FLANIGANS ENTERPRISES INC 10-K

ITEM 9A. CONTROLS AND PROCEDURES . Evaluation of Disclosure Controls and Procedures We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed with the U.S. Securities and Exchange Commission (the “SEC”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. As of September 28, 2024, an evaluation was performed under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) to the Securities Exchange Act of 1934). Based on that evaluation, management, including our Chief Executive Officer and Chief Financial Officer, concluded that our disclosure controls and procedures were not effective as of September 28, 2024. Remediation of Material Weakness in Internal Control Over Financial Reporting During the course of our independent registered public accounting firm performing its quarterly review procedures in connection with our unaudited condensed consolidated financial statements to be included in our Form 10-Q for the first quarter of our 2023 fiscal year, we became aware of certain errors made by management in recording certain transactions and in performing debt covenant calculations, which constituted material weaknesses in our internal controls. As a result of this finding, during the second quarter of our fiscal year 2023, we began the process of addressing these material weaknesses by bolstering our internal controls over the review of certain financial transactions and their impact on our interim and annual financial statements, as well as our review of the debt covenant calculations. During the second quarter of our fiscal year 2024 the additional controls had been implemented and evaluated by management and determined to be operating effectively and as a result of our findings, as of the end of the second quarter of our fiscal year 2024, we have concluded that our previously listed material weaknesses had been remediated. Material Weaknesses in Internal Control Over Financial Reporting A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our interim or annual financial statements will not be prevented or detected on a timely basis. Information technology general controls (ITGCs) were not designed and implemented effectively to ensure (i) that access to applications and data, and the ability to make program and database changes, were adequately restricted to appropriate personnel and (ii) that database changes were logged completely and accurately. Business process controls (automated and manual) that are dependent on the affected ITGCs were also deemed ineffective because they could have been adversely impacted. The material weaknesses identified above did not result in any material misstatements in our financial statements or disclosures, and there were no changes to previously released financial results. However, as a result of this finding, during the first quarter of our fiscal year 2025, we began the process of addressing these material weaknesses to our ITGCs. 38 Changes in Internal Control Over Financial Reporting Apart from the changes discussed above we have not made any additional changes to our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting. Management’s Assessment on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Management, including our Chief Executive Officer and Chief Financial Officer, performed an evaluation of the effectiveness of the Company’s internal control over financial reporting. 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, 2024, our internal control over financial reporting was not effective. Limitations on the Effectiveness of Controls and Permitted Omission from Management’s Assessment Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. All internal control systems, no matter how well designed, have inherent limitations, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal controls can only provide reasonable assurance with respect to financial statement preparation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. This annual report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to rules of the SEC that permit us to provide only management’s report in this Annual Report on Form 10-K. ITEM 9B. OTHER INFORMATION. During the three months ended September 28, 2024, none of the Company’s directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” each as defined in Item 408(a) of Regulation S-K under the Exchange Act. A copy of our insider trading policy and related Rule 10b5-1 trading plan policy has been filed as Exhibit 19.1 to this Annual Report. ITEM 9C DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS. Not Applicable. PART III The information required by Item 10 (Directors, Executive Officers and Corporate Governance), Item 11 (Executive Compensation), Item 12 (Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters), Item 13 (Certain Relationships and Related Transactions, and Director Independence), and Item 14 (Principal Accountant Fees and Services) is incorporated by reference to our Proxy Statement for our 2025 Annual Meeting of Shareholders, which will be filed with the Securities and Exchange Commission no later than 120 days from the end of our 2024 fiscal year. The information under the heading “Executive Officers” in Part I of this Form 10-K is also incorporated herein by reference. 39 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES . (a)(1) Financial Statements See Part II, Item 8, “Financial Statements and Supplementary Data” for Financial Statements included with this Annual Report on Form 10-K. (a)(2) Financial Statement Schedules All other schedules have been omitted because the required information is not applicable or the information is included in the consolidated financial statements or the Notes thereto. (a)(3) Exhibits The exhibits listed on the accompanying Index to Exhibits are filed as part of this Annual Report. Incorporated by Reference Exhibit Number Exhibit Description Form Date Number Filed Herewith 2 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 SB-2 5/5/1987 2 3 Restated Articles of Incorporation, adopted January 9, 1984 10-K 12/29/1982 3 10(a)(1) Employment Agreement with Joseph G. Flanigan* DEF14A 1/27/1988 10(a)(1) 10(a)(2) Form of Employment Agreement between Joseph G. Flanigan and the Company (as ratified and amended by the stockholders at the 1988 annual meeting is incorporated herein by reference).* 10-K 10(a)(1) 10(c) Consent Agreement regarding the Company's Trademark Litigation 8-K 4/10/1985 10( c) 10(d) King of Prussia(#850)Partnership Agreement* 8-K 4/10/1985 10(d) 10(o) Management Agreement for Atlanta, Georgia, (#600)* 10-K 10/3/1992 10(o) 10(p) Settlement Agreement with Former Vice Chairman of the Board of Directors (re #5) 10-K 10/3/1992 10(p) 10(q) Hardware Purchase Agreement and Software License Agreement for restaurant point of sale system. 10-KSB 10/2/1993 10(q) 10(a)(3) Key Employee Incentive Stock Option Plan DEF14A 1/26/1994 10(a)(3) 10( r) Limited Partnership Agreement of CIC Investors #13, Ltd,. between Flanigan's Enterprises, Inc., as General Partner and fifty percent owner of the limited partnership, and Hotel Properties, LTD. * 10-KSB 9/30/1995 10(r) 40 10(s) Form of Franchise Agreement between Flanigan's Enterprises, Inc. and Franchisees. * 10-KSB 9/30/1995 10(s) 10(t) Licensing Agreement between Flanigan's Enterprises, Inc. and James B. Flanigan, dated November 4, 1996, for non-exclusive use of the service mark "Flanigan's" in the Commonwealth of Pennsylvania. * 10-KSB 9/28/1996 10(t) 10(u) Limited Partnership Agreement of CIC Investors #15 Ltd., dated March 28, 1997, between B.D. 15 Corp. as General Partner and numerous limited partners, including Flanigan's Enterprises, Inc. as a limited partner owning twenty five percent of the limited partnership. * 10-KSB 9/27/1997 10(u) 10(v) Limited Partnership Agreement of CIC Investors #60 Ltd., dated July 8, 1997, between Flanigan's Enterprises, Inc., as General Partner and numerous limited partners, including Flanigan's Enterprises, Inc. as limited partner owning forty percent of the limited partnership. * 10-KSB 9/27/1997 10(v) 10(w) Stipulated Agreed Order of Dismissal upon Mediation with former franchisee. 10-KSB 9/27/1997 10(w) 10(x) Limited Partnership Agreement of CIC Investors #70, Ltd. dated February 1999 between Flanigan's Enterprises, Inc. as General Partner and numerous limited partners, including Flanigan's Enterprises, Inc. as limited partner owning forty percent of the limited partnership. * 10-KSB 10/02/1999 10(x) 10(y) Limited Partnership Agreement of CIC Investors #80, Ltd., dated May 2001, between Flanigan's Enterprises, Inc. as General Partner and numerous limited partners, including Flanigan's Enterprises, Inc., as limited partner owning twenty five percent of the limited partnership. * 10-KSB 9/29/2001 10(y) 10(z) Limited Partnership Agreement of CIC Investors #95, Ltd., dated July 2001, between Flanigan's Enterprises, Inc., as General Partner and numerous limited partners, including Flanigan's Enterprises, Inc. as limited partner owning twenty eight percent of the limited partnership. * 10-KSB 9/29/2001 10(z) 10(bb) Limited Partnership Agreement of CIC Investors #65, Ltd., dated June 24, 2004, between Flanigan’s Enterprises, Inc., as General Partner, and numerous limited partners, including Flanigan’s Enterprises, Inc. as limited partner owning twenty six percent of the limited partnership. * 10-K 10/2/2004 10(bb) 41 10(cc) Amended and Restated Limited Partnership Certificate and Agreement of CIC Investors #13, Ltd., dated March 1, 2006, 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 thirty nine percent of the limited partnership. * 10-K 9/30/2006 10(cc) 10(dd) Limited Partnership Agreement of CIC Investors #50, Ltd., dated October 17, 2006, 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 sixteen percent of the limited partnership. * 10-K 9/29/2007 10(dd) 10(ee) Limited Partnership Agreement of CIC Investors #55, Ltd., dated December 12, 2006, 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 forty eight percent of the limited partnership. * 10-K 9/29/2007 10(ee) 10(ff) 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. * 10-K 9/29/2012 10(ff) 10(gg) Limited Partnership Agreement of CIC Investors #85, Ltd., dated April 4, 2019, 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 seven percent of the limited partnership. * 10-K 10/1/2022 10(gg) 10(hh) Limited Partnership Agreement of CIC Investors #25, Ltd., dated September 21, 2021, between Flanigan’s Enterprises, Inc., as General Partner, Flanigan’s Management Services, Inc. and numerous limited partners, excluding Flanigan’s Enterprises, Inc. * 10-K 10/1/2022 10(hh) 13 Registrant's Form 10-K constitutes the Annual Report to Shareholders for the fiscal year ended September 28, 2024. X 19.1 Insider Trading Policy and related Rule 10b5-1 Trading Plan Policy X 21(a) Company's subsidiaries are set forth in this Annual Report on Form 10-K. X 42 31.1 Certification Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended of Chief Executive Officer. X 31.2 Certification Pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended of Chief Financial Officer . X 32.1 Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Chief Executive Officer. X 32.2 Certification Pursuant to 18 U.S.C. Section 1350 as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 of Chief Financial Officer. X 97.1 Incentive Compensation Clawback Policy X * Compensatory plan or arrangement. List of XBRL documents as exhibits 101 ITEM 16. FORM 10-K SUMMARY None. SIGNATURES 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. FLANIGAN'S ENTERPRISES, INC. By: /s/ JAMES G. FLANIGAN II JAMES G. FLANIGAN II Chief Executive Officer Date: 12/27/2024 By: /s/ JEFFREY D. KASTNER JEFFREY D. KASTNER Chief Financial Officer and Secretary (Principal Financial and Accounting Officer) Date: 12/27/2024 43 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in their capacities and on the dates indicated. /s/ JAMES G. FLANIGAN II Chairman of the Board, Date: 12/27/2024 James G. Flanigan II Chief Executive Officer, and Director /s/ JEFFREY D. KASTNER Chief Financial Officer, Date: 12/27/2024 Jeffrey D. Kastner Secretary and Director /s/ AUGUST BUCCI Chief Operating Officer Date: 12/27/2024 August Bucci and Director /s/ MICHAEL B. FLANIGAN Director Date: 12/27/2024 Michael B. Flanigan /s/ PATRICK J. FLANIGAN Director Date: 12/27/2024 Patrick J. Flanigan /s/ CHRISTOPHER O’NEIL Vice President of Package Date: 12/27/2024 Christopher O’Neil Operations and Director /s/ MARY ELIZABETH BENNETT Director Date: 12/27/2024 Mary Elizabeth Bennett /s/ CHRISTOPHER J. NELMS Director Date: 12/27/2024 Christopher J. Nelms /s/ JOHN P. FOSTER Director Date: 12/27/2024 John P. Foster 44 Flanigan’s Enterprises, Inc. and Subsidiaries CONSOLIDATED FINANCIAL STATEMENTS SEPTEMBER 28, 2024 AND SEPTEMBER 30, 2023 Flanigan’s Enterprises, Inc. and Subsidiaries INDEX TO CONSOLIDATED FINANCIAL STATEMENTS PAGE REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID 688 ) F-1 CONSOLIDATED FINANCIAL STATEMENTS Balance Sheets F-2 – F-3 Statements of Income F-4 Statements of Comprehensive Income F-5 Statements of Stockholders’ Equity F-6 Statements of Cash Flows F-7 – F-8 Notes to Consolidated Financial Statements F-9 – F-30 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors of Flanigan’s Enterprises, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Flanigan’s Enterprises, Inc. and subsidiaries (the “Company”) as of September 28, 2024 and September 30, 2023, the related consolidated statements of income, comprehensive income, stockholders’ equity and cash flows for each of the two years in the period ended September 28, 2024, 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, 2024 and September 30, 2023, and the results of its operations and its cash flows for each of the two years in the period ended September 28, 2024, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company’s management. 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”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. 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. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters. /s/ Marcum llp Marcum llp We have served as the Company’s auditor since 1999. Fort Lauderdale, FL December 27, 2024 F- 1 Flanigan’s Enterprises, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS SEPTEMBER 28, 2024 AND SEPTEMBER 30, 2023 (in thousands, except share and per share amounts) ASSETS 2024 2023 Current Assets: Cash and cash equivalents $ 21,402 $ 25,532 Prepaid income taxes 170 219 Other receivables 1,063 834 Inventories 7,020 7,198 Prepaid expenses 1,874 1,511 Total current assets 31,529 35,294 Property and equipment, net 81,747 74,724 Construction in progress — 5,416 81,747 80,140 Right-of-use assets, operating leases 26,828 26,987 Investment in Limited Partnerships 274 252 Other Assets: Liquor licenses 1,268 1,268 Deposits on property and equipment 57 887 Leasehold interests, net 68 63 Other 311 878 Total other assets 1,704 3,096 Total assets $ 142,082 $ 145,769 See notes to consolidated financial statements. F- 2 Flanigan’s Enterprises, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS SEPTEMBER 28, 2024 AND SEPTEMBER 30, 2023 (in thousands, except share and per share amounts) (Continued) LIABILITIES AND STOCKHOLDERS’ EQUITY 2024 2023 Current Liabilities: Accounts payable and accrued expenses $ 7,213 $ 9,271 Accrued compensation 1,798 1,808 Due to franchisees 4,149 4,977 Current portion of long term debt 1,400 1,295 Operating lease liabilities, current 2,467 2,385 Deferred revenue 2,897 2,635 Total current liabilities 19,924 22,371 Long term debt, net of current portion 20,512 21,833 Operating lease liabilities, non-current 25,847 25,850 Deferred tax liabilities 389 801 Total liabilities 66,672 70,855 Commitments and Contingencies Note 12 Stockholders’ Equity: Flanigan’s Enterprises, Inc.’s Stockholders’ Equity Common stock, $ .10 par value, 5,000,000 shares authorized; 4,197,642 shares issued; 1,858,647 outstanding for the years ended 2024 and 2023 420 420 Capital in excess of par value 6,240 6,240 Retained earnings 60,674 58,247 Accumulated other comprehensive income ( 41 ) 395 Treasury stock, at cost, 2,338,995 shares ( 6,077 ) ( 6,077 ) Total Flanigan’s Enterprises, Inc.’s Stockholders’ Equity 61,216 59,225 Noncontrolling interests 14,194 15,689 Total stockholders' equity 75,410 74,914 Total liabilities and stockholders' equity $ 142,082 $ 145,769 See notes to consolidated financial statements. F- 3 Flanigan’s Enterprises, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME Years Ended September 28, 2024 and September 30, 2023 (in thousands, except share and per share amounts) 2024 2023 Revenues: Restaurant food sales $ 114,795 $ 107,238 Restaurant bar sales 30,010 29,000 Package store sales 40,497 35,187 Franchise related revenues 1,693 1,857 Rental income 1,105 951 Other revenues 221 163 188,321 174,396 Costs and Expenses: Cost of merchandise sold: Restaurant 49,862 45,488 Package goods 30,128 25,810 Payroll and related costs 59,349 56,607 Operating Expenses 24,892 23,658 Occupancy costs 8,086 7,566 Selling, general and administrative expenses 5,340 4,682 Depreciation and amortization 4,268 3,561 181,925 167,372 Income from Operations 6,396 7,024 Other Income (Expense): Interest expense ( 1,019 ) ( 1,067 ) Interest and other income 207 108 Gain on sale of property and equipment 2 — ( 810 ) ( 959 ) Income before Provision for Income Taxes 5,586 6,065 Provision for Income Taxes ( 286 ) ( 649 ) Net Income 5,300 5,416 Less: Net Income Attributable to Noncontrolling Interests ( 1,944 ) ( 1,417 ) Net Income Attributable to Flanigan’s Enterprises Inc.’s Stockholders $ 3,356 $ 3,999 Net Income Per Common Share: Basic and Diluted $ 1.81 $ 2.15 Weighted Average Shares and Equivalent Shares Outstanding Basic and Diluted 1,858,647 1,858,647 See notes to consolidated financial statements. F- 4 Flanigan’s Enterprises, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME Years Ended September 28, 2024 and September 30, 2023 (in thousands) 2024 2023 Net income: $ 5,300 $ 5,416 Other comprehensive income: Change in fair value of interest rate swap ( 436 ) 395 Total Comprehensive Income 4,864 5,811 See notes to consolidated financial statements. F- 5 Flanigan’s Enterprises, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED SEPTEMBER 28, 2024 AND SEPTEMBER 30, 2023 (in thousands, except share amounts) Capital in Common Stock Excess of Retained Treasury Stock Noncontrolling Shares Amount Par Value AOCI Earnings Shares Amount Interests Total Balance, September 30, 2023 4,197,642 $ 420 $ 6,240 $ 395 $ 58,247 2,338,995 $ ( 6,077 ) $ 15,689 $ 74,914 Net income — — — — 3,356 — — 1,944 5,300 Other comprehensive loss — — — ( 436 ) — — — — ( 436 ) Distributions to noncontrolling interests — — — — — — — ( 3,439 ) ( 3,439 ) Dividends paid — — — — ( 929 ) — — — ( 929 ) Balance, September 28, 2024 4,197,642 $ 420 $ 6,240 $ ( 41 ) $ 60,674 2,338,995 $ ( 6,077 ) $ 14,194 $ 75,410 Capital in Common Stock Excess of Retained Treasury Stock Noncontrolling Shares Amount Par Value AOCI Earnings Shares Amount Interests Total Balance, October 1, 2022 4,197,642 $ 420 $ 6,240 $ — $ 55,086 2,338,995 $ ( 6,077 ) $ 17,671 $ 73,340 Net income — — — — 3,999 — — 1,417 5,416 Other comprehensive income — — — 395 — — — — 395 Distributions to noncontrolling interests — — — — — — — ( 3,399 ) ( 3,399 ) Dividends paid — — — — ( 838 ) — — — ( 838 ) Balance, September 30, 2023 4,197,642 $ 420 $ 6,240 $ 395 $ 58,247 2,338,995 $ ( 6,077 ) $ 15,689 $ 74,914 See notes to consolidated financial statements. F- 6 Flanigan’s Enterprises, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED SEPTEMBER 28, 2024 AND SEPTEMBER 30, 2023 (in thousands) 2024 2023 Cash Flows from Operating Activities: Net income $ 5,300 $ 5,416 Adjustments to reconcile net income to net cash and cash equivalents provided by operating activities: Depreciation and amortization 4,268 3,561 Amortization of leasehold interests 26 23 Amortization of operating lease right-of-use assets 2,549 2,530 Gain on sale of property and equipment ( 2 ) — Loss on abandonment of property and equipment 91 65 Gain on casualty loss ( 30 ) — Amortization of deferred loan costs 35 38 Deferred income taxes ( 265 ) 62 Loss from unconsolidated limited partnership ( 42 ) ( 9 ) Changes in operating assets and liabilities: (Increase) decrease in: Other receivables ( 199 ) ( 378 ) Prepaid income taxes 49 16 Inventories 178 ( 709 ) Prepaid expenses ( 363 ) 64 Other assets ( 16 ) ( 39 ) Increase (decrease) in: Accounts payable and accrued expenses ( 2,072 ) ( 55 ) Operating lease liabilities ( 2,311 ) ( 2,299 ) Due to franchisees ( 828 ) 197 Deferred revenue 262 6 Net cash and cash equivalents provided by operating activities 6,630 8,489 Cash Flows from Investing Activities: Purchase of property and equipment ( 3,445 ) ( 13,177 ) Purchase of construction in progress ( 1,594 ) ( 3,531 ) Deposits on property and equipment ( 174 ) ( 1,962 ) Purchase of leaseholds ( 31 ) — Proceeds from sale of property and equipment 83 60 Distributions from unconsolidated limited partnership 20 51 Net cash and cash equivalents used in investing activities ( 5,141 ) ( 18,559 ) F- 7 Flanigan’s Enterprises, Inc. and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED SEPTEMBER 28, 2024 AND SEPTEMBER 30, 2023 (in thousands) 2024 2023 Cash Flows from Financing Activities: Payments on long term debt ( 1,251 ) ( 2,299 ) Dividends paid ( 929 ) ( 838 ) Distributions to limited partnerships’ noncontrolling interests ( 3,439 ) ( 3,399 ) Net cash and cash equivalents used in financing activities ( 5,619 ) ( 6,536 ) Net Decrease in Cash and Cash Equivalents ( 4,130 ) ( 16,606 ) Cash and Cash Equivalents - Beginning of Period 25,532 42,138 Cash and Cash Equivalents - End of Period $ 21,402 $ 25,532 Supplemental Disclosure for Cash Flow Information: Cash paid during the year for: Interest $ 967 $ 1,067 Income taxes $ 501 $ 571 Supplemental Disclosure of Non-Cash Investing and Financing Activities: (Decrease) Increase in fair value of interest rate swap $ ( 583 ) $ 529 Purchase deposits capitalized to property and equipment $ 289 $ 2,390 Purchase deposits transferred to construction in progress $ 715 $ 545 Construction in progress transferred to property and equipment $ 7,676 $ 7,110 Construction in progress in accounts payable and accrued expenses $ 4 $ 931 Remeasurement of right-of-use operating lease $ 2,390 $ — See notes to consolidated financial statements. F- 8 Flanigan’s Enterprises, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 28, 2024 AND SEPTEMBER 30, 2023 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Capitalization The Company was incorporated in 1959 and operates in South Florida as a chain of full-service restaurants and package liquor stores. Restaurant food and beverage sales make up the majority of our total revenue. As of September 28, 2024, we (i) operate 32 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 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”, a restaurant in which we do not have an ownership interest, and “Brendan’s Sports Pub”, a restaurant/bar we own, all of the restaurants operate under our service marks “Flanigan’s Seafood Bar and Grill” or “Flanigan’s” and all of the package liquor stores operate under our service marks “Big Daddy’s Liquors” or “Big Daddy’s Wine & Liquors”. The Company’s Articles of Incorporation, as amended, authorize us to issue and have outstanding at any one time 5,000,000 shares of common stock at a par value of $ 0.10 per share. We operate under a 52-53 week year ending the Saturday closest to September 30. Our fiscal years 2024 and 2023 are each comprised of a 52-week period. Principles of Consolidation The consolidated financial statements include the accounts of the Company and our subsidiaries, all of which are wholly owned, and the accounts of the ten limited partnerships in which we act as general partner and have controlling interests. All significant intercompany transactions and balances have been eliminated in consolidation. Noncontrolling interests in consolidated subsidiaries are included in the consolidated balance sheets as a separate component of equity. We report consolidated net income inclusive of both the Company’s and the noncontrolling interests’ share, as well as amounts of consolidated net income (loss) attributable to each of the Company and the noncontrolling interests. 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 intercompany profits are eliminated. Certain amounts in the prior year consolidated financial statements and related disclosures have been reclassified herein to conform to the presentation of the fiscal year ended September 28, 2024 consolidated financial statements and related disclosures for reporting, which did not have a material impact on our net income or total assets. Use of Estimates The consolidated financial statements and related disclosures are prepared in conformity with accounting principles generally accepted in the United States and SEC rules. We are required to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the periods reported. These 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, and estimates relating to loyalty reward programs. 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. 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. F- 9 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Cash and Cash Equivalents We consider all highly liquid investments with an original maturity of three months or less at the date of purchase and receivables from our credit card merchants to be cash equivalents. We maintain deposit balances with financial institutions, which balances may from time to time, exceed the federally insured limits which are $ 250,000 for interest and non-interest bearing accounts. The deposit balances that exceed the federally insured limits are approximately $ 14,479,000 as of September 28, 2024. We have not experienced any losses on such accounts. Other Receivables Our receivables consist primarily of rebates due to our restaurant or package stores. Inventories Our inventories, which consist primarily of package liquor products, are stated at the lower of weighted average cost or net realizable value. The movement of inventory approximates first in, first out (FIFO). Liquor Licenses In accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 350, “ Intangibles - Goodwill and Other ”, our liquor licenses are indefinite lived assets, which are not being amortized, but are tested annually for impairment (see Note 9). Property and Equipment Our property and equipment are stated at cost less accumulated depreciation and amortization. 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. 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. 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 15 years. Our buildings of our corporate offices in Fort Lauderdale, Florida; our construction office/warehouse in Fort Lauderdale, Florida; our combination restaurant and package liquor stores in Hallandale, Florida and North Lauderdale, Florida; our restaurants in N. Miami and Fort Lauderdale, Florida; our property in Sunrise, Florida which we lease to a limited partnership (Store #85), our property in Fort Lauderdale, Florida which we lease to a franchisee (Store #15), our package stores in N. Miami, Florida and El Portal, Florida and our shopping centers in Miami, Florida and Hallandale Beach, Florida all of which we own, are being depreciated over forty years . Building improvements are being depreciated over 20 years. Leasehold Interests Our purchase of an existing restaurant location usually includes a lease to the business premises. As a result, a portion of the purchase price is allocated to the leasehold interest. We capitalize the cost of the leasehold interest and amortization commences upon our assumption of the lease. We amortize leasehold interests on a straight-line basis over the remaining term of the lease. Concentrations of Credit Risk Financial instruments that potentially subject us to concentrations of credit risk are cash and cash equivalents. F- 10 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Major Suppliers Throughout our fiscal years 2024 and 2023, we purchased a significant portion of our food products from two major suppliers. The first major supplier represents 38 % and 42 % of our cost of goods sold and 31 % and 29 % of our accounts payable and accrued expenses as of September 28, 2024 and September 30, 2023, respectively. The second major supplier represents 11 % and 6 % of our cost of goods sold and 2 % and 1 % of our accounts payable and accrued expenses as of September 28, 2024 and September 30, 2023, respectively. We believe that several other alternative vendors are available, if necessary. Throughout our fiscal years 2024 and 2023, we purchased the majority of our alcoholic beverages from three local distributors. One of these three local distributors represents 23 % and 24 % of our cost of goods sold for the years ended September 28, 2024 and September 30, 2023, respectively and 6 % and 5 % of our accounts payable and accrued expenses as of September 28, 2024 and September 30, 2023, respectively. Each distributor has exclusive rights from the manufacturers to sell specific brands in given areas, so unless the exclusive distribution rights are transferred to another vendor, there are no alternate distributors available. Revenue Recognition Revenue-related to food, bar and package sales 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 revenues net of sales tax. We sell gift cards which do not have expiration dates. Revenue from gift cards is recognized when gift cards are redeemed by the customer. Our Big Daddy’s Good Customer Loyalty Program awards customers with a $ 20 Good Customer Gift Card, (“Gift Card”) to be used at our Flanigan’s Seafood Bar and Grill restaurants for every ten (10) purchases of at least $ 25 made by such customer at our Big Daddy’s Liquors package liquor stores. Pursuant to ASC 606, we recognize deferred revenue in the amount of the Gift Card upon the issuance of the Gift Card and reduce package liquor store revenue by a like amount. We recognize revenue when the Gift Card is redeemed in our restaurants or when it expires unused. Gift cards have various expiration dates based upon each program, while gift cards purchased for cash have no expiration dates. Lunch Club Loyalty Program awards customers with a free lunch once they have earned a required number of points. Pursuant to ASC 606, we recognize deferred revenue in the amount of the free lunch and reduce restaurant store revenue by a like amount. We recognize revenue when the free lunch is redeemed in our restaurants or when it expires unused. Holiday Promotional Card Program awards customers with a $ 20 promotional gift card (“Promo Gift Card”) when they spend $ 100 in the restaurants on food/drink or purchase a $ 100 gift card. This $ 20 promotional card can only be redeemed within a three month window. Pursuant to ASC 606, we recognize deferred revenue in the amount of the Promo Gift Card upon issuance and reduce restaurant store revenue by a like amount. We recognize revenue when the Gift Card is redeemed in our restaurants or when it expires unused. Pre-opening Costs As new restaurants open, our income from operations will be adversely affected due to our obligation to fund pre-opening costs. 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 costs. We expense pre-opening costs as incurred and during our fiscal year ended September 28, 2024 we expensed $ 77,000 for our store #19R. During our fiscal year ended September 30, 2023 we expensed $ 188,000 for CIC Investors #25, LTD (Store #25). Advertising Costs Our advertising costs are expensed as incurred. Advertising costs incurred during our fiscal years ended September 28, 2024 and September 30, 2023 were approximately $ 223,000 and $ 253,000 , respectively. General Liability Insurance We have general liability insurance which incorporates a $ 50,000 self-insured retention per occurrence for us and a $ 10,000 self-insured retention per occurrence for the limited partnerships. Our insurance carrier is responsible for $ 1,000,000 coverage per occurrence above our self-insured retentions, up to a maximum aggregate of $ 2,000,000 per year. We were also 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. We secured general liability insurance and excess liability insurance to be effective as of December 30, 2024. Our general policy is to settle only those legitimate and reasonable claims asserted and to aggressively defend and go to trial, if necessary, on frivolous and unreasonable claims. Under our current liability insurance policy, certain expenses incurred by us in defending a claim, including attorney's fees, are a part of a $ 50,000 self-insured retention per occurrence for us and a $ 10,000 self-insured retention per occurrence for the limited partnerships. F- 11 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Fair Value of Financial Instruments The respective carrying value of our on-balance-sheet financial instruments approximate their fair value. These instruments include cash and cash equivalents, other receivables, accounts payables, accrued expenses and debt. We have assumed carrying values to approximate fair values for those financial instruments, which are short-term in nature or are receivable or payable on demand. We estimated the fair value of debt based on current rates offered to us for debt of comparable maturities and similar collateral requirements. In accordance with FASB ASC Topic 820-10-50-1, we utilized a valuation model to determine the fair value of our swap agreement. As the valuation models for the swap agreement were based upon observable inputs, they are classified as Level 2 (see Note 13). Derivative Instruments We account for derivative instruments in accordance with FASB ASC Topic 815-10-05-4, “ Accounting for Derivative Instruments and Hedging Activities” as amended, which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities. In accordance with FASB ASC Topic 815-10-05-4, derivative instruments are recognized as assets or liabilities in the Company’s consolidated balance sheets and are measured at fair value. We determined that the interest rate swap agreement is an effective hedging agreement and changes in fair value are adjusted quarterly (see Note 13). Income Taxes We account for our income taxes using FASB ASC Topic 740, “ Income Taxes ”, which requires the recognition of deferred tax liabilities and assets for expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. We follow the provisions regarding Accounting for Uncertainty in Income Taxes, which require the recognition of a financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more likely than not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. For our fiscal years ended September 28, 2024 and September 30, 2023, 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, 2024. Long-Lived Assets We continually evaluate whether events and circumstances have occurred that may warrant revision of the estimated life of our intangible and other long-lived assets or whether the remaining balance of our intangible and other long-lived assets should be evaluated for possible impairment. If and when such factors, events or circumstances indicate that intangible or other long-lived assets should be evaluated for possible impairment, we will determine the fair value of the asset by making an estimate of expected future cash flows over the remaining lives of the respective assets and compare that fair value with the carrying value of the assets in measuring their recoverability. In determining the expected future cash flows, the assets will be grouped at the lowest level for which there are cash flows, at the individual store level. Earnings Per Share We follow FASB ASC Topic 260 - “ Earnings per Share .” This section provides for the calculation of basic and diluted earnings per share. Basic earnings per share includes no dilution. Earnings per share are computed by dividing income available to common stockholders by the basic and diluted weighted average number of common shares. F- 12 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Recently Adopted and Recently Issued Accounting Pronouncements Adopted 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. 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. This ASU will be effective for the Company in our fiscal year 2026, with the guidance applied either prospectively or retrospectively. Early 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. F- 13 NOTE 2. PROPERTY AND EQUIPMENT, NET (in thousands) 2024 2023 Furniture and equipment $ 17,741 $ 15,956 Leasehold improvements 32,381 31,314 Land and land improvements 36,221 36,027 Building and improvements 38,065 30,613 Vehicles 2,281 2,085 Other 317 — 127,006 115,995 Less accumulated depreciation and amortization ( 45,259 ) ( 41,271 ) 81,747 74,724 Construction in progress — 5,416 $ 81,747 $ 80,140 Depreciation and amortization expense for the fiscal years ended September 28, 2024 and September 30, 2023 was approximately $ 4,268 ,000 and $ 3,561 ,000, respectively. NOTE 3. LEASEHOLD INTERESTS, NET (in thousands) 2024 2023 Leasehold interests, at cost $ 3,055 $ 3,024 Less accumulated amortization ( 2,987 ) ( 2,961 ) $ 68 $ 63 Future leasehold amortization as of September 28, 2024 is as follows: (in thousands) 2025 $ 27 2026 23 2027 6 2028 5 2029 5 Thereafter 2 Total $ 68 Leasehold amortization expense for the fiscal years ended September 28, 2024 and September 30, 2023 was approximately $ 26,000 and $ 23,000 , respectively. F- 14 NOTE 4. INVESTMENT IN LIMITED PARTNERSHIPS We have invested along with others (some of whom are affiliated with our officers and directors) in eleven limited partnerships which currently own and operate eleven South Florida based restaurants under our service marks “Flanigan’s Seafood Bar and Grill” or “Flanigan’s”. In addition to being a limited partner in these limited partnerships, we are the sole general partner of ten of these limited partnerships and manage and control the operations of these restaurants except for the restaurant located in Fort Lauderdale, Florida where we only hold a limited partnership interest. Generally, the terms of the limited partnership agreements provide that until the investors’ cash investment in a limited partnership (including any cash invested by us) is returned in full, (available cash is distributed to the investors pro-rata based on ownership interest), 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 to us. 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 (½) to the investors (including us), pro-rata based on 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 on the investors’ investment. As of September 28, 2024, all limited partnerships, with the exception of the limited partnership which owns the restaurant in Sunrise, Florida (Store #85), which opened for business in March 2022 and the limited partnership which owns the restaurant in Miramar, Florida (Store #25), which opened for business in April 2023, 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 receipt of distributable amounts from the limited partnerships, we receive a fee equal to 3 % of gross sales for use of our service marks “Flanigan’s Seafood Bar and Grill” or “Flanigan’s”, which use is authorized while we act as general partner only. This 3 % fee is “earned” when sales are made by the limited partnerships and is paid weekly, in arrears. Whether we will have any additional restaurants in the future will be dependent, among other things, on market conditions and our ability to raise capital. We anticipate that we will continue to form limited partnerships to raise funds to own and operate restaurants under our service marks “Flanigan’s Seafood Bar and Grill” or “Flanigan’s” using the same or substantially similar financial arrangements. Below is information on the eleven limited partnerships which own and operate “Flanigan’s Seafood Bar and Grill” or “Flanigan’s” restaurants: Surfside, Florida We are the sole general partner and a 46 % limited partner in this limited partnership which has owned and operated a restaurant in Surfside, Florida under our “Flanigan’s Seafood Bar and Grill” service mark since March 6, 1998. 33.3 % of the 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 this limited partnership. This entity is consolidated in the accompanying consolidated 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” service mark since April 4, 2000. 28.3 % of the 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 this limited partnership. This entity is consolidated in the accompanying consolidated financial statements. West Miami, Florida We are the sole general partner and a 27 % limited partner in this limited partnership which has owned and operated a restaurant in West Miami, Florida under our “Flanigan’s Seafood Bar and Grill” service mark since October 11, 2001. 32.7 % of the 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 this limited partnership. This entity is consolidated in the accompanying consolidated financial statements. F- 15 Wellington, Florida 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. 21.9 % of the 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 this limited partnership. This entity is consolidated in the accompanying consolidated financial statements. Pinecrest, Florida We are the sole general partner and 45 % limited partner in this limited partnership which has owned and operated a restaurant in Pinecrest, Florida under our “Flanigan’s Seafood Bar and Grill” service mark since August 14, 2006. 19.4 % of the 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 this limited partnership. This entity is consolidated in the accompanying consolidated financial statements. Pembroke Pines, Florida We 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” service mark since October 29, 2007. 23.0 % of the 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 this limited partnership. This entity is consolidated in the accompanying consolidated financial statements. Davie, Florida We are the sole general partner and a 49 % limited partner in this limited partnership which has owned and operated a restaurant in Davie, Florida under our “Flanigan’s Seafood Bar and Grill” service mark since July 28, 2008. 12.0 % of the 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 this limited partnership. This entity is consolidated in the accompanying consolidated financial statements. Miami, Florida We are the sole general partner and a 5 % limited partner in this limited partnership which has owned and operated a restaurant in Miami, Florida under our “Flanigan’s Seafood Bar and Grill” service mark since December 27, 2012. 26.3 % of the 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 this limited partnership. This entity is consolidated in the accompanying consolidated financial statements. F- 16 NOTE 4. INVESTMENT IN LIMITED PARTNERSHIPS (Continued) Sunrise, Florida We are the sole general partner and a 7 % limited partner in this limited partnership which has owned and operated a restaurant in Sunrise, Florida under our “Flanigan’s” service mark since March 22, 2022. 32.1 % of the limited partnership interest is owned by persons who are either our officers, directors or their family members. As of the end of our fiscal year 2024, this limited partnership has returned to its investors approximately 19.0 % of their initial cash invested and as a result, we are currently not entitled to receive any management fees from this limited partnership. This entity is consolidated in the accompanying consolidated financial statements. Miramar, Florida We are the sole general partner in this limited partnership which has owned and operated a restaurant in Miramar, Florida under our “Flanigan’s” service mark since April 18, 2023. No units of limited partnership interest were purchased by the Company. 25.5 % of the limited partnership interest is owned by persons who are either our officers, directors or their family members. As of the end of our fiscal year 2024, this limited partnership has returned to its investors approximately 25 % of their initial cash invested and as a result, we are currently not entitled to receive any management fee from this limited partnership. This entity is consolidated in the accompanying consolidated financial statements. 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. 56.9 % of the 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 cash invested, but since we are not the general partner of this limited partnership, we do not receive an annual management fee. We have a franchise arrangement with this limited partnership and for accounting purposes, we do not consolidate the operations of this limited partnership into our operations. Our investment in this entity is reported using the equity method in the accompanying consolidated financial statements. The following is a summary of financial information pertaining to our limited partnership investment in Fort Lauderdale, Florida: Unaudited (in thousands) September 28, 2024 September 30, 2023 Financial Position: Current Assets $ 438 $ 355 Non-Current Assets 705 733 Total Assets 1,143 1,088 Current Liabilities 229 259 Non-Current Liabilities — — Total Liabilities 229 259 Equity 914 829 Total Liabilities and Equity $ 1,143 $ 1,088 Operating Results: Revenues 5,051 4,848 Gross Profit 3,311 3,208 Net (Loss) Income 166 ( 40 ) F- 17 NOTE 5. PURCHASE OF REAL PROPERTY; LEASEHOLD / SUB-LEASEHOLD INTERESTS El Portal, Florida (“Big Daddy’s Liquors”/Warehouse) During the third quarter of our fiscal year 2023, we closed with a non-affiliated third party on the purchase of the real property it owns located at 8600 Biscayne Boulevard, El Portal, Florida consisting of approximately 6,000 square feet of commercial space which we sublease and where our “Big Daddy’s Liquors” package liquor store and our warehouse (Store #47) operate for $ 3,200,000 . We paid all cash at closing. Despite the purchase of this property, the sublease arrangement remains in place with all investors. Hallandale Beach, Florida During the third quarter of our fiscal year 2023, we closed with a non-affiliated third party on the purchase of a three building shopping center in Hallandale Beach, Florida, which consists of one stand-alone building a portion of which is leased to one unaffiliated third party (approximately 950 square feet) and a portion which is occupied by us (approximately 500 square feet); a second stand-alone building which is leased to one unaffiliated third party (approximately 1,500 square feet); and a third stand-alone building which is leased to one unaffiliated third party (approximately 2,500 square feet) for $ 8,500,000 . The rental income generated by these three lease arrangements is not material. The real property is located adjacent to our real property located at 4 N. Federal Highway, Hallandale Beach, Florida, where our combination package store and restaurant (Store #31) operates. We paid all cash at closing and accounted for this transaction as an asset acquisition. Purchase of Leasehold/Sub-leasehold Interests In 1974, we sold the underlying ground lease to the real property located at 8600 Biscayne Boulevard, El Portal, Florida to related and unrelated third parties and simultaneously subleased it back. We operate our retail package liquor store (Store #47) and warehouse from this location. During the first quarter of our fiscal year 2024, we re-purchased a 4 % interest in the underlying ground lease, as well as the sublease agreement from an unrelated third party for $ 31,000 and currently own 56 % of each lease. As a result, we now only pay 44 % of the rent due under the ground lease and the sublease agreement. NOTE 6. INSURANCE PREMIUMS Due to continuing higher interest rates, for the policy year commencing December 30, 2023 we paid the premiums for property, general liability, excess liability and terrorism policies in full with premiums totaling approximately $ 3.92 million, which includes coverage for our franchises (of approximately $ 850,000 ), which are not included in our consolidated financial statements. For the policy year commencing December 30, 2024, we will pay the premiums for property, general liability, excess liability and terrorism policies in full again due to continuing higher interest rates. NOTE 7. DEFERRED REVENUE Changes in deferred revenue on the consolidated balance sheets were as follows: Loyalty Program Gift Cards Holiday Promo Lunch Club Big Daddy Good Customer Other Total September 30, 2023 $ 1,215 $ — $ 79 $ 1,341 $ — $ 2,635 Revenue deferred 3,560 1,663 24 831 2 6,080 Revenue recognized ( 3,387 ) ( 1,663 ) ( 1 ) ( 767 ) — ( 5,818 ) September 28, 2024 $ 1,388 $ — $ 102 $ 1,405 $ 2 $ 2,897 October 1, 2022 $ 1,103 $ — $ 73 $ 1,453 $ — $ 2,629 Revenue deferred 3,560 1,382 117 675 — 5,734 Revenue recognized ( 3,448 ) ( 1,382 ) ( 111 ) ( 787 ) — ( 5,728 ) September 30, 2023 $ 1,215 $ — $ 79 $ 1,341 $ — $ 2,635 NOTE 8. RE-CONSTRUCTION FOLLOWING 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. The package liquor store re-opened for business during the first quarter of our fiscal year 2023 in a newly constructed stand-alone building. The restaurant re-opened for business during the second quarter of our fiscal year 2024 in a newly constructed stand-alone building where our combination package liquor store and restaurant was previously located. F- 18 NOTE 9. LIQUOR LICENSES Liquor licenses, which are indefinite lived assets, are tested for impairment in September of each of our fiscal years. The fair value of liquor licenses at September 28, 2024, 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, 2024 and September 30, 2023, the total carrying amount of our liquor licenses was $ 1,268,000 . NOTE 10. INCOME TAXES The components of our provision for income taxes for our fiscal years 2024 and 2023 are as follows: (in thousands) 2024 2023 Current: Federal $ 246 $ 298 State 305 289 551 587 Deferred: Federal ( 282 ) ( 84 ) State 17 146 ( 265 ) 62 $ 286 $ 649 A reconciliation of income tax computed at the statutory federal rate to income tax expense is as follows: (in thousands) 2024 2023 Tax provision at the statutory rate $ 1,173 $ 1,273 Non-controlling interests ( 408 ) ( 297 ) State income taxes, net of federal income tax 264 343 FICA tip credit ( 1,029 ) ( 799 ) True up adjustment 77 89 Other permanent items, net 209 40 $ 286 $ 649 We have deferred tax liabilities and assets which arise primarily due to depreciation recorded at different rates for tax and book purposes offset by cost basis differences in depreciable assets due to the deferral of the recognition of insurance recoveries on casualty losses for tax purposes, investments in and management fees paid by limited partnerships, accruals for potential uninsured claims, bonuses accrued for book purposes but not paid within two and a half months for tax purposes, the capitalization of certain inventory costs for tax purposes not recognized for financial reporting purposes, the recognition of revenue from gift cards and other promotional programs not redeemed within twelve months of issuance, allowances for uncollectable receivables, unfunded limited retirement commitments, book-tax differences related to operating leases, interest rate swap mark-to-market adjustments and FICA tax credit. The components of our deferred tax assets (liabilities) at September 28, 2024 and September 30, 2023 were as follows: (in thousands) Deferred tax assets: 2024 2023 Reversal of aged payables $ 18 $ 18 Capitalized inventory costs 26 28 Accrued bonuses 52 66 Accruals for potential uninsured claims 27 13 Gift cards 247 223 Deferred revenue 205 179 Tip credit 914 570 Operating lease liabilities 3,319 3,525 Limited partnership investments 446 475 Interest rate swaps 14 ( 134 ) Accrued limited retirement 76 73 Subtotal $ 5,344 $ 5,036 Less: Valuation allowance — — Total net deferred tax assets 5,344 5,036 F- 19 NOTE 10. INCOME TAXES (Continued) (in thousands) Deferred tax liabilities: 2024 2023 Limited partnership management fees $ ( 680 ) $ ( 873 ) Book/tax differences in property and equipment and intangible assets ( 1,901 ) ( 1,573 ) Operating lease right of use assets ( 3,152 ) ( 3,391 ) Total deferred tax liabilities ( 5,733 ) ( 5,837 ) Net deferred tax liability $ ( 389 ) $ ( 801 ) As of September 28, 2024, the Company has federal general business credit carryforward of $ 914,000 . General business credit carryovers can be carried back 1 year and carried forward 20 years. The company's general business credit carryforward will begin to expire in fiscal year 2040. The Company and its subsidiaries file a U.S. Corporation federal income tax return and a Florida Corporation income tax return. These returns are subject to examination by taxing authorities for all fiscal years after 2020. NOTE 11. DEBT Debt consists of the following as of September 28, 2024 and September 30, 2023: Long-Term Debt 2024 2023 Mortgage payable to institutional lender, 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 $ 43,400 , with a balloon payment of approximately $ 5,373,000 due on November 27, 2026. As of September 28 2024, the net book value of the collateral securing this mortgage was $ 5,501,000 . 6,016 6,295 Mortgage payable to institutional lender, secured by first mortgage on real property and improvements, bearing interest at the fixed rate of 3.63 % per annum, fully amortized over fifteen ( 15 ) years, payable in monthly installments of principal and interest of approximately $ 31,100 , with a final payment on July 1, 2036. As of September 28, 2024, the net book value of the collateral securing this mortgage was $ 10,910,000 . 3,579 3,815 Mortgage payable to institutional lender, secured by first mortgage on real property and improvements, bearing interest at the fixed rate of 3.65 % per annum, fully amortized over fifteen ( 15 ) years, payable in monthly installments of principal and interest of approximately $ 16,000 , with a final payment on March 2, 2036. As of September 28, 2024, the net book value of the collateral securing this mortgage was $ 7,787,000 . 1,790 1,913 Mortgage payable to institutional lender, secured by a first mortgage on real property and improvements, bearing interest at BSBY Screen Rate – 1 Month +1.50%, ( 5.32 % at September 28, 2024), but with the interest fixed at 4.90 % pursuant to a swap agreement, amortized over fifteen ( 15 ) years, payable in monthly installments of principal of approximately $ 36,700 , with a final payment on September 28, 2037. As of September 28, 2024, the net book value of the collateral securing this mortgage was $ 3,438,000 . Additionally, effective November 15, 2024, the publication of BSBY was terminated and as of such date, the variable rate of interest under our debt instrument is equal to the lender’s 1 Month CME Term Secured Overnight Financing Rate (“SOFR”), plus 10 basis points, as an equivalent alternative approved by the lender. 8,124 8,505 Mortgage payable to institutional 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 $ 6,400 , with a final payment on December 28, 2031. As of September 28, 2024, the net book value of the collateral securing this mortgage was $ 1,021,000 . 487 535 F- 20 NOTE 11. DEBT (Continued) 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 6 %, amortized over fifteen ( 15 ) years, payable in monthly installments of principal and interest of approximately $ 9,300 , with a balloon payment of approximately $ 487,000 on August 1, 2032. As of September 28,2024, the net book value of the collateral securing this mortgage was $ 2,040,000 . 1,000 1,049 Mortgage payable to institutional 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 $ 6,500 , with a final payment on December 28, 2031. As of September 28, 2024, the net book value of the collateral securing this mortgage was $ 1,002,000 . 498 547 Mortgage payable to unrelated third party, secured by first mortgage on real property and improvements, bearing interest at 7.5 %, amortized over twenty ( 20 ) years, payable in monthly installments of principal and interest of approximately $ 7,300 , with a final payment on March 1, 2034. As of September 28, 2024, the net book value of the collateral securing this mortgage was $ 1,046,000 . 600 641 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 on November 1, 2026. As of September 28, 2024, the net book value of the collateral securing this mortgage was $ 549,000 . 76 109 Other 17 29 Less unamortized loan costs ( 275 ) ( 310 ) 21,912 23,128 Less current portion ( 1,400 ) ( 1,295 ) $ 20,512 $ 21,833 Long-term debt at September 28, 2024 matures as follows: 2025 1,400 2026 1,413 2027 6,555 2028 1,180 2029 1,239 Thereafter 10,400 22,187 Less unamortized loan costs ( 275 ) $ 21,912 F- 21 NOTE 11. DEBT (Continued) As of September 28, 2024, we are in compliance with the financial covenants contained in our loans with our unrelated third party institutional lender (the “Institutional Lender”) under which we owe in the aggregate, approximately $ 20,494,000 (the “Institutional Loans”), of our total loans of approximately $ 21,912,000 . As of September 28, 2024, the year-end fair value of our debt approximates carrying value. In February 2023, we determined that as of December 31, 2022, we did not meet the required Post-Distribution Basic Fixed Charge Coverage Ratio (the “Post-Distribution/Fixed Charge Covenant”) contained in each of our six (6) loans (the “Institutional Loans”) with our unrelated third party institutional lender (the “Institutional Lender’). On February 23, 2023, we received from the Institutional Lender, a written waiver of the non-compliance with the Post-Distribution/Fixed Charge Covenant (the “Covenant Non-Compliance”), pursuant to which, among other things, the Institutional Lender waived (1) the non-compliance as of December 31, 2022 and (2) their right to exercise 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 had 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 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 28, 2024. NOTE 12. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS Construction Contracts (a) 2505 N. University Drive, Hollywood, Florida (Store #19 – “Flanigan’s”) 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 2505 N. 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. ERP Contract In the third quarter of our fiscal year 2024, we entered into an agreement with Oracle, an unrelated third party vendor for the licensing and support of NetSuite, a cloud-based Oracle ERP solution to replace our general ledger. The agreement is for a period of five years at a fixed rate of approximately $ 40,000 annually, with a cap on the percentage increase to our fees for our options to extend the term of the agreement for years six and seven . The fee for the five year agreement will be paid to the unrelated third party vendor over a period of five years, with a deferral of any payments for the first six months of the agreement. We do not expect the implementation of NetSuite to be complete and functional until the second quarter of our fiscal year 2025. In the third quarter of our fiscal year 2024, we also entered into an agreement with an unrelated third party implementation partner for the implementation of NetSuite. The fee for its implementation services will be approximately $ 237,000 , payable as hourly services are performed and billed. Legal Matters Our sale of alcoholic beverages subjects us to “dram shop” statutes, which allow an injured person to recover damages from an establishment that served alcoholic beverages to an intoxicated person. If we receive a judgment substantially in excess of our insurance coverage or if we fail to maintain our insurance coverage, our business, financial condition, operating results or cash flows could be materially and adversely affected. There are currently no “dram shop” claims pending against us. We are a party to various other claims, legal actions and complaints arising in the ordinary course of our business. 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. F- 22 NOTE 12. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued) Leases To conduct certain of our operations, we lease restaurant and package liquor store space in South Florida from unrelated third parties. Our leases have remaining lease terms of up to 48 years, some of which include options to renew and extend the lease terms for up to an additional 26 years. 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 during our fiscal year ended October 3, 2020, common area maintenance and property taxes are not considered to be lease components. The components of lease expense are as follows: (in thousands) 52 Weeks 52 Weeks Ended September 28, 2024 Ended September 30, 2023 Operating Lease Expense, which is included in occupancy costs $ 3,852 $ 3,822 Variable Lease Expense, which is included in occupancy costs $ 918 $ 1,035 (in thousands) Classification on the Condensed Consolidated Balance Sheets September 28, 2024 September 30, 2023 Assets Operating lease assets $ 26,828 $ 26,987 Liabilities Operating lease current liabilities $ 2,467 $ 2,385 Operating lease non-current liabilities $ 25,847 $ 25,850 Weighted Average Remaining Lease Term: Operating Leases 10.17 Years 9.86 Years Weighted Average Discount: Operating leases 5.02 % 4.75 % The following table outlines the minimum future lease payments for the next five years and thereafter: (in thousands) For fiscal year Operating 2025 3,776 2026 3,860 2027 3,765 2028 3,780 2029 3,800 Thereafter 20,231 Total lease payments (undiscounted cash flows) 39,212 Less imputed interest ( 10,898 ) Total operating lease liabilities $ 28,314 F- 23 NOTE 12. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued) Purchase Commitments 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. The 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. Flanigan’s Fish Company, LLC As of September 28, 2024, Flanigan’s Fish Company, LLC, a Florida limited liability company (“FFC”), supplies certain fish to all of our restaurants. Since we 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 (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. Franchise Program At September 28, 2024 and September 30, 2023, we were the franchisor of five units under franchise agreements. Of the five franchised stores, three are combination restaurant/package liquor stores and two are restaurants (one of which we operate). Four franchised stores are owned and operated by related parties as follows: • James G. Flanigan, our Chairman of the Board of Directors, Chief Executive Officer and President of the Company, and Michael B. Flanigan, a member of our Board of Directors and James G. 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 adjacent package liquor store located in Coconut Grove, Florida (Store #18). • Patrick J. Flanigan, brother to both James G. Flanigan and Michael B. Flanigan and a member of our Board of Directors, owns 100 % of a company which has a franchise arrangement with us for the operation of a combination restaurant/package liquor store located in Pompano Beach, Florida (Store #43). • Our officers and directors collectively own 30 % of the shareholder interest of a company which has a franchise arrangement with us for the operation of a restaurant located in Deerfield Beach, Florida. The shareholder interest of James G. Flanigan’s family represents an additional 60 % of the total invested capital in this franchised location (Store #14). • Patrick J. Flanigan is the sole general partner and a 25 % limited partner in a limited partnership which has a franchise arrangement with us for the operation of a restaurant located in Fort Lauderdale, Florida. The Company is a 25 % limited partner in this limited partnership and officers and directors of the Company (excluding Patrick J. Flanigan) own an additional 31.9 % limited partnership interest in this franchised location (Store #15). Under the franchise agreements, we provide guidance, advice and management assistance to the franchisees. In addition and for an additional annual fee of approximately $ 25,000 , we also act as fiscal agent for the franchisees whereby we collect 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 2024 and 2023, we earned royalties of $ 1,195,000 and $ 1,163,000 , respectively, from our related franchises, which royalties are included in Franchise-related revenues in our Consolidated Statements of Income. We are not currently offering or accepting new franchises. F- 24 NOTE 12. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued) Employment Agreements/Bonuses As of September 28, 2024 and September 30, 2023, we had no employment agreements. Our Board of Directors approved an annual performance bonus, with 14.75 % of the corporate pre-tax net income, plus or minus non-recurring items, but before depreciation and amortization in excess of $ 650,000 paid to the Chief Executive Officer and 5.25 % paid to other members of management, (the “Officers Bonus”). Officers Bonuses for our fiscal years 2024 and 2023 amounted to approximately $ 1,434,000 and $ 1,604,000 , respectively. Our Board of Directors also approved an additional annual performance bonus, with 5 % of the pre-tax net income before depreciation and amortization from our restaurants in excess of $ 1,875,000 and our share of the pre-tax net income before depreciation and amortization from the restaurants owned by the limited partnerships paid to the Chief Operating Officer and 5 % paid to the Chief Financial Officer (the “Restaurant Bonus’'). Restaurant Bonuses for our fiscal years 2024 and 2023 amounted to approximately $ 1,037,000 and $ 1,090,000 , respectively. Management Agreements Deerfield Beach, Florida Since January 2006, we have managed “The Whale’s Rib”, a casual dining restaurant located in Deerfield Beach, Florida, pursuant to a management agreement. We paid $ 500,000 in exchange for our rights to manage this restaurant. The management agreement was amortized and paid on a straight-line basis over the life of the initial term of the agreement, ten ( 10 ) years. The restaurant is owned by a third party unaffiliated with us. In exchange for providing management, bookkeeping and related services, we receive one-half (½) of the net profit, if any, from the operation of the restaurant. During the third quarter of our fiscal year 2011, the term of the management agreement was extended through January 9, 2036. For the fiscal years ended September 28, 2024 and September 30, 2023, we generated $ 200,000 and $ 400,000 of revenue, respectively, from providing these management services. NOTE 13. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS We follow FASB (ASC) Topic 820, “Fair Value Measurement”, 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 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 – Unadjusted quoted prices in active markets for identical assets or liabilities. ● Level 2 Inputs – Inputs other than quoted prices included in Level 1 that are either directly or indirectly observable through correlation with market data. These include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; and inputs to evaluation models or other pricing methodologies that do not require significant judgment because the inputs used in the model, such as interest rates and volatility, can be corroborated by readily observable market data. ● Level 3 Inputs – One or more significant inputs that are unobservable and supported by little or no market activity, and that reflect the use of significant management judgment. Level 3 assets and liabilities include those whose fair value measurements are determined using pricing models, discounted cash flow methodologies or similar valuation techniques, and significant management judgment or estimation. F- 25 NOTE 13. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS (Continued) Interest Rate Swap Agreements At September 28, 2024, we had one variable rate instrument outstanding that is impacted by changes in interest rates. The interest rate of our variable rate debt instrument is equal to the lender’s BSBY Screen Rate plus one and one-half percent ( 1.50 %) per annum. In September 2022, we refinanced the mortgage loan encumbering the property where our combination package liquor store and restaurant located at 4 N. Federal Highway, Hallandale Beach, Florida, (Store #31) operates, which mortgage loan is held by an unaffiliated third party lender (the “$ 8.90 M Loan”). Effective November 15, 2024, the publication of BSBY was terminated and as of such date, the variable rate of interest under our debt instrument is equal to the lender’s 1 Month CME Term Secured Overnight Financing Rate (“SOFR”), plus 10 basis points, as an equivalent alternative approved by the lender. As a means of managing our interest rate risk on this debt instrument, we entered into an interest rate swap agreement with our unrelated third-party lender to convert this variable rate debt obligation to a fixed rate. We are currently party to the following interest rate swap agreement: (i) The interest rate swap agreement entered into in September 2022 relates to the $ 8.90 M Loan (the “$ 8.90 M Term Loan Swap”). The $ 8.90 M Term Loan Swap requires us to pay interest for a fifteen ( 15 ) year period at a fixed rate of 4.90 % on an initial amortizing notional principal amount of $ 8,900,000 , while receiving interest for the same period at BSBY Screen Rate – 1 Month, plus 1.50% , on the same amortizing notional principal amount. Due to the change in the interest rate on the $ 8.9 M Loan, on November 22, 2024, we terminated the $ 8.90 M Term Loan Swap and simultaneously entered into a new interest rate swap agreement for $ 8,015,601 , the balance due on the $ 8.90 M Loan, which requires us to pay interest for twelve (12) years, ten (10) months, which is the balance of the original fifteen (15) year period at a fixed rate of 4.90 % on an initial amortizing notional principal amount of $ 8,015,601 , while receiving interest for the same period at the lender’s 1 Month CME Term Secured Overnight Financing Rate (“SOFR”), plus 10 basis points, at the same amortizing notional principal amount. We determined that the interest rate swap agreement is an effective hedging agreement and changes in fair value are adjusted quarterly. NOTE 14. COMMON STOCK Treasury Stock Purchase of Common Shares During our fiscal years 2024 and 2023, we did not purchase any shares of our common stock. As of September 28, 2024, 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. Our current repurchase plan has no expiration date and purchases under this program may be made from time to time on the open market and in private transactions, depending on market conditions, up to a purchase price of price of $ 15 per share. The Internal Revenue Service imposes a 1.0 % tax on stock repurchases after December 31, 2022 over $ 1,000,000 within a fiscal year. NOTE 15. BUSINESS SEGMENTS We operate in two reportable segments – package stores and restaurants. The operation of package stores consists of retail liquor sales and related items. The operation of restaurants consists of restaurant food and bar sales. Operating income is total revenue less cost of merchandise sold and operating expenses relative to each segment. In order to evaluate each of these two operating segments we also break out our Corporate entity which functions as a cost center accumulating expenses that do not directly relate to the reportable segments operations. As such, our Chief Operating Decision Maker (CODM) (our Chief Financial Officer) ensures that these expenses are separated in order to properly evaluate the two main reportable segments as presented below. We have disclosed for each reportable segment the significant expense categories that are reviewed by CODM in the tables below and there are no additional significant expenses within the expense categories presented. The key areas of focus by CODM for allocation of resources are revenues from each reportable segment, as well as their cost of merchandise sold, payroll related costs, and operating expenses (these figures are presented both pre-elimination and post-elimination with a line clearly distinguishing the elimination amounts). While CODM analyzes these categories, the area of focus is period over period fluxes to determine that the right allocation of resources is attributed to each segment in order to ensure profitability is maximized. Gross profit is not shown on the Consolidated Statements of Income but is a metric that CODM uses to assess segment performance and as such is included in the tables below. In computing operating income, none of the following items have been included: interest expense, other non-operating income and expenses and income taxes. Identifiable assets by segment are those assets that are used in our operations in each segment. Corporate assets are principally cash and real property, improvements, furniture, equipment and vehicles used at our corporate headquarters. We do not have any operations outside of the United States and transactions between restaurants and package liquor stores are not material. The accounting policies of the segments are the same as those described in the summary of significant accounting policies. CODM analyzes each segment’s income from operations for making decisions regarding resource allocation. Information concerning the revenues and operating income for the years ended September 28, 2024 and September 30, 2023, and identifiable assets for the two reportable segments in which we operate, are shown in the following tables. F- 26 NOTE 15. BUSINESS SEGMENTS (Continued) For the Fiscal Year Ended September 28, 2024 (in thousands) Restaurant Package Corporate Eliminations Total REVENUES: Restaurant food sales $ 114,795 $ — $ — $ — $ 114,795 Intersegment revenues 4,141 — — ( 4,141 ) — Restaurant bar sales 30,010 — — — 30,010 Package goods sales — 40,497 — — 40,497 TOTAL REVENUE: 148,946 40,497 — ( 4,141 ) 185,302 COST OF MERCHANDISE SOLD: Cost of merchandise sold: 49,862 30,128 — — 79,990 Intersegment cost of merchandise sold 4,141 — — ( 4,141 ) — TOTAL COST OF MERCHANDISE SOLD: 54,003 30,128 — ( 4,141 ) 79,990 GROSS PROFIT: 94,943 10,369 — — 105,312 ADDITIONAL REVENUES: Franchise-related revenues — — 1,693 — 1,693 Intersegment franchise-related revenues — — 5,845 ( 5,845 ) — Rental income — — 1,105 — 1,105 Intersegment rental income — — 849 ( 849 ) — Intersegment partnership income — — 1,156 ( 1,156 ) — Other revenues 165 — 56 — 221 TOTAL ADDITIONAL REVENUES: 165 — 10,704 ( 7,850 ) 3,019 ADDITIONAL EXPENSES: Payroll and related costs 49,024 3,153 7,172 — 59,349 Intersegment payroll costs — ( 24 ) — 24 — Operating expenses 20,517 2,704 1,671 — 24,892 Intersegment operating expenses 2,431 — 3,173 ( 5,604 ) — Occupancy costs 6,534 980 572 — 8,086 Intersegment occupancy costs 665 184 — ( 849 ) — Selling, general and administrative expenses 1,232 170 3,938 — 5,340 Intersegment selling, general and administrative expenses — — 286 ( 286 ) — Depreciation and amortization 3,216 499 553 — 4,268 TOTAL ADDITIONAL EXPENSES: 83,619 7,666 17,365 ( 6,715 ) 101,935 Income from Operations 11,489 2,703 ( 6,661 ) ( 1,135 ) 6,396 OTHER INCOME (EXPENSE): Interest expense — — ( 1,019 ) — ( 1,019 ) Intersegment interest expense — — ( 8 ) 8 — Interest and other income 22 82 103 — 207 Intersegment interest and other income — 20 8 ( 28 ) — Gain on sale of property and equipment — — 2 — 2 22 102 ( 914 ) ( 20 ) ( 810 ) Income (loss) before provision for income taxes: 11,511 2,805 ( 7,575 ) ( 1,155 ) 5,586 Provision for income taxes — — ( 286 ) — ( 286 ) Net Income 11,511 2,805 ( 7,861 ) ( 1,155 ) 5,300 Less: Net Income attributable to noncontrolling interests ( 1,944 ) — — — ( 1,944 ) Net Income Attributable to Flanigan's Enterprises, Inc. $ 9,567 $ 2,805 $ ( 7,861 ) $ ( 1,155 ) $ 3,356 F- 27 NOTE 15. BUSINESS SEGMENTS (Continued) For the Fiscal Year Ended September 30, 2023 (in thousands) Restaurant Package Corporate Eliminations Total REVENUES: Restaurant food sales $ 107,238 $ — $ — $ — $ 107,238 Intersegment revenues 3,919 — — ( 3,919 ) — Restaurant bar sales 29,000 — — — 29,000 Package goods sales — 35,187 — — 35,187 TOTAL REVENUE: 140,157 35,187 — ( 3,919 ) 171,425 COST OF MERCHANDISE SOLD: Cost of merchandise sold: 45,488 25,810 — — 71,298 Intersegment cost of merchandise sold 3,919 — — ( 3,919 ) — TOTAL COST OF MERCHANDISE SOLD: 49,407 25,810 — ( 3,919 ) 71,298 GROSS PROFIT: 90,750 9,377 — — 100,127 ADDITIONAL REVENUES: Franchise-related revenues — — 1,857 — 1,857 Intersegment franchise-related revenues — — 6,600 ( 6,600 ) — Rental income — — 951 — 951 Intersegment rental income — — 825 ( 825 ) — Intersegment partnership income — — 1,312 ( 1,312 ) — Other revenues 160 — 3 — 163 TOTAL ADDITIONAL REVENUES: 160 — 11,548 ( 8,737 ) 2,971 ADDITIONAL EXPENSES: Payroll and related costs 46,561 2,944 7,102 — 56,607 Intersegment payroll costs — ( 25 ) — 25 — Operating expenses 19,525 2,663 1,470 — 23,658 Intersegment operating expenses 2,312 — 4,060 ( 6,372 ) — Occupancy costs 6,233 853 480 — 7,566 Intersegment occupancy costs 661 164 — ( 825 ) — Selling, general and administrative expenses 1,116 177 3,389 — 4,682 Intersegment selling, general and administrative expenses — — 273 ( 273 ) — Depreciation and amortization 2,646 468 447 — 3,561 TOTAL ADDITIONAL EXPENSES: 79,054 7,244 17,221 ( 7,445 ) 96,074 Income from Operations 11,856 2,133 ( 5,673 ) ( 1,292 ) 7,024 OTHER INCOME (EXPENSE): Interest expense — — ( 1,067 ) — ( 1,067 ) Intersegment interest expense — — ( 8 ) 8 — Interest and other income 6 58 44 — 108 Intersegment interest and other income — 20 8 ( 28 ) — 6 78 ( 1,023 ) ( 20 ) ( 959 ) Income (loss) before provision for income taxes: 11,862 2,211 ( 6,696 ) ( 1,312 ) 6,065 Provision for income taxes — — ( 649 ) — ( 649 ) Net Income 11,862 2,211 ( 7,345 ) ( 1,312 ) 5,416 Less: Net Income attributable to noncontrolling interests ( 1,417 ) — — — ( 1,417 ) Net Income Attributable to Flanigan's Enterprises, Inc. $ 10,445 $ 2,211 $ ( 7,345 ) $ ( 1,312 ) $ 3,999 F- 28 NOTE 15. BUSINESS SEGMENTS (Continued) (in thousands) For the Fiscal Year Ended September 28, September 30, 2024 2023 Capital Expenditures: Restaurants $ 4,986 $ 7,440 Package stores 197 3,855 Corporate 864 9,279 Consolidated Totals $ 6,047 $ 20,574 (in thousands) September 28, September 30, 2024 2023 Identifiable Assets: Restaurants $ 77,613 $ 76,575 Package stores 23,084 23,714 Corporate 41,385 45,480 Consolidated Totals $ 142,082 $ 145,769 NOTE 16. QUARTERLY INFORMATION (UNAUDITED) The following is a summary of our unaudited quarterly results of operations for the quarters in our fiscal years 2024 and 2023. (in thousands) Quarter Ended December 30, 2023 March 30, 2024 June 29, 2024 Sep. 28, 2024 Revenues $ 45,140 $ 48,069 $ 49,102 $ 46,010 Income from operations 792 2,685 2,287 632 Net income attributable to stockholders 109 1,942 1,121 184 Net income per share – basic and diluted 0.06 1.04 0.60 0.10 Weighted average common stock outstanding – basic and diluted 1,858,647 1,858,647 1,858,647 1,858,647 (in thousands) Quarter Ended December 31, 2022 April 1, 2023 July 1, 2023 September 30, 2023 Revenues $ 41,861 $ 43,803 $ 45,372 $ 43,360 Income from operations 1,197 2,711 2,700 416 Net income (loss) attributable to stockholders 624 1,897 1,605 ( 127 ) Net income (loss) per share – basic and diluted 0.34 1.02 0.86 ( 0.07 ) Weighted average common stock outstanding – basic and diluted 1,858,647 1,858,647 1,858,647 1,858,647 Quarterly operating results are not necessarily representative of our operations for a full year for various reasons including the seasonal nature of both the restaurant and package store segments. NOTE 17. 401(k) PLAN Effective July 1, 2004, we began sponsoring a 401(k) retirement plan covering substantially all employees who meet certain eligibility requirements. Employees may contribute elective deferrals to the plan up to amounts allowed under the Internal Revenue Code. We are not required to contribute to the plan but may make discretionary profit sharing and/or matching contributions. During our fiscal years ended September 28, 2024 and September 30, 2023, the Board of Directors approved discretionary matching contributions totaling $ 74,000 and $ 70,000 , respectively. F- 29 NOTE 18. SUBSEQUENT EVENTS Subsequent to the end of our fiscal year 2024, we entered into a new Master Services Agreement with our current vendor for a period of one (1) year effective January 1, 2025, with Company options of four (4) one (1) year renewal options to extend the term of the same. Subsequent events have been evaluated through the date these consolidated financial statements were issued and except as provided above, no events required disclosure. Subsequent to the end of our fiscal year 2024, for the policy year commencing December 30, 2024, we bound coverage on the following property, general liability, auto, excess liability, and terrorism policies with premiums totaling approximately $ 4,014,000 of which property, general liability, excess liability and terrorism insurance includes coverage for our franchises and our managed restaurant (of approximately $ 867,000 ), which are not included in our consolidated financial statements: (i) For the policy year beginning December 30, 2024, our general liability insurance, excluding limited partnerships, is a one (1) year policy with our insurance carriers. For the policy commencing December 30, 2024, the self-insured retention per occurrence is $ 50,000 . The one (1) year general liability insurance premium is in the amount of $ 479,000 ; (ii) For the policy year beginning December 30, 2024, the general liability insurance for our limited partnerships, including franchisees and the managed restaurant is a one (1) year policy with our insurance carriers. For the policy commencing December 30, 2024, the self-insured retention per occurrence is $ 10,000 . The one (1) year general liability insurance premium is in the amount of $ 1,099,000 ; (iii) For the policy year beginning December 30, 2024, our automobile insurance is a one (1) year policy. The one (1) year automobile insurance premium is in the amount of $ 234,000 ; (iv) For the policy year beginning December 30, 2024, our property insurance is a one (1) year policy. The one (1) year property insurance premium is in the amount of $ 1,317,000 ; (v) For the policy year beginning December 30, 2024, our excess liability insurance is a one (1) year policy. The one (1) year excess liability insurance premium is in the amount of $ 866,000 ; and (vi) For the policy year beginning December 30, 2024, our terrorism insurance is a one (1) year policy. The one (1) year terrorism insurance premium is in the amount of $ 19,000 . Of the $ 4,014,000 annual premium amounts, which includes coverage for our franchises and our managed restaurant which are not included in our consolidated financial statements, we will pay the annual premium amounts in full with no financing due to high interest rates. Subsequent events have been evaluated through the date these consolidated financial statements were issued and except as provided above, no events required disclosure. F- 30