refurbishing in order to remain competitive. We have budgeted $1,000,000 for our refurbishing program for fiscal year 2022. See Item 7, "Liquidity and Capital Resources" for discussion of the amounts spent in fiscal year 2021. 30 Table of Contents The following table summarizes information related to the properties upon which our operations are conducted: Name and Location Approx. Square Footage Seats Franchised/ Owned by Lease Terms Big Daddy's Liquors #4 Flanigan's Enterprises Inc. (5) 7003 Taft Street Hollywood, Florida 1,978 N/A Company 3/1/02 to 2/28/27 Options to 2/28/47 Big Daddy's Liquors #7 Flanigan's Enterprises, Inc. 1550 W. 84th Street Hialeah, Florida 1,450 N/A Company 11/1/00 to 10/31/25 Big Daddy's Liquors #8 Flanigan's Enterprises, Inc. 959 State Road 84 Fort Lauderdale, Florida 4,084 N/A Company 5/1/99 to 4/30/24 Option to 4/30/29 Flanigan’s Seafood Bar and Grill #9 Flanigan’s Enterprises, Inc. 1550 W. 84th Street Hialeah, Florida 4,700 130 Company 1/1/10 to 12/31/24 Options to 12/31/49 Flanigan's Legends Seafood Bar and Grill #11 11 Corporation, Inc. (1) 330 Southern Blvd. W. Palm Beach, Florida 5,000 150 Franchise 1/4/00 to 1/3/25 Flanigan's Seafood Bar and Grill #12 Flanigan’s Enterprises, Inc. 2405 Tenth Ave. North Lake Worth, Florida 5,000 180 Company 11/16/92 to 11/15/23 Options to 11/15/38 Flanigan's Seafood Bar and Grill #14 Big Daddy's #14, Inc. (1) (4) 2041 NE Second St. Deerfield Beach, Florida 3,320 90 Franchise 6/1/79 to 6/1/24 Options to 6/1/34 Flanigan’s Seafood Bar and Grill #15 CIC Investors #15 Ltd. (1) (7) 1479 E. Commercial Blvd. Ft. Lauderdale, Florida 4,000 90 Franchise/ Limited Partnership 1/1/09 to 8/31/26 Options to 8/31/36 31 Table of Contents Name and Location Approx. Square Footage Seats Franchised/ Owned by Lease Terms Flanigan’s Seafood Bar and Grill #18 Twenty Seven Birds Corp. (1) (2) 2721 Bird Avenue Miami, Florida 4,500 200 Franchise 2/15/72 to 12/31/25 Options to 12/31/35 Big Daddy's Liquors #18 Twenty Seven Birds Corp. (1) (2) 2988 S.W. 27 th Avenue Miami, Florida 3,000 N/A Franchise 2/15/72 to 12/31/25 Options to 12/31/35 Flanigan’s Wine & Liquors #19 (8) Flanigan’s Enterprises, Inc. 7990 Davie Road Extension Hollywood, Florida 3,000 N/A Company Company-Owned Flanigan’s Seafood Bar and Grill #19 (8) Flanigan’s Enterprises, Inc. 2505 N. University Dr. Hollywood, Florida 4,500 160 Company Company-Owned Flanigan's Seafood Bar and Grill #20 Flanigan's Enterprises, Inc. 13205 Biscayne Blvd. North Miami, Florida 5,100 150 Company Company-Owned Big Daddy’s Liquors #20 Flanigan's Enterprises, Inc. 13185 Biscayne Blvd. North Miami, Florida 2,500 N/A Company Company-Owned Flanigan's Seafood Bar and Grill #22 Flanigan's Enterprises, Inc. 2600 W. Davie Blvd. Ft. Lauderdale, Florida 4,100 200 Company Company-Owned Big Daddy’s Wine & Liquors #24 Flanigan’s Enterprises, Inc. (11) 11225 Miramar Parkway, #245 Miramar, Florida 2,000 N/A Company 3/5/22 to 3/5/32 Options to 3/5/47 32 Table of Contents Name and Location Approx. Square Footage Seats Franchised/ Owned by Lease Terms Flanigan's Seafood Bar and Grill #31 Flanigan's Enterprises, Inc. 4 N. Federal Highway Hallandale, Florida 4,600 150 Company Company-Owned Flanigan's Seafood Bar and Grill #33 Flanigan’s Enterprises, Inc. 45 S. Federal Highway Boca Raton, Florida 4,620 130 Company 10/1/10 to 6/30/30 Big Daddy's Liquors #34 Flanigan's Enterprises, Inc. 9494 Harding Ave. Surfside, Florida 3,000 N/A Company 5/29/97 to 5/28/22 Options to 5/28/37 Flanigan's Seafood Bar and Grill #40 Flanigan's Enterprises, Inc. 5450 N. State Road 7 N. Lauderdale, Florida 4,600 140 Company Company-Owned Piranha Pat's #43 BD 43 Corporation (1) (2) 2500 E. Atlantic Blvd. Pompano Beach, Florida 4,500 90 Franchise 12/1/72 to 11/30/22 Big Daddy’s Liquors #45 Flanigan’s Enterprises, Inc. 12776 S.W. 88th Street Miami, Florida 3,250 N/A Company 7/1/19 to 6/30/24 Options to 6/30/34 Big Daddy's Liquors #47 Flanigan's Enterprises, Inc. (3) 8600 Biscayne Blvd. Miami, Florida 6,000 N/A Company 12/21/68 to 1/1/30 Options to 1/1/50 Flanigan’s Seafood Bar and Grill #13 CIC Investors #13, Ltd. 11415 S. Dixie Highway Pinecrest, Florida 8,000 200 Limited Partnership 6/01/91 to 1/31/31 Option to 1/31/36 Flanigan’s #25 CIC Investors #25, Ltd. (10) 11225 Miramar Parkway, #250 Miramar, Florida 6,000 200 Limited Partnership 3/5/22 to 3/5/32 Options to 3/5/47 33 Table of Contents Name and Location Approx. Square Footage Seats Franchised/ Owned by Lease Terms Flanigan’s Seafood Bar and Grill #50 CIC Investors #50, Ltd. 17185 Pines Boulevard Pembroke Pines, Florida 4,000 200 Limited Partnership 10/24/06 to 10/23/26 and Options to 10/23/31 Flanigan’s Seafood Bar and Grill #55 CIC Investors #55, Ltd. 2190 S. University Drive Davie, Florida 5,900 200 Limited Partnership 1/5/07 to 12/31/26 Option to 12/31/31 Flanigan’s Seafood Bar and Grill #60 CIC Investors #60 Ltd. 9516 Harding Avenue Surfside, Florida 6,800 200 Limited Partnership 8/1/97 to 12/31/26 Flanigan’s Seafood Bar and Grill #65 CIC Investors #65, Ltd. 2335 State Road 7, Suite 100 Wellington, Florida 6,128 200 Limited Partnership 5/01/05 to 6/30/25 Flanigan's Seafood Bar and Grill #70 CIC Investors #70 Ltd. 12790 SW 88 St. Miami, Florida 4,850 200 Limited Partnership Company-Owned Flanigan’s Seafood Bar and Grill #75 Flanigan’s Enterprises, Inc. 950 S. Federal Highway Stuart, Florida 7,000 200 Company 5/1/10 to 4/30/26 Option to 4/30/31 Flanigan's Seafood Bar and Grill #80 CIC Investors #80 Ltd. 8695 N.W. 12th St Miami, Florida 5,000 165 Limited Partnership 6/15/01 to 2/14/24 Options to 2/14/39 Flanigan's Seafood Bar and Grill #85 CIC Investors #85 Ltd. (9) 14301 W. Sunrise Blvd. Sunrise, Florida 6,900 200 Limited Partnership Company-Owned Flanigan's Seafood Bar and Grill #90 CIC Investors #90 Ltd. 9857 S.W. 40 th Street Miami, Florida 6,400 200 Limited Partnership 4/1/11 to 3/31/31 Option to 3/31/36 34 Table of Contents Name and Location Approx. Square Footage Seats Franchised/ Owned by Lease Terms Flanigan's Seafood Bar and Grill #95 Flanigan’s Enterprises, Inc. 2460 Weston Road Weston, Florida 5,700 235 Company 10/1/17 to 9/30/22 Options to 9/30/32 Flanigan’s Calusa Center, LLC (6) 12750 – 12790 S.W. 88 th Street Miami, Florida 23,700 N/A Company Company-owned shopping center --------------------------------------------- (1) Franchised by Company. (2) Lease assigned to franchisee. (3) In 1974, we sold and assigned the underlying ground lease to unaffiliated third parties and simultaneously subleased it back. We have re-purchased from the unaffiliated third parties and currently own 52% of the underlying ground lease, as well as the sublease agreement. As a result, we pay all rent due under the ground lease, but only 48% of the rent due under the sublease agreement. (4) Effective December 1, 1998, we purchased the Management Agreement to operate the franchised restaurant for the franchisee. (5) Ground lease executed by us on September 25, 2001. We constructed a 4,120 square foot building, of which 1,978 square feet is used by us for the operation of a package liquor store and the other 2,142 square feet is subleased to an unaffiliated third party as retail space. The package liquor store opened for business on November 17, 2003. (6) During the first quarter of our fiscal year 2012, our wholly owned subsidiary, Flanigan’s Calusa Center, LLC, closed on the purchase of a two building shopping center in Miami, Florida, which consists of (i) one stand-alone building which is leased to ten unaffiliated third parties and houses our recently opened (October 2019) package liquor store (approximately 3,250 square feet) and (ii) a second stand-alone building where our limited partnership owned restaurant located at 12790 SW 88 th Street, Miami, Florida, (Store #70), operates. (7) During the second quarter of our fiscal year 2014, we closed on the purchase of the building in Fort Lauderdale, Florida, which is leased to our franchisee owned restaurant located at 1479 E. Commercial Boulevard, Fort Lauderdale, Florida, (Store #15). (8) During the first quarter of our fiscal year 2019, our combination package liquor store and restaurant located at 2505 N. University Drive, Hollywood, Florida (Store #19), was damaged by a fire and was forced to close. While it was initially contemplated that Store #19 would be renovated, because of the damage caused by the fire, we determined that Store #19 should be demolished and rebuilt. As a result, the package liquor store and restaurant has been closed since our first quarter year 2019. Our loss was covered by insurance, including but not limited to business interruption coverage. (9) During the second quarter of our fiscal year 2019, we entered into a lease for this location, which lease was subsequently assigned to a limited partnership. We plan to raise funds to renovate this new location for operation as a “Flanigan’s Seafood Bar and Grill” restaurant using our limited partnership ownership model. The option to purchase was retained by the Company when the lease was assigned to the limited partnership and the option to purchase was exercised by the Company during the second quarter of our fiscal year 2021. 35 Table of Contents (10) During the fourth quarter of our fiscal year 2019, we entered into a lease for this location, which lease was subsequently assigned to a limited partnership. We plan to raise funds to renovate this new location for operation as a “Flanigan’s” restaurant using our limited partnership ownership model. (11) During the fourth quarter of our fiscal year 2019, we entered into a lease for this location. We are developing this new location for operation as a “Big Daddy’s Wine & Liquors” retail package liquor store. Casualty Loss During the first quarter of our fiscal year 2019, our combination package liquor store and restaurant located at 2505 N. University Drive, Hollywood, Florida (Store #19) was damaged by a fire and was forced to close. 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 our fiscal years 2021, 2020 and 2019. Purchase of Real Property 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 rented 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 (Store #40). 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 through 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 the acquisition of the property on December 31, 2020. We paid 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 granted us an option to purchase, (the “Option to Purchase”) the real property and improvements by March 2, 2021 for $4,800,000. 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. During the first quarter of our fiscal year 2021, we exercised the Option to Purchase and during the second quarter of our fiscal year 2021 we closed on the acquisition of the real property located at 14301 W. Sunrise Boulevard, Sunrise, Florida. We financed this acquisition with a loan from an unrelated third party lender in the principal amount of $2.2 million and paid cash for the balance. The mortgage loan accrues interest at the fixed annual rate of 3.65%, is amortized over fifteen (15) years, and requires us to pay monthly payments of principal and interest in the amount of $15,900 with the entire principal balance and all accrued but unpaid interest due in March, 2036. Purchase of 4 COP Liquor License During the third quarter of our fiscal 2021, we purchased a 4 COP quota liquor license, which permits the sale of beer, wine and liquor for on and/or off premise consumption, for Broward County, Florida from an unrelated third party for $192,200. The liquor license is currently inactive, but we intend to use it in connection with the operation of a package liquor store we are developing in Miramar, Florida. 36 Table of Contents Execution of Leases for New Locations Miramar, Florida (“Flanigan’s”) During the fourth quarter of our fiscal year 2019, we entered into a Lease Agreement with a non-affiliated third party, (the “Landlord”), to rent approximately 6,000 square feet of commercial space for a restaurant location in a shopping center at 11225 Miramar Parkway, #250, Miramar, Florida 33024 (Store #25), which shopping center was under construction and where we anticipate opening a new restaurant location. We assigned this 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 are currently selling limited partnership interests to third parties, as well as affiliates of the Company, in order to raise net proceeds in an amount of $4,000,000, which proceeds will be used to build out this potential restaurant location. 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). Any excess amounts advanced by us will be reimbursed to us by the limited partnership without interest. Subsequent to the end of the third quarter of our fiscal year 2021, we received notification from the Landlord that it had completed substantially all of the Landlord’s work under the Lease Agreement and was delivering possession of the leased premises to us. Miramar, Florida (“Big Daddy’s Wine & Liquors”) During the fourth quarter of our fiscal year 2019, we entered into a Lease Agreement with a non-affiliated third party, (the “Landlord”), to rent approximately 2,000 square feet of commercial space for a restaurant location in a shopping center at 11225 Miramar Parkway, #245, Miramar, Florida 33024 (Store #24), which shopping center was under construction and where we anticipate opening a new retail package liquor store. The new package liquor store location will be Company-owned. Subsequent to the end of the third quarter of our fiscal year 2021, we received notification from the Landlord that it had completed substantially all of the Landlord’s work under the Lease Agreement and was delivering possession of the leased premises to us. Extension of Leases for Existing Locations Pinecrest, Florida During the second quarter of our fiscal year 2021, the lease with an unrelated third party for the space located at 11415 S. Dixie Highway, Pinecrest, Florida (Store #13) where a limited partnership owned restaurant operates, was extended through January 31, 2031 with one (1) five (5) year renewal option. The fixed annual rental was reduced by 7½% and the fixed annual rental increases were reduced to 2% from 3% for the first seven (7) years. Otherwise the extended lease is on substantially the same terms and conditions, including fixed annual rental increases and continued percentage rent as existed before the extension. Surfside, Florida During the second quarter of our fiscal year 2021, the lease with an unrelated third party for the space located at 9516 Harding Avenue, Surfside, Florida (Store #60) where a limited partnership owned restaurant operates was extended through December 31, 2026. The fixed annual rental increases were increased from $0.75 per square foot annually to $1.00 per square foot effective January 1, 2022. Otherwise, the extended lease is on substantially the same terms and conditions as existed before the extension. 37 Table of Contents Expansion of Leased Premises; Extension of Lease Miami, Florida During the third quarter of our fiscal year 2021, the lease with an unrelated third party for the space located at 9857 SW 40 th Street, Miami, Florida (Store #90), where a limited partnership owned restaurant, was amended to add approximately 2,100 square feet to the leased premises and extend the term of the lease through March 31, 2031, with one (1) five (5) year renewal option. The fixed annual rental for the expanded leased premises was increased by $5,000 monthly, with fixed annual rental increases. Otherwise, the extended lease is on substantially the same terms and conditions as existed before the expansion and extension. Re-Financing of Existing Mortgage Mortgage on Real Property – North Miami, Florida During the third quarter of our fiscal year 2021, we re-financed with an unrelated third party lender, our mortgage loan encumbering the real property and improvements located at 13105 – 13205 Biscayne Boulevard, North Miami, Florida where our Flanigan’s Seafood Bar and Grill restaurant and Big Daddy’s Liquors retail package liquor store operate (Store #20), increasing the principal amount borrowed from $1.5 million to $4.3 million. We received the net cash proceeds from the refinancing transaction ($2.8 million) shortly after the end of the third quarter of our fiscal year 2021. The re-financed mortgage loan earns interest at the fixed annual rate of 3.63%, is amortized over fifteen (15) years, requires us to pay monthly payments of principal and interest in the amount of $31,129 with the entire principal balance and all accrued interest due in July 2036. We intend to use the excess funds we received from the re-financing of this mortgage loan for working capital purposes. SUBSEQUENT EVENTS Menu Price Increases Subsequent to the end of our fiscal year 2021, we increased menu prices for our food offerings to target an increase to our food revenues of approximately 8.55% annually and menu prices for our bar offerings to target an increase to our bar revenues of approximately 7.68% annually to offset higher food and bar costs and higher overall expenses. Forgiveness of 2 nd PPP Loans Subsequent to the end of our fiscal year 2021, application was made and we received forgiveness of the entire amount of principal and accrued interest on the 2 nd PPP Loans, including the Managed Store. General Liability Insurance; Excess Insurance For the policy year beginning December 30, 2021, 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. 38 Table of Contents Property Insurance; Windstorm Insurance; Deductibles For the policy year beginning December 30, 2021, 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 For the policy year commencing December 30, 2021, we financed the premiums on the following property, general liability, excess liability and terrorist policies, totaling approximately $2.54 million, which property, general liability, excess liability and terrorist insurance includes coverage for our franchises which are not included in our consolidated financial statements: (i) For the policy year beginning December 30, 2021, 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 $467,000; (ii) For the policy year beginning December 30, 2021, 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 $589,000; (iii) For the policy year beginning December 30, 2021, our automobile insurance is a one (1) year policy. The one (1) year automobile insurance premium is in the amount of $194,000; (iv) For the policy year beginning December 30, 2021, our property insurance is a one (1) year policy. The one (1) year property insurance premium is in the amount of $700,000; (v) For the policy year beginning December 30, 2021, our excess liability insurance are two (2) one (1) year policies. The aggregate (1) year excess liability insurance premiums are in the amount of $576,000; (vi) For the policy year beginning December 30, 2021, our terrorist insurance is a one (1) year policy. The one (1) year terrorist insurance premium is in the amount of $8,900; and (vii) For the policy year beginning December 30, 2021, our equipment breakdown insurance is a one (1) year policy. The one (1) year equipment breakdown insurance premium is in the amount of $6,800. Of the $2,542,000 annual premium amounts, which includes coverage for our franchises which are not included in our consolidated financial statements, we financed $2,328,000 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 $215,000. 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.