What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-12-27 compared with 2023-12-29 · 250 added, 365 removed, 168 unchanged (79% of the section changed)

11 unchanged sentences

Financial information broken into these two principal industry

segments for the two fiscal years ended September 30, 2023 and October 1, 2022 is set forth in the Consolidated Financial Statements which

are attached hereto.

segments for the two fiscal years ended September 28, 2024 and September 30, 2023 is set forth in the Consolidated Financial Statements

which are attached hereto.

As of September 28, 2024, we (i)

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Owned Units .

We manage and control the operations of the ten restaurants owned by limited partnerships, except the Fort Lauderdale,

Florida restaurant which is managed and controlled by a related franchisee.

Accordingly, the results of operations of all limited partnership

owned restaurants, except the Fort Lauderdale, Florida restaurant are consolidated with our results of operations for accounting purposes.

The results of operations of the Fort Lauderdale, Florida restaurant are accounted for by us utilizing the equity method.

We manage and control the operations of ten of the eleven restaurants owned by limited partnerships, except the Fort

Lauderdale, Florida restaurant which is managed and controlled by a related franchisee.

Accordingly, the results of operations of all

limited partnership owned restaurants, except the Fort Lauderdale, Florida restaurant are consolidated with our results of operations

for accounting purposes.

The results of operations of the Fort Lauderdale, Florida restaurant are accounted for by us utilizing the equity

RESULTS OF OPERATIONS

REVENUES (in thousands):

-----------------------52 Weeks Ended-----------------------

-----------------------For the Fiscal Year Ended-----------------------

September 28, 2024

October 1, 2022

September 30, 2023

(In thousands)

5 unchanged sentences

Rental income

Other operating income

Other revenues

Total Revenue

Comparison of Fiscal Years Ended September 30, 2023 and October 1,

Comparison of Fiscal Years Ended September 28, 2024 and September

revenue for our fiscal year 2024 increased $13,925,000 or 7.98% to $188,321,000 from $174,396,000 for our fiscal year 2023 due primarily

to increased package liquor store and restaurant sales, increased menu prices, revenue generated from the opening of our limited partnership

owned restaurant in Miramar, Florida (Store #25) in April 2023, the operation of our limited partnership owned restaurant in Sunrise,

Florida (Store #85) and the operation of Brendan’s Sports Pub (Store #30) for our entire fiscal year 2023 as opposed to a part of

our fiscal year 2022, the opening of the package liquor store in Hollywood, Florida (Store #19P) in December 2022, the opening of the

package liquor store in Miramar, Florida (Store #24) in March, 2023 and the comparatively less adverse effects of COVID-19 on our operations

for our current fiscal year.

Additionally, effective March 26, 2023 we increased menu prices for our food offerings to target an increase

to our food revenues of approximately 2.06% and effective March 19, 2023 we increased menu prices for our bar offerings to target an increase

to our bar revenues of approximately 5.65% annually, to offset higher food costs and higher overall expenses (collectively the “Recent

Price Increases”).

Prior to these increases, we previously raised menu prices in the first quarter of our fiscal year 2022.

that the Recent Price Increases also contributed to our increased revenues

to increased package liquor store and restaurant sales, increased menu prices, revenue generated from the opening of our corporate owned

restaurant in Hollywood, Florida (Store #19R) in March 2024, the operation of our limited partnership owned restaurant in Miramar, Florida

(Store #25) and our package liquor stores in Miramar, Florida (Store #24) and Hollywood, Florida (Store #19P) for our entire fiscal year

2024 as opposed to a part of our fiscal year 2023.

Effective August 25, 2024, we increased menu prices for our bar offerings to target

an increase to our bar revenues of approximately 5.63% annually to offset higher food and liquor costs.

Effective March 26, 2023 we increased

menu prices for our food offerings to target an increase to our food revenues of approximately 2.06% and effective March 20, 2023 we increased

menu prices for our bar offerings to target an increase to our bar revenues of approximately 5.65% annually, to offset higher food costs

and higher overall expenses (collectively the “Recent Price Increases”).

Prior to these increases, we previously raised menu

prices in the first quarter of our fiscal year 2022.

Restaurant Food Sales .

1 unchanged sentence

year 2024 as compared to $107,238,000 for our fiscal year 2023.

The increase in restaurant food sales for our fiscal year 2023 as compared

to restaurant food sales during our fiscal year 2022 is attributable to the Recent Price Increases, restaurant food sales generated from

the opening of our limited partnership owned restaurant in Miramar, Florida (Store #25) in April 2023, and the operation of our limited

partnership owned restaurant in Sunrise, Florida (Store #85) and the operation of Brendan’s Sports Pub (Store #30) for our entire

fiscal year 2023 as opposed to a part of our fiscal year 2022 and the comparatively greater adverse effects of COVID-19 on our operations

during the our fiscal year 2022 as compared with our fiscal year 2023.

The increase in restaurant food sales is attributable to the Recent Price

Increases and food sales generated from the opening of corporate owned restaurant in Hollywood, Florida (Store #19R) during the second

quarter of our fiscal year 2024 and the operation of our limited partnership owned restaurant in Miramar, Florida (Store #25) for our

entire fiscal year 2024 as opposed to a part of our fiscal year 2023.

Comparable weekly restaurant food sales for restaurants open for

all of our fiscal years 2023 and 2022 respectively, which consists of nine restaurants owned by us and nine restaurants owned by affiliated

limited partnerships, (excluding our Miramar, Florida location (Store #25), Brendan’s Sports Pub, (Store #30), and Sunrise, Florida

location (Store #85), which opened for business during the third quarter of our fiscal year 2023, the third quarter of our fiscal year

2022 and the second quarter of our fiscal year 2022, respectively) was $1,734,000 and $1,798,000 for our fiscal years 2023 and 2022, respectively,

a decrease of 3.56%.

Comparable weekly restaurant food sales for Company owned restaurants only was $835,000 and $886,000 for our fiscal

years 2023 and 2022, respectively, a decrease of 5.76%.

Comparable weekly restaurant food sales for affiliated limited partnership owned

restaurants only, (excluding Store #25 which opened for business during the third quarter of our fiscal year 2023 and Store #85 which

opened for business during the second quarter of our fiscal year 2022), was $898,000 and $912,000 for our fiscal years 2023 and 2022 respectively,

a decrease of 1.54%.

We expect that restaurant food sales, including non-alcoholic beverages, for our fiscal year 2024 will increase due

to increased restaurant traffic, Store #25 being open for business for our entire fiscal year 2024 and the opening of our reconstructed

restaurant in Hollywood, Florida (Store #19R) for business during our fiscal year 2024.

all of our fiscal years 2024 and 2023, which consists of ten restaurants owned by us (excluding our Hollywood, Florida location (Store

#19R) which opened for business during the second quarter of our fiscal year 2024) and nine restaurants owned by affiliated limited partnerships,

(excluding our Miramar, Florida location (Store #25) which opened for business during the third quarter of our fiscal year 2023) was $1,987,000

and $1,967,000 for our fiscal years 2024 and 2023 respectively, an increase of 1.02%.

Comparable weekly restaurant food sales for Company-owned

restaurants only (excluding our Hollywood, Florida location (Store #19R) which opened for business during the second quarter of our fiscal

year 2024) was $938,000 and $923,000 for our fiscal years 2024 and 2023, respectively, an increase of 1.63%.

Comparable weekly restaurant

food sales for affiliated limited partnership owned restaurants only, (excluding our Miramar, Florida location (Store #25) which opened

for business during the third quarter of our fiscal year 2023), was $1,049,000 and $1,044,000 for our fiscal years 2024 and 2023 respectively,

an increase of 0.48%.

We expect that restaurant food sales, including non-alcoholic beverages, for our fiscal year 2025 will increase

due to increased restaurant traffic and the operation of our Company-owned Store #19R for our entire fiscal year 2025.

Restaurant Bar Sales .

1 unchanged sentence

to $29,000,000 for our fiscal year 2023.

The increase in restaurant bar sales during our fiscal year 2023 is primarily due to the Recent

Price Increases, restaurant bar sales generated from the opening of our limited partnership owned restaurant in Miramar, Florida (Store

#25) in April 2023, and the operation of our limited partnership owned restaurant in Sunrise, Florida (Store #85) and the operation of

Brendan’s Sports Pub (Store #30) for our entire fiscal year 2023 as opposed to a part of our fiscal year 2022 and the comparatively

greater adverse effects of COVID-19 on our operations during the our fiscal year 2022 as compared with our fiscal year 2023.

weekly restaurant bar sales (for restaurants open for all of our fiscal years 2023 and 2022 respectively, which consists of nine restaurants

owned by us and nine restaurants owned by affiliated limited partnerships, (excluding our Miramar, Florida location (Store #25), Brendan’s

Sports Pub (Store #30), and Sunrise, Florida (Store #85), which opened for business during the third quarter of our fiscal year 2023,

the third quarter of our fiscal year 2022 and the second quarter of our fiscal year 2022, respectively) was $481,000 for our fiscal year

2023 and $487,000 for our fiscal year 2022, a decrease of 1.23%.

Comparable weekly restaurant bar sales for Company owned restaurants

only was $196,000 and $211,000 for our fiscal years 2023 and 2022, respectively, a decrease of 7.11%.

Comparable weekly restaurant bar

sales for affiliated limited partnership owned restaurants only was $286,000 and $276,000 for our fiscal years 2023 and 2022 respectively,

an increase of 3.62%.

We expect that restaurant bar sales for our fiscal year 2024 will increase due to increased restaurant traffic,

Store #25 being open for business for our entire fiscal year 2024 and the opening of our reconstructed restaurant in Hollywood, Florida

(Store #19R) for business during our fiscal year 2024.

The increase in restaurant bar sales is attributable to the Recent Price Increases and food sales

generated from the opening of corporate owned restaurant in Hollywood, Florida (Store #19R) during the second quarter of our fiscal year

2024 and the operation of our limited partnership owned restaurant in Miramar, Florida (Store #25) for our entire fiscal year 2024 as

opposed to a part of our fiscal year 2023.

Comparable weekly restaurant bar sales for restaurants open for all of our fiscal years 2024

and 2023 respectively, which consists of ten restaurants owned by us (excluding our Hollywood, Florida location (Store #19R) which opened

for business during the second quarter of our fiscal year 2024) and nine restaurants owned by affiliated limited partnerships, (excluding

our Miramar, Florida location (Store #25), which opened for business during the third quarter of our fiscal year 2023) was $526,000 for

our fiscal year 2024 and $539,000 for our fiscal year 2023, a decrease of 2.41%.

Comparable weekly restaurant bar sales for Company-owned

restaurants only (excluding our Hollywood, Florida location (Store #19R) which opened for business during the second quarter of our fiscal

year 2024) was $234,000 and $231,000 for our fiscal years 2024 and 2023 respectively, an increase of 1.30%.

Comparable weekly restaurant

bar sales for affiliated limited partnership owned restaurants only (excluding our Miramar, Florida location (Store #25) which opened

for business during the third quarter of our fiscal year 2023) was $292,000 and $307,000 for our fiscal years 2024 and 2023 respectively,

a decrease of 4.89%.

We expect that restaurant bar sales for our fiscal year 2025 will increase due to the operation of our Company-owned

Store #19R for our entire fiscal year 2025.

Package Liquor Store Sales .

Revenue generated

from sales of liquor and related items at package liquor stores totaled $35,187,000 for our fiscal year 2023 as compared to $31,692,000

for our fiscal year 2022, an increase of $3,495,000.

This increase was primarily due to increased package liquor store traffic due to

what appears to be continued increased demand for package liquor store products resulting from the COVID-19 pandemic and package liquor

sales generated from the opening of our package liquor store in Hollywood, Florida (Store #19P) in December 2022 and the opening of our

package liquor store in Miramar, Florida (Store #24) in March, 2023.

The weekly average of same store package liquor store sales, which

includes nine (9) Company-owned package liquor stores, (excluding Store #19P, which was closed for our fiscal year 2022 due to a fire

on October 2, 2018 but re-opened for business during the first quarter of our fiscal year 2023 and excluding Store #24 which opened for

business during the second quarter of our fiscal year 2023), was $631,000 and $609,000 for our fiscal years 2023 and 2022 respectively,

an increase of 3.61%.

We expect that package liquor store sales for our fiscal year 2024 will increase due to increased package liquor

store traffic and the operation of the package liquor stores located at 7990 Davie Road Extension, Hollywood, Florida (Store #19P) which

opened for business during the first quarter of our fiscal year 2023 and located at 11225 Miramar Parkway #245, Miramar, Florida (Store

#24), which opened for business during the second quarter of our fiscal year 2023, for the entire fiscal year.

Revenue generated from sales of liquor and related items at package liquor stores totaled $40,497,000 for our fiscal year 2024 as compared

to $35,187,000 for our fiscal year 2023, an increase of $5,310,000.

This increase was primarily due to increased package liquor store

traffic and the package liquor sales generated from the operation of our package liquor stores in Hollywood, Florida (Store #19P) and

Miramar, Florida (Store #24), for our entire fiscal year 2024 as opposed to a part of our fiscal year 2023.

The weekly average of same

store package liquor store sales, which includes nine (9) Company-owned package liquor stores, (excluding Store #19P which reopened during

the first quarter of fiscal year 2023, and Store #24 which opened for business during the second quarter of our fiscal year 2023), was

$674,000 and $631,000 for our fiscal years 2024 and 2023 respectively, an increase of 6.81%.

We expect that package liquor store sales

for our fiscal year 2025 will increase due to increased package liquor store traffic.

Costs and Expenses .

Costs and expenses (consisting of cost of merchandise sold, payroll and related costs, operating expenses, occupancy costs, selling, general

and administrative expenses and depreciation and amortization), for our fiscal year 2024 increased $14,553,000 or 8.70% to $181,925,000

from $167,372,000 for our fiscal year 2023.

The increase was primarily due to increased payroll, increased consultant fees to improve

our accounting process, an expected general increase in food costs, costs and expenses incurred from the opening of our Company-owned

restaurant in Hollywood Florida (Store #19R) in March 2024, the operation of our limited partnership owned restaurant in Miramar, Florida

(Store #25), and our package liquor stores in Miramar, Florida (Store #24) and Hollywood, Florida (Store #19P), for our entire fiscal

year 2024 as opposed to a part of our fiscal year 2023, partially offset by actions taken by management to reduce and/or control costs.

We anticipate that our operating costs and expenses will continue to increase through our fiscal year 2025.

Operating costs and expenses

costs and expenses, (consisting of cost of merchandise sold, payroll and related costs, occupancy costs and selling, general and administrative

expenses), for our fiscal year 2023 increased $16,169,000 or 10.69% to $167,372,000 from $151,203,000 for our fiscal year 2022.

was primarily due to increased payroll, increased consultant fees to improve our accounting process and an expected general increase in

food costs, costs and expenses incurred from the opening of the package liquor stores in Hollywood, Florida (Store #19P) and Miramar,

Florida (Store #24), during our fiscal year 2023, the opening of our limited partnership owned restaurant in Miramar, Florida (Store #25)

during our fiscal year 2023, and the operation of our Brendan’s Sports Pub (Store #30) and limited partnership owned restaurant

in Sunrise, Florida (Store #85) for our entire fiscal year 2023 but only a part of our fiscal year 2022, partially offset by actions taken

by management to reduce and/or control costs.

We anticipate that our operating costs and expenses will increase through our fiscal year

2024 primarily due to our package liquor stores in Hollywood, Florida (Store #19P) and Miramar, Florida (Store #24) being open for business

for our entire fiscal year 2024, our limited partnership owned restaurant in Miramar, Florida (Store #25) being open for business for

our entire fiscal year 2024 and the opening of our reconstructed restaurant in Hollywood, Florida (Store #19R) for business during our

fiscal year 2024.

Operating costs and expenses increased as a percentage of total revenue to approximately 95.97% in our fiscal year 2023

from 95.62% in fiscal year 2022.

increased as a percentage of total revenue to approximately 96.60% in our fiscal year 2024 from 95.97% in our fiscal year 2023.

Gross Profit .

Gross profit is calculated by subtracting the cost of merchandise sold from sales.

Restaurant Food and Bar Sales .

Gross profit for food and bar sales for our fiscal year 2023 increased to $90,750,000 from $79,072,000 for our fiscal year 2022.

profit margin for restaurant food and bar sales (calculated as gross profit reflected as a percentage of restaurant food and bar sales),

was 66.61% for our fiscal year 2023 and 63.96% for our fiscal year 2022.

Gross profit margin for restaurant food and bar sales increased

during our fiscal year 2023 when compared to our fiscal year 2022 due to decreases in our cost of ribs and the Recent Price Increases,

partially offset by among other things, higher food costs.

Restaurant Food and

Gross profit for food and bar sales for our fiscal year 2024 increased to $94,943,000 from $90,750,000 for our fiscal

Gross profit margin for the restaurant food and bar sales decreased during our fiscal year 2024 when compared to our fiscal

year 2023 due to higher food costs partially offset by, among other things, the Recent Price Increases.

Our gross profit margin for restaurant

food and bar sales (calculated as gross profit reflected as a percentage of restaurant food and bar sales), was 65.57% for our fiscal

year 2024 and 66.61% for our fiscal year 2023.

Package Store Sales .

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We anticipate that the gross profit margin for package liquor store merchandise

will remain stable during our fiscal year 2024.

Payroll and Related Costs .

Payroll and related costs for our fiscal year 2023 increased $6,871,000 or 13.81% to $56,607,000 from $49,736,000 for our fiscal year

Payroll and related costs for our fiscal year 2023 were higher due primarily to the operation of our limited partnership owned

restaurant in Sunrise, Florida (Store #85), and Brendan’s Sports Pub (Store #30) during our entire fiscal year 2023 as opposed

to a part of our fiscal year 2022 and the operation of our limited partnership owned restaurant in Miramar, Florida (Store #25), the

retail package liquor store in Hollywood, Florida (Store #19P), and the retail package liquor store in Miramar, Florida (Store #24) for

a part of our fiscal year 2023 only and higher salaries to employees to remain competitive with other potential employees in a tight

labor market.

Payroll and related costs as a percentage of total revenue was 32.46% for our fiscal year 2023 and 31.45% of total revenue

for our fiscal year 2022.

will decrease for our fiscal year 2025 due to higher costs and a reduction in pricing of certain package store merchandise to be more

Payroll and Related

Payroll and related costs for our fiscal year 2024 increased $2,742,000 or 4.84% to $59,349,000 from $56,607,000 for our

fiscal year 2023.

Payroll and related costs for our fiscal year 2024 were higher due primarily to the opening of our corporate owned restaurant

in Hollywood, Florida (Store #19R) in March 2024, the operation of our limited partnership owned restaurant in Miramar, Florida (Store

#25) and our package liquor stores in Miramar, Florida (Store #24) and Hollywood, Florida (Store #19P) for our entire fiscal year 2024

as opposed to a part of our fiscal year 2023 and the increase to the Florida minimum wage.

Payroll and related costs as a percentage of

total revenue was 31.51% for our fiscal year 2024 and 32.46% of total revenue for our fiscal year 2023.

Operating Expenses .

Operating expenses (including but not limited to utilities, insurance, cleaning, credit card fees, supplies, security, and other costs

closely related to running restaurant and package operations) for our fiscal year 2024 increased $1,234,000 or 5.22% to $24,892,000 from

$23,658,000 for our fiscal year 2023 due primarily to the opening of our corporate owned restaurant in Hollywood, Florida (Store #19R)

in March 2024, the operation of our limited partnership owned restaurant in Miramar, Florida (Store #25) and our package liquor stores

in Miramar, Florida (Store #24) and Hollywood, Florida (Store #19P) for our entire fiscal year 2024 as opposed to a part of our fiscal

year 2023, inflation and otherwise due to increases in expenses across all categories.

Occupancy Costs .

2 unchanged sentences

from $7,566,000 for our fiscal year 2023.

The increase in occupancy costs was primarily due to the payment of rent for our retail package

liquor store located at 11225 Miramar Parkway, #250, Miramar, Florida (Store #24), our restaurant location located at 11225 Miramar Parkway,

#250, Miramar, Florida (Store #25) and Brendan’s Sports Pub (Store #30) during our entire fiscal year 2023 as opposed to a part

of our fiscal year 2022.

The increase in occupancy costs was primarily due to an increase in real property taxes.

Selling, General

1 unchanged sentence

Selling, general and administrative expenses (consisting of general corporate expenses, including

but not limited to advertising, insurance, professional costs, clerical and administrative overhead) for our fiscal year 2023 increased

$5,330,000 or 18.29% to $31,901,000 from $26,571,000 for our fiscal year 2022.

Selling, general and administrative expenses increased

due primarily to Store #85 and Store #30 being open for our entire fiscal year 2023 as opposed to a part of our fiscal year 2022 and

Store #19P, Store #24and Store #25 being open during a part of our fiscal year 2023 only, increased consultant fees to improve our accounting

process, inflation and otherwise to increases in expenses across all categories.

We anticipate that our selling, general and administrative

expenses as a percentage of total revenue will increase during our fiscal year 2024 due primarily to increases across all categories.

Selling, general and administrative expenses increased as a percentage of total revenue in our fiscal year 2023 to 18.29% as compared

to 16.80% in our fiscal year 2022.

Depreciation and

Amortization.

Depreciation and amortization expense for our fiscal year 2023, which is included in selling, general and administrative

expenses, increased $572,000 or 18.99% to $3,584,000 from $3,012,000 from our fiscal year 2022.

This increase is driven by the opening

of Stores #19P, #24, and #25.

As a percentage of total revenue, depreciation and amortization expense was 2.06% of revenue for our fiscal

year 2023 and 1.90% of revenue for our fiscal year 2022.

but not limited to advertising, professional costs, clerical and administrative overhead) for our fiscal year 2024 increased $658,000

or 14.05% to $5,340,000 from $4,682,000 for our fiscal year 2023 due primarily to increased consultant fees to improve our accounting

process and otherwise to increases in expenses across all categories.

Selling, general and administrative expenses increased as a percentage

of total revenue for our fiscal year 2024 to 2.84% as compared to 2.68% for our fiscal year 2023.

Depreciation and Amortization.

Depreciation and amortization expense for our fiscal year 2024 increased $707,000 or 19.85% to $4,268,000 from $3,561,000 for

our fiscal year 2023.

This increase is driven by the opening of our corporate owned restaurant in Hollywood, Florida (Store #19R) in

March 2024, the operation of our limited partnership owned restaurant in Miramar, Florida (Store #25) and our package liquor stores in

Miramar, Florida (Store #24) and Hollywood, Florida (Store #19P) for our entire fiscal year 2024 as opposed to a part of our fiscal year

Depreciation and amortization expense increased as a percentage of total revenue for our fiscal year 2024 to 2.27% as compared

to 2.04% for our fiscal year 2023.

Interest Expense,

Interest expense, net, for our fiscal year 2023 increased $310,000 to $1,067,000 from $757,000 for our fiscal year 2022.

Interest expense, net, increased for our fiscal year 2023 due to the interest on our borrowing of $8,900,000 from an unrelated third

party lender to re-finance the mortgage loan on our property located at 4 N.

Federal Highway, Hallandale Beach, Florida (Store #31) and

due to interest on our borrowing of $1,100,000 from a related third party lender to re-finance the mortgage loan on our property located

at 2600 West Davie Boulevard, Fort Lauderdale, Florida (Store #22) during our fiscal year 2022.

Interest expense, net, for our fiscal year 2024 decreased $48,000 to $1,019,000 from $1,067,000 for our fiscal year 2023.

Income Taxes.

tax for our fiscal year 2024 was an expense of $286,000, as compared to an expense of $649,000 for our fiscal year 2023.

as a percentage of income before provision for income taxes increased for our fiscal year 2023 (10.70%) as compared to our fiscal year

2022 (7.78%).

income for our fiscal year 2023 decreased $3,633,000 or 40.15% to $5,416,000 from $9,049,000 for our fiscal year 2022 due primarily to

the higher income attributable to the forgiveness of debt of certain of our PPP Loans during our fiscal year 2022, higher food costs and

overall increased expenses during our fiscal year 2023, partially offset by increased revenue at our retail package liquor stores and

restaurants during our fiscal year 2023 and the Recent Price Increases.

As a percentage of revenue, net income for our fiscal year 2023

is 3.11%, as compared to 5.72% for our fiscal year 2022.

as a percentage of income before provision for our fiscal year 2024 is 5.12% as compared to 10.70% in our fiscal year 2023.

income for our fiscal year 2024 decreased $116,000 or 2.14% to $5,300,000 from $5,416,000 for our fiscal year 2023 due primarily to higher

food costs and overall increased expenses, including but not limited to, increased consultant fees to improve our accounting process.

As a percentage of total revenue, net income for our fiscal year 2024 is 2.81%, as compared to 3.11% for our fiscal year 2023.

Net Income Attributable

to Flanigan’s Enterprise, Inc.

Stockholders.

to Flanigan’s Enterprise, Inc.’s Stockholders.

Net income attributable to stockholders for our fiscal year 2024 decreased

$2,313,000 or 36.64% to $3,999,000 from $6,312,000 for our fiscal year 2022 due primarily to the higher income attributable to the forgiveness

of debt of certain of our PPP Loans during our fiscal year 2022, higher food costs and overall increased expenses during our fiscal year

2023, and a higher portion of net income attributable to noncontrolling interests (specifically the operations of our Miramar location),

partially offset by increased revenue at our retail package liquor stores and restaurants during our fiscal year 2023 and the Recent Price

As a percentage of revenue, net income attributable to stockholders for our fiscal year 2023 is 2.29%, as compared to 3.99%

for our fiscal year 2022.

$643,000 or 16.08% to $3,356,000 from $3,999,000 for our fiscal year 2023 due primarily to higher food costs and overall increased expenses,

including but not limited to, increased consultant fees to improve our accounting process and a higher portion of our net income attributable

to noncontrolling interests (specifically the operation of our Miramar location for our entire fiscal year 2024 as opposed to a part

of our fiscal year 2023).

As a percentage of revenue, net income attributable to stockholders for our fiscal year 2024 is 1.78%, as compared

to 2.29% for our fiscal year 2023.

New Limited Partnership Restaurants

As new restaurants open, our income

from operations will be adversely affected due to our obligation to advance pre-opening costs, including but not limited to pre-opening

rent for the new locations.

During our fiscal year 2023, we opened one new restaurant location in Miramar, Florida as a “Flanigan’s”.

Menu Price Increases and Trends

During the fiscal year 2023, we

increased menu prices for our food offerings (effective March 26, 2023) to target an aggregate increase to our food revenues of approximately

2.06% annually and we increased menu prices for our bar offerings (effective March 20, 2023) to target an increase to our bar revenues

of approximately 5.65% annually to offset higher food and liquor costs and higher overall expenses.

During the fiscal year 2022, we increased

menu prices for our food offerings (effective October 3, 2021 and December 19, 2021, respectively) to target an aggregate increase to

our food revenues of approximately 8.83% annually and we increased menu prices for our bar offerings (effective December 12, 2021) to

target an increase to our bar revenues of approximately 7.80% annually to offset higher food and liquor costs and higher overall expenses.

Prior to these increases, we previously raised menu prices in the third quarter of our fiscal year 2021.

COVID-19 has and will continue

to materially and adversely affect our restaurant business for what may be a prolonged period of time.

This damage and disruption has

resulted from events and factors that were impossible for us to predict and are beyond our control.

As a result, COVID-19 has materially

adversely affected our results of operations for the fiscal year 2023 and will, in all likelihood, impact our results of operations, liquidity,

and/or financial condition throughout our fiscal year 2024.

The extent to which our restaurant business may be adversely impacted and

its effect on our operations, liquidity and/or financial condition cannot be accurately predicted.

Based on current COVID-19 trends,

the Department of Health and Human Services (HHS) permitted the federal Public Health Emergency for COVID-19 (PHE) declared by the Secretary

of the Department of Health and Human Services (Secretary) under Section 319 of the Public Health Service (PHS) Act to expire at the

end of the day on May 11, 2023.

LIQUIDITY AND CAPITAL

As new limited partnership restaurants

open, our income from operations will be adversely affected due to our obligation to advance pre-opening costs, including but not limited

to pre-opening rent for the new limited partnership locations.

During our fiscal year 2024 we did not open any new limited partnership

restaurants, nor did we have any in the development stage.

During our fiscal year 2023, we opened one new limited partnership restaurant

location in Miramar, Florida as a “Flanigan’s”.

Menu Price Increases

During our fiscal year 2024, we

increased menu prices for our bar offerings (effective August 25, 2024) to target an increase to our bar revenues of approximately 5.63%

annually to offset higher food and liquor costs and higher overall expenses.

During our fiscal year 2023, we increased menu prices for

our food offerings (effective March 26, 2023) to target an aggregate increase to our food revenues of approximately 2.06% annually and

we increased menu prices for our bar offerings (effective March 20, 2023) to target an increase to our bar revenues of approximately 5.65%

annually to offset higher food and liquor costs and higher overall expenses.

Prior to these increases, we previously raised menu prices

in the first quarter of our fiscal year 2022.

Subsequent to the end of our fiscal year 2024, we increased our menu prices for our bar

offerings (effective December 4, 2024) to target an increase to our bar revenues of approximately 4.90% annually and we increased our

menu prices for our food offerings (effective November 17, 2024) to target an increase to our food revenues of approximately 4.14% annually

to offset higher food and liquor costs and higher overall expenses.

LIQUIDITY AND CAPITAL RESOURCES

We fund our operations through

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As of September 28, 2024, we had cash and cash equivalents of approximately $21,402,000,

a decrease of $16,606,000 from our cash balance of $42,138,000 as of October 1, 2022.

This decrease is primarily due to our decision not

to finance our insurance premiums for the annual period beginning December 30, 2022 ($3,281,000), the purchase of properties at Hallandale

Beach, Florida ($8,500,000), and El Portal, Florida ($3,200,000), and the continued construction of Store #19R ($1,308,000).

During the second quarter of our

fiscal year 2021, certain of the entities owning the limited partnership stores (the “LP’s”), 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 (the “Lender”) pursuant to the Paycheck Protection Program (the “PPP”) under the

United States Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) enacted March 27, 2020, in the aggregate

principal amount of approximately $3.98 million (the “2 nd PPP Loans”), of which approximately:

(i) $3.46 million

was loaned to six (6) of the LP’s;

and (ii) $0.52 million was loaned to the Managed Store.

During the first quarter of our fiscal

year 2022, we applied for forgiveness for all PPP Loans, including the Managed Store, and as of September 30, 2023, the entire amount

of principal and accrued interest was forgiven under the 2 nd PPP Loans.

a decrease of $4,130,000 from our cash balance of $25,532,000 as of September 30, 2023.

The decrease is primarily due to the completion

of the construction of our Store #19R ($2,106,000).

Inflation is affecting all aspects

of our operations, including but not limited to food, beverage, fuel and labor costs.

Supply chain issues also contribute to inflation.

Inflation, including supply chain issues are having a material impact on our operating results.

Notwithstanding the negative effects

of COVID-19 on our operations, we believe that our current cash availability from our cash on hand, positive cash flow from operations

and borrowed funds will be sufficient to fund our operations and planned capital expenditures for at least the next twelve months.

Inflation is having a material impact on our operating

We believe that our current cash

availability from our cash on hand, positive cash flow from operations and borrowed funds will be sufficient to fund our operations and

planned capital expenditures for at least the next twelve months.

The following table is a summary of our cash flows for our fiscal

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Net cash used in investing activities

Net cash (used in) provided by financing activities

Net cash used in financing activities

Net (Decrease) Increase in Cash and Cash Equivalents

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During the fiscal year 2024, we acquired property and equipment

and construction in progress of $20,574,000, (including non-cash items which include $2,390,000 of purchase deposits transferred to property

and equipment and $545,000 of purchase deposits transferred to construction in progress and $931,000 of construction in progress in accounts

payable) including $367,000 for renovations to three (3) existing limited partnership owned restaurants and $378,000 for renovations to

three (3) Company owned restaurants.

During our fiscal year 2022, we acquired property and equipment of $12,655,000 (of which $3,849,000

was for construction in progress;

$3,258,000 construction in progress transferred to property and equipment;

$969,000 construction in

progress in accounts payable;

$50,000 was deposits recorded in other assets;

and $512,000 was deposits transferred to construction in

progress as of October 2, 2021), which amount included $937,000 for renovations to three (3) existing limited partnership restaurants

and $159,000 for renovations to two (2) Company-owned restaurants.

and construction in progress of $6,047,000, (of which $289,000 was purchase deposits transferred to property and equipment, $715,000 was

purchase deposits transferred to CIP, and $4,000 was property and equipment in accounts payable), including $528,000 for renovations to

three (3) Company-owned restaurants and $135,000 for one (1) limited partnership owned restaurant.

During the fiscal year 2023, we acquired

property and equipment and construction in progress of $20,574,000, (including non-cash items which include $2,390,000 of purchase deposits

transferred to property and equipment and $545,000 of purchase deposits transferred to construction in progress and $931,000 of construction

in progress in accounts payable) including $367,000 for renovations to three (3) existing limited partnership owned restaurants and $378,000

for renovations to three (3) Company-owned restaurants.

As of September 28, 2024, we had

long term debt (including the current portion) of $23,128,000, as compared to $25,389,000 as of October 1, 2022.

Our long-term debt decreased

as of September 30, 2023 as compared to October 1, 2022 because we satisfied the principal balance and all accrued interest ($367,000)

due on our $5.5 million term loan.

In addition, we did not finance our insurance premiums for our annual insurance renewal effective December

long term debt (including the current portion) of $21,912,000, as compared to $23,128,000 as of September 30, 2023.

In February 2023, we determined

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certain remedies under the Institutional Loans, including the right to accelerate the indebtedness owed by us thereunder, resulting in

the indebtedness under the Institutional Loans to be immediately due and payable, which would have a material adverse effect on the Company.

The Post-Distribution/Fixed Charge Covenant requires we maintain a ratio of at least 1.15 to 1.00 and for the twelve

(12) months ended September 30, 2023 our ratio was calculated to be 1.40 to 1.00.

We have prepared projections going forward

and expect to be in compliance.

the indebtedness under the Institutional Loans to be immediately due and payable, which would have had a material adverse effect on the

The Post-Distribution/Fixed Charge Covenant requires we maintain a ratio of at least 1.15 to 1.00 and for the twelve (12) months

ended September 28, 2024 our ratio was calculated to be 1.62 to 1.00.

As a result, our classification of debt is appropriate as of September

We repaid long term debt, including

auto loans, financial insurance premiums, and mortgages in the amount of $2,299,000 and $3,736,000 in our fiscal years 2023 and 2022,

respectively.

(a) Advance on Existing Mortgage Loan –

Fort Lauderdale, Florida

During our fiscal year 2022, we requested and received

a loan advance of $697,000 from an entity controlled by a member of our Board of Directors, which entity currently holds a first priority

mortgage note on our real property and improvements where our restaurant located at 2600 West Davie Boulevard, Fort Lauderdale, Florida

operates (the “West Davie Mortgage Note”).

Including the $697,000 advance, the principal amount outstanding amount owed under

the West Davie Mortgage Note as of September 30, 2023 is $1,049,000.

The West Davie Mortgage Note accrues interest at 6% annually, (increased

from 5% annually), is amortizable over 15 years with monthly installments of principal and interest of approximately $9,300 required to

be made and a final balloon payment of approximately $487,000 required to be made August 1, 2032.

(b) Re-Finance of Mortgage on Real Property

– Hallandale Beach, Florida

During our fiscal year 2022, we

re-financed our mortgage debt with our non-affiliated third-party lender secured by our real property located at 4 N.

Federal Highway,

Hallandale, Florida where our combination package liquor store and restaurant (Store #31) operates and borrowed an additional $8,012,000

raising the principal balance to $8,900,000, (the “$8.90M Mortgage”).

The $8.90M Mortgage bears interest at a variable rate

equal to the BSBY Screen Rate – 1 Month plus 1.50%.

We entered into an interest rate swap agreement to hedge the interest rate risk,

which fixed the interest rate on the $8.90M Mortgage at 4.90% per annum throughout its term.

The $8.90M Mortgage is fully amortized over

fifteen (15) years, with our monthly payment of principal and interest totaling $33,000.

(c ) Financed Insurance Premiums

Prior to fiscal year 2023, we

financed our annual insurance premiums.

Due to higher interest rates, during the first quarter of our fiscal year 2023, for the policy

year commencing December 30, 2022, we paid the premiums for property, general liability, excess liability and terrorist policies, totaling

approximately $3.281 million, in full, which includes coverage for our franchisees (which is $658,000), which are not included in our

consolidated financial statements.

Due to continuing higher interest rates for the policy year commencing December 30, 2023, we will pay

the premiums for property, general liability, excess liability, crime and terrorism policies in full ($3.932 million), which includes

coverage for our franchises (approximately $786,000).

We paid the $3.281 million annual

premium amounts on January 9, 2023, which includes coverage for our franchisees which are not included in our consolidated financial

We secured property insurance for the period commencing after the expiration of the current policy on December 30, 2023.

Subsequent Events for a discussion of property insurance for the period commencing December 30, 2023 on page 31.)

auto loans and mortgages in the amount of $1,251,000 and $2,299,000 in our fiscal years 2024 and 2023, respectively.

Construction Contracts

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(Store #19 – “Flanigan’s”)

During the third quarter of our

fiscal year 2019, we entered into an agreement with an unaffiliated third party 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 #19), which has been closed

since October 2, 2018 due to damages caused by a fire, of which $62,000 has been paid.

During the first quarter of our fiscal year 2022,

we entered into an agreement with a third party unaffiliated general contractor to re-build our restaurant at this location totaling $2,515,000

and during our fiscal year 2023 we agreed to change orders increasing the total contract price by $1,021,000 to $3,536,000, of which $1,534,000

has been paid through September 30, 2023 and $1,090,000 has been paid subsequent to the end of our fiscal year 2023.

Sunrise Boulevard, Sunrise, Florida

(Store #85- "Flanigan's')

During the second quarter of our

fiscal year 2022, we entered into an agreement with a third party unaffiliated general contractor for exterior renovations at this location

totaling $343,000 and through the end of our fiscal year 2023 we agreed to change orders to the agreement increasing the total contract

price by $327,000 to $670,000, of which the full amount has been paid as of the end of our fiscal year 2023.

During the first quarter of our

fiscal year 2022, we entered into an agreement with a third party unaffiliated general contractor to re-build our restaurant located at

University Drive, Building B, Hollywood, Florida (Store #19R), which had been closed since October 2, 2018 due to damage caused

by a fire and re-opened March 26, 2024.

The contract totaled $2,515,000 and through our fiscal year 2024 we agreed to change orders increasing

the total contract price by $1,512,000 to $4,027,000, of which $3,905,000 has been paid through September 28, 2024.

Subsequent to the

end of our fiscal year 2024, we agreed to final change orders increasing the total contract price by $3,000 to $4,030,000 and the balance

of the contract price of $125,000 has been paid subsequent to the end of our fiscal year 2024.

Purchase Commitments/Supply

In order to fix the cost and ensure

adequate supply of baby back ribs for our restaurants for calendar years 2023 and 2024, we entered into purchase agreements with our current

rib supplier, whereby we agreed to purchase approximately $7.0 million of “2.25 & Down Baby Back Ribs” (industry jargon

for the weight range in which slabs of baby back ribs are sold) from this vendor during calendar year 2023, at a prescribed cost, which

we believe is competitive.

The increase in our cost of baby back ribs for calendar year 2024 compared to calendar year 2023 is due to

the increase in volume of our purchase of ribs for Store #25, Miramar, Florida being open for the entire calendar year and Store #19,

Hollywood, Florida anticipated to be open for a part of the calendar year, offset by a decrease in market price.

In order to fix the cost

and ensure adequate supply of baby back ribs for our restaurants for calendar year 2025, we entered into a purchase agreement with a

new rib supplier, whereby we agreed to purchase approximately $7.8 million of “2.5 & Down Baby Back Ribs” (weight range

in which baby back ribs are sold) during calendar year 2025, at a prescribed cost, which we believe is competitive.

For calendar year

2024, we entered into a purchase agreement with our current rib supplier, whereby we agreed to purchase approximately $7.0 million of

“2.25 & Down Baby Back Ribs” during calendar year 2024, at a prescribed cost, which we also believe is competitive.

increase in our cost of baby back ribs for calendar year 2025 compared to calendar year 2024 is due to our purchase of larger sized baby

back ribs and the purchase of baby back ribs for Store #19R, Hollywood, Florida for the entire calendar year, offset by a decrease in

market price.

While we anticipate purchasing

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As of September 28, 2024, Flanigan’s

Fish Company, LLC, a Florida limited liability company (“FFC”) supplies certain of the fish to all of our restaurants.

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

Fish Company, LLC, a Florida limited liability company (“FFC”), supplies certain fish to all of our restaurants.

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

financial statements of the Company.

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 a noncontrolling interest in our consolidated financial statements.

Purchase of Limited Partnership Interests

During our fiscal year 2023, we

did not purchase any limited partnership interests.

During our fiscal year 2022 we purchased 74 limited partnership units (7.4% limited

partnership interest) in CIC Investors #85, Ltd.

Sales and purchases of fish are recognized in restaurant food sales and restaurant (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 a noncontrolling interest in our consolidated financial statements.

Working Capital

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current liabilities, and working capital as of the end of our fiscal years 2024 and 2023.

September 28, 2024

September 30, 2023

(in Thousands)

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Working Capital

Our working capital decreased

as of September 30, 2023 from our working capital as of October 1, 2022 primarily due to increases in (i) cash purchases of real property;

(ii) cash purchases of property and equipment;

and (iii) deposits on property and equipment.

Current assets as of October 1, 2022 increased

due to our increased borrowings resulting from the Hallandale Mortgage Debt and the West Davie Mortgage Debt, significant portions of

which we classified as long term liabilities as of September 30, 2023.

Current assets as of September 30, 2023 decreased due to our decision

not to finance our insurance premiums for the annual period beginning December 30, 2022, as well as the current year investments in the

purchase of property.

While there can be no assurance

due to, among other things, unanticipated expenses or unanticipated decline in revenues, or both, we believe that our cash on hand, positive

cash flow from operations and borrowed funds will adequately fund operations, debt reductions and planned capital expenditures throughout

our fiscal year 2024.

During our fiscal year 2024, we

plan to use certain funds on-hand, borrowed funds, and/or insurance proceeds to complete the construction of our new building on the real

property we own located at 2505 N.

University Drive Hollywood, Florida (Store #19R) where we plan to operate our “Flanigan’s”

There can be no assurance as to the timing for us to complete the construction of the restaurant for Store #19R.

due to, among other things, unanticipated expenses or unanticipated decline in revenues, or both, we believe that our cash on hand and

positive cash flow from operations will adequately fund operations, debt reductions and planned capital expenditures throughout our fiscal

Off-Balance Sheet Arrangements

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Pronouncements

Recently Adopted

There are no accounting pronouncements

that we have recently adopted.

The FASB issued guidance, ASU

2022-06 Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides

optional expedient and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other

transactions affected by reference rate reform if certain criteria are met.

In response to the concerns about structural risks of interbank

offered rates (“IBORs”) and, particularly, the risk of cessation of the London interbank offered rate (“LIBOR”),

regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference

rates that are more observable or transaction based and less susceptible to manipulation.

This accounting standards update provides companies

with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected

to be discontinued.

LIBOR rates were published until June 30, 2023.

All principal and interest of the Term Loan was paid during the first

quarter of our fiscal year 2023, so the discontinuance of LIBOR rates will have no impact on us.

The FASB issued guidance, ASU

2016-13 Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, which provides

a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected.

The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present

the net carrying value at the amount expected to be collected on the financial asset.

The measurement of expected credit losses is based

on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts

that affect the collectability of the reported amount.

This guidance would be effective for the Company in the first quarter of our fiscal

however, after performing a thorough analysis the Company concluded there is no material impact.

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.

The FASB issued guidance, Accounting

Standards Update (ASU) 2016-13 Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments,

which provides a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected

to be collected.

The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial

asset(s) to present the net carrying value at the amount expected to be collected on the financial asset.

The measurement of expected

credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable

and supportable forecasts that affect the collectability of the reported amount.

This guidance was effective for the Company in the first

quarter of our fiscal year 2024;

however, after performing a thorough analysis the Company concluded there was no material impact from

the adoption of this ASU.

In November 2023, the FASB issued

ASU 2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures,” which updates reportable segment

disclosure requirements, primarily through requiring enhanced disclosures about significant segment expenses and information used to assess

segment performance.

We early adopted this ASU in the third quarter of our fiscal year 2024 and this ASU affected the expense presentation

of our Consolidated Statements of Income and our Business Segments footnote.

For further information regarding the Company’s Business

Segments, please refer to our Consolidated Statements of Income and Business Segments footnote.

Recently Issued

In December 2023, the FASB issued

ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures,” which requires enhanced income tax disclosures,

primarily related to standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction.

ASU will be effective for the Company in our fiscal year 2026, with the guidance applied either prospectively or retrospectively.

adoption is permitted.

We are currently evaluating the impact the adoption of the new accounting guidance will have on our tax disclosures.

There are no other recently

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

Critical Accounting Policies

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for property and equipment are significant estimates.

Expenditures for the leasehold improvements and equipment when a restaurant is first

constructed are material.

Expenditures for the leasehold improvements and equipment when a restaurant is

first constructed are material.

In addition, periodic refurbishing takes place and those expenditures can be material.

We estimate the useful

life of those assets by considering, among other things, expected use, life of the lease on the building, and warranty period, if applicable.

We estimate the

useful life of those assets by considering, among other things, expected use, life of the lease on the building, and warranty period,

if applicable.

The assets are then depreciated using a straight-line method over those estimated lives.

These estimated lives are reviewed periodically

and adjusted if necessary.

Any necessary adjustment to depreciation expense is made in the income statement of the period in which the

adjustment is determined to be necessary.

These estimated lives are reviewed

periodically and adjusted if necessary.

Any necessary adjustment to depreciation expense is made in the income statement of the period

in which the adjustment is determined to be necessary.

Consolidation of Limited Partnerships

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refer to Note 10 to the consolidated financial statements for our fiscal year 2024.

Effective September 29, 2019,

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

This standard had a material impact on our Consolidated Statements of Income due to the escalations of rent in the extensions but did

not have a material impact on the Consolidated Statement of Cash Flows.

Under Accounting Standards Codification

Topic 842, Leases (“ASC 842”), lease arrangements must 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 our fiscal 2020, using the modified retrospective approach.

Estimates associated with leases include lease classification,

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis