What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-17 compared with 2021-08-18 · 76 added, 104 removed, 194 unchanged (48% of the section changed)

7 unchanged sentences

Our Burger Time operating principles include:

(i) offering bigger burgers and more value for the money;

(i) offering a “Bigger Burger” to deliver our customers “more good food for your money”;

(ii) offering a limited menu to permit attention to quality and speed of preparation;

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Our primary strategy is to serve the drive-thru and take-out segment of the quick-service restaurant industry.

Operationally, we take several steps to maintain efficiency, including maintaining inventory of approximately $5,000 to $15,000 per store at any given time (which also has the advantage of allowing for frequent deliveries of fresh food).

Historically, our Burger Time investment model targeted an average total cash investment of between $325,000 and $535,000.

Real estate and finance costs vary materially by location but, assuming the average investment figure applies, the amount allocated to the purchase of real estate would be approximately $225,000.

Our average customer transaction increased by approximately 4% in the first six months of fiscal 2021 compared to 2020 and currently is approximately $11.50.

Operationally, we take several steps to maintain efficiency, including maintaining inventory of $5,000 to $15,000 per store at any given time (which also has the advantage of allowing for frequent deliveries of fresh food)..

Our average customer transaction increased by 4% in the first nine months of fiscal 2021 compared to 2020 and currently is approximately $11.90.

This recent increase is principally because of a menu price increase implemented in the middle of 2020.

Our sales trends are influenced by many factors and the environment remains challenging for smaller restaurant chains as competition from the major fast-food hamburger-focused business is intense.

Our sales trends are influenced by many factors, including the COVID pandemic, which had been a positive for our sales, however, the environment is challenging for smaller restaurant chains as competition from the major fast-food hamburger-focused business is intense.

Material Trends and Uncertainties

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Beef costs were stable in 2020 and recently have increased by approximately 13.7% per pound following an increase of approximately 5% in 2019.

Given the competitive nature of the fast-food burger restaurant industry, it may be difficult to raise menu prices to fully cover future cost increases.

Given the competitive nature of the fast-food burger restaurant industry, in response to recent commodity price increases, we are planning to implement a price increase in the fourth quarter of 2021, however, it may be difficult to raise menu prices to fully cover future cost increases.

During 2020 and continuing into 2021, a significant increase in business volume contributed to improved profit margins.

Additional margin improvements may have to be made through operational improvements, equipment advances and increased volumes to help offset any food cost increases, due to the competitive state of the restaurant industry.

Labor is a critical factor in operating our stores.

In most areas where we operate our restaurants, there historically has been a shortage of suitable labor and recently, securing staff for restaurant has become more challenging.

This has resulted in higher wages as the competition for employees intensifies, not only in the restaurant industry, but in practically all retail and service industries.

It is crucial for the Company to develop and maintain programs to attract and retain quality employees.

Increases in the federally and state mandated minimum wage may also impact our operations.

A variety of proposals have been made to increase the federal minimum wage to $15 per hour and state and local governments have, in some cases, implemented minimum wage rates.

In North Dakota, the minimum wage is set at the federally mandated minimum wage of $7.25 per hour and the rates are annually adjusted to reflect any increase in cost of living.

South Dakota has established a minimum wage of $9.10 per hour which is annually adjusted to increase with the cost of living.

Minnesota’s minimum-wage rate for small employers, such as us, is $8.04 per hour.

Our hourly employees earn a wage of on average of approximately $12 to $13 per hour.

An increase in the minimum wage to $15 per hour would adversely impact our profit margins.

Since March 2020, we have faced the effects of the COVID-19 and its more recent variants as a global pandemic which has been both unpredictable and persistent, The COVID-19 pandemic has adversely affected workforces, customers, economies, and financial markets globally and has disrupted the normal flow the US economy.

Our stores have, for the most part, remained open for drive-through business during the last year, however, many businesses experienced a disruption of normal operations.

More recently, food service businesses, including ours, have faced challenges in attracting and hiring workers and it is possible the labor shortages may become more acute in the busier summer months.

In 2020 extending through early 2021, many states, including Minnesota, mandated limited public gatherings to halt or delay the spread of disease.

Under these emergency orders, essential services remained open, including, but not limited to gas stations, pharmacies, grocery stores, food banks, convenience stores, take-out and delivery restaurants, banks, hospitals, and laundromats.

Under the directions limiting public gatherings, regulators generally allowed drive-through restaurant services to remain open.

To date, our restaurants have remained open although we have curtailed hours at some stores and have experienced temporary restaurant closures while locations have been cleaned and employees tested.

Thus far, we have been able to reopen after two or three days.

Local, regional or national governments may, at any time, implement directives that limit or order our business to close or take other measures intended to mitigate the spread of disease.

Further, some customers may choose to remain in self-imposed isolation and avoid public gathering places.

While a program to vaccinate a majority of Americans is currently in progress, it is not possible for us to predict the duration or magnitude of the effects of the outbreak and its impact on our business or results of operations at this time.

The conditions may influence restaurant customer traffic and our ability to adequately staff our restaurants, receive deliveries on a timely basis or perform functions at the corporate level.

Further, such conditions could impact the availability of the menu items we offer and the ability of suppliers to deliver such products.

We also may be adversely affected if jurisdictions in which we have restaurants impose mandatory closures, seek voluntary closures or impose restrictions on operations.

Even if such measures are not implemented, the perceived risk of infection or significant health risk may adversely affect our business.

We expect to continue to navigate an unprecedented time for our business and industry.

As the restrictions on behavior eased with approved vaccines being distributed and administered, all the states in which we operate have lifted mandatory mask mandates and we expect that, in most respects, restaurant industry operations will return to pre-pandemic norms.

Our restaurants may revert to more typical pre-pandemic operations and revenues which may result in sales declines from recent levels.

We may be subject to additional competition, as many restaurants initiated take home and delivery services during the pandemic and customers may have grown accustomed to a wider range of take-out foods beyond quick-service restaurant (QSR) options, which would negatively impact our revenue.

We continue to monitor the course of the pandemic and its impact on our customer base and the wider country.

It is not possible for us to predict the future course of the pandemic in light of a multitude of factors, including the spread of new variants of the original coronavirus disease among the U.S.

population and the efficacy of existing treatments and vaccines.

Future conditions may influence restaurant customer traffic and our ability to adequately staff our restaurants, receive deliveries on a timely basis or perform functions at the corporate level.

Additional margin improvements may have to be achieved through operational improvements, equipment advances and increased volumes to help offset any food cost increases due to the competitive state of the restaurant industry.

The general state of the economy influences restaurant customer traffic, our ability to staff our restaurants, receive deliveries on a timely basis or perform functions at the corporate level.

Further, such conditions could impact the availability of the menu items we offer and the ability of suppliers to deliver such products.

We also may be adversely affected if jurisdictions in which we have restaurants impose mandatory closures, seek voluntary closures or impose restrictions on operations.

We also may be adversely affected if jurisdictions in which we have restaurants sre ordered to close, or we may be forced to implement temporary voluntary closures or impose restrictions on operations as a result of a shortage in available workers.

Even if such measures are not implemented, the perceived risk of infection or significant health risk may adversely affect our business.

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We are seeking to increase value for our shareholders in the foodservice industry.

Our principal strategy comprises acquiring multi-unit restaurant concepts and individual restaurant properties at attractive multiples of earnings.

Our principal strategy is to acquire multi-unit restaurant concepts and individual restaurant properties at attractive multiples of earnings.

Though we do not currently plan to do so, under certain circumstances, we may develop additional Burger Time locations through the acquisition and conversion of existing properties.

Other key elements of our growth strategy encompass increasing same store sales and introducing a campaign to boost brand awareness.

Other key elements of our growth strategy encompass increasing same store sales and boosting brand awareness.

Expansion Through Acquisitions

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Future Development of Additional Burger Time Restaurants

We may, in certain circumstances, consider developing additional Burger Time location.

We may consider developing additional Burger Time location.

Conditions which might give rise to developing additional Burger Time locations include the opportunity to acquire and convert a property that previously had operated as a fast-food establishment at a highly attractive price in a location that fits naturally within Burger Time’s geographic footprint so that we may share service expenses, including advertising costs.

If we elect to open additional Burger Time restaurants, we expect that development of these restaurants will, based on our experience, require a minimum six to nine months after opening to achieve the targeted restaurant-level sales and operating margins.

In a case where we open a restaurant in new and untested markets, achieving targeted sales may take longer since the local population will not be familiar with our brand and building brand awareness takes time.

How quickly new restaurants achieve their targeted sales and operating margin depends on many factors, including the level of consumer familiarity with our brand, as well as the availability of experienced managers and other staff.

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We cannot be certain that capital will be available to us on acceptable terms if at all.

Results of Operations for the Thirteen Weeks Ended July 4, 2021, and the Thirteen Weeks Ended June 28, 2020

Results of Operations for the Thirteen Weeks Ended October 3, 2021, and the Thirteen Weeks Ended September 27, 2020

The following table sets forth, for the fiscal periods indicated, our Condensed Statements of Operations expressed as percentage of total revenues.

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13 Weeks Ended,

September 27,

COSTS AND EXPENSES

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Food and paper costs

Occupancy costs

Occupancy cost

Other operating expenses

Depreciation and amortization

Impairment of assets held for sale

General and administrative

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INTEREST INCOME

OTHER INCOME (PAYROLL PROTECTION GRANT)

Net Revenues:

Net sales for fiscal second quarter of 2021 decreased $13,655 to $2,382,683 from $2,396,338 in fiscal 2020.

Sales in 2021 have continued to be strong.

We have held most of the gains realized during the period of significant dining restrictions resulting in a favorable impact on drive-through locations.

This continuing trend has led to an increase in consumers choosing Burger Time as a meal alternative.

Restaurant unit sales for the 13-week period ranged from a low of approximately $154,000 to a high of approximately $312,500 and average sales for each Burger Time unit during the period was approximately $237,200 in 2021 essentially unchanged from the same period in 2020.

Net sales for fiscal third quarter of 2021 decreased $93,455 to $2,280,999 from $2,374,454 in fiscal 2020.

Sales in 2021 have continued to be strong relative to the 2019 the pre-pandemic level.

We have maintained the majority of the gains realized during the period of significant dining restrictions at the height of the pandemic which contributed to a continuing favorable impact on drive-through locations.

This trend has led to an increase in consumers choosing Burger Time as a meal alternative.

Restaurant gross unit sales at the Company’s nine Burger Time locations for the 13-week period ranged from a low of approximately $147,000 to a high of approximately $298,000 and average sales for each Burger Time unit during the period was approximately $227,000 in 2021 a decline of approximately $10,000 from the same period in 2020.

Costs of Sales - food and paper:

Cost of sales - food and paper for second quarter of fiscal 2021 increased as a percentage of sales to 38.1% of restaurant sales from 37.3% of restaurant sales in the second quarter of fiscal 2020.

Cost of sales - food and paper for third quarter of fiscal 2021 increased as a percentage of sales to 41.4% of restaurant sales from 36.4% of restaurant sales in the third quarter of fiscal 2020.

This increase was the net result of inflationary pressures of certain items, a favorable six-month verbal fixed price arrangement on the price of ground beef patties at $2.51 per pound which, more recently, has increased to $2.95 per pound, increases in cost have been mitigated by the impact of a price increase taken at the end of second quarter in 2020 fully realized in 2021 we are planning to implement a menu price increase in the fourth quarter of 2021 to, in part, offset increasing costs.

Restaurant Operating Costs:

Restaurant operating costs (which refer to all the costs associated with the operation of our restaurants, but do not include general and administrative costs, impairment charges and depreciation and amortization) as a percent of restaurant sales increased to 76.6% of sales in the second fiscal quarter of 2021 from 74.4% in similar period of fiscal 2020.

This was due to the net effect of the higher cost incurred for personal protection equipment, the impact of the 2020 price increase, offset by tighter labor markets and the matters discussed in the “Cost of Sales,” “Labor Costs,” “Occupancy and Other Operating Cost” sections below.

For the second quarter of fiscal 2021, labor and benefits costs increased slightly by $10,529 to $621,227 and increased as a percentage of sales to 26.1% of restaurant sales from 25.5% of restaurant sales in fiscal 2020.

Restaurant operating costs (which refer to all the costs associated with the operation of our restaurants, but do not include general and administrative costs, impairment charges and depreciation and amortization) as a percent of restaurant sales decreased to 36.9% of sales in the third fiscal quarter of 2021 from 38.6% in similar period of fiscal 2020.

This was due to the net effect of improved utilization of store labor, offset by by higher cost incurred for personal protection equipment, a tighter labor markets and the matters discussed in the “Cost of Sales,” “Labor Costs,” “Occupancy and Other Operating Cost” sections below all of which were offset by the midyear 2020 price increase.

For the third quarter of fiscal 2021, labor and benefits costs increased slightly as a percentage of sales to 26.6% of restaurant sales from 26.3% of restaurant sales in fiscal 2020.

The increase in the percentage was the result of tighter labor markets leading to higher hourly wage costs offset by the leveraging of existing staffing.

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Occupancy and Other Operating Expenses

For the second fiscal quarter of 2021, occupancy and other expenses increased $14,430 to $295,978 (12.4% of sales) in 2021 from 11.6% of sales in similar period in 2020.

For the third fiscal quarter of 2021, occupancy and other expenses decreased slightly to $235,485 (10.3% of sales) from $291,936 (12.3% of sales) in 2020.

The decrease is the result of a reduction in one time maintenance charges incurred in 2020.

Depreciation and Amortization Expense:

For second fiscal quarter of 2021, depreciation and amortization increased $12,458 to $58,558 (2.5% of sales) from $46,100 (1.9% of sales) in the second quarter of fiscal 2020.

For third fiscal quarter of 2021, depreciation and amortization increased $10,737 to $60,405 (2.6% of sales) from $49,668 (2.1% of sales) in the third quarter of fiscal 2020.

General and Administrative Costs

General and administrative costs decreased $1,303 from $116,947 (4.9% of sales) to $115,644 (4.9% of sales) in the second fiscal quarter of 2021.

General and administrative costs decreased $113,887 from $188,292 (7.9% of sales) to $74,415 (3.3% of sales) in the third fiscal quarter of 2021.

The decline is, in part, the result of a decrease in corporate staff during the 2021 period.

The Company expects to fill a vacant position during the fourth quarter.

Income from Operations

The income from operations for the 13 week-period was $382,516 in fiscal 2021 compared to an income from operations of $350,156 in similar period in 2020.

The increase in the percentage of income from operations to 16.0% in fiscal 2021 compared to 14.6% fiscal 2020 was principally the result of a $100,000 impairment charge in the 2020 period to reduce the carrying value of property held for sale and the matters discussed in the “Net Revenues” and “Restaurant Operating Costs” sections above.

The income from operations for the 13-week period was $358,743 in fiscal 2021 compared to an income from operations of $355,865 in the similar period in 2020.

The increase in the percentage of income from operations to 15.8% in fiscal 2021 from 15.0% in fiscal 2020 was the result of higher input costs resulting from inflationary pressures in the marketplace offset by a significant decline in General and Administrative costs.

Restaurant-level EBITDA :

To supplement the condensed consolidated financial statements, which are prepared and presented in accordance with GAAP, the Company uses restaurant-level EBITDA, which is not a measure defined by GAAP.

To supplement the condensed consolidated financial statements, which are prepared and presented in accordance with Generally Accepted Accounting Principles, (GAAP), the Company uses restaurant-level EBITDA, which is not a measure defined by GAAP.

This non-GAAP operating measure is useful to both management and, we believe, to investors because it represents one means of gauging the overall profitability of our recurring and controllable core restaurant operations.

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Depreciation and amortization and impairment charges are excluded because they are not ongoing controllable cash expenses, and they are not related to the health of ongoing operations.

13 Weeks Ended,

13-Week Period

September 27,

Reconciliation:

Income from operations

Depreciation and amortization and impairment charge

Depreciation and amortization

General and administrative, corporate level expenses

1 unchanged sentence

Restaurant-level EBITDA margin

Our Results of Operations for the Twenty-Six Weeks Ended July 4, 2021 and the Twenty-Six Weeks Ended June 28, 2020

Results of Operations for the Thirty-Nine Weeks Ended October 3, 2021, and the Thirty-Nine Weeks Ended September 27, 2020

The following table sets forth, for the fiscal periods indicated, our Condensed Statements of Operations expressed as percentage of total revenues.

Percentages below may not reconcile because of rounding.

39 Weeks Ended,

September 27,

COSTS AND EXPENSES

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Net Revenues:

Net sales for 26-week period representing the first half of fiscal 2021 increased $623,787 or 16.9% to $4,323,555 from $3,699,768 in fiscal 2020.

The increase in sales was principally the result of favorable impact in the first half of the 26-week period the government shutdown restrictions on social gatherings for dining alternatives resulting in consumers choosing Burger Time as a meal alternative combined with generally favorable weather conditions during the period.

Restaurant sales for the 26-week period for our Burger Time locations ranged from a low of approximately $280,300 to high of approximately $587,600 and average sales for each Burger Time unit during the period was approximately $438,200 in 2021 an increase from approximately $382,300 in same 26-week period in 2020.

Net sales for the 39-week period representing the first three quarters of fiscal 2021 increased $530,332 or 8.7% to $6,604,554 from $6,074,222 in fiscal 2020.

The increase in sales was principally the result of moderating but still favorable impact in the first half of the 39-week period of the consumer response to the pandemic resulting in consumers choosing Burger Time as a meal alternative combined with generally favorable weather conditions during the period.

Gross restaurant sales for the 39-week period for our nine Burger Time locations ranged from a low of approximately $418,000 to high of approximately $886,000 and average sales for each Burger Time unit during the period was approximately $617,000 in 2021 an increase from approximately $556,000 in same 39-week period in 2020.

Costs of Sales - food and paper:

Cost of sales - food and paper for the first half of fiscal 2021 decreased as a percentage of sales to 37.9% from 38.8% of restaurant sales in the similar period in 2020.

This decrease was mainly due to combined effects of second half 2020 menu price increase and the overall increase in business activity supported by a relatively stable market for ground beef and other products.

Average beef prices paid by the Company were approximately of $2.51 per pound in 2021 which was unchanged from 2020 contributing to an improved gross margin.

Cost of sales - food and paper for the 39-week period representing the first three quarters of fiscal 2021 increased as a percentage of sales to 39.1% from 37.9% of restaurant sales in the similar period in 2020.

This increase was mainly due to inflationary pressures in the general economy increasing product cost .

Average beef prices paid by the Company were approximately of $2.51 per pound in 2021 which was unchanged from 2020.

Although, near the end of the period beef prices increased 13.7% per pound which we expect will impact fourth quarter results to some degree.

Restaurant Operating Costs:

Restaurant operating costs (which refer to all the costs associated with the operation of our restaurants, but do not include general and administrative costs, impairment charge and depreciation and amortization) as a percent of restaurant sales declined to 78.2% of sales in 2021 from 82.6% in fiscal 2020.

Restaurant operating costs (which refer to all the costs associated with the operation of our restaurants, but do not include general and administrative costs, impairment charge, depreciation, and amortization) as a percent of restaurant sales declined to 39.2% of sales in the 2021 period from 41.8% in the fiscal 2020 period.

This was due primarily to the increase in sales activity and its impact as further discussed in the “Cost of Sales,” “Labor Costs,” “Occupancy and Other Operating Cost” sections below.

For the first half of fiscal 2021, labor and benefits costs decreased to 27.5% of restaurant sales from 29.6% of restaurant sales in the fiscal 2020 period.

For the 39-week period representing the first three quarters of fiscal 2021, labor and benefits costs decreased to 27.2% of restaurant sales from 28.3% of restaurant sales in the fiscal 2020 period.

The Company was able to favorably leverage staffing levels against the significant increase in volume during the second half of the period.

While the hiring markets have become more challenging in terms of filling open positions, the Company continued to benefit from limited turnover in its unit restaurant management which tends to cause unfavorable variations in labor costs.

Payroll costs are semi-variable in nature, meaning that they do not decrease proportionally to decreases in revenue, thus they increase as a percentage of restaurant sales when there is a decrease in restaurant sales.

Payroll costs are semi-variable in nature, meaning that they do not decrease proportionally to decreases in revenue, thus they may increase as a percentage of restaurant sales when there is a decrease in restaurant sales conversely in tight labor markets occasionally the labor percentage cost decreases significantly as managers help fill spot shortages in staff.

Occupancy and Other Operating Expenses

For the first 26 weeks of fiscal 2021, occupancy and other expenses increased $30,428 or 12.8% of sales to $555,735 from $525,307 (14.2% of restaurant sales) in the similar period in 2020 many of these costs are fixed and the lower percentage reflect the increase in restaurant sales, this was offset by an increased focus on maintenance projects resulting from very high volume at our stores impacting our major systems such as HVAC and refrigeration.

For the first 39 weeks of fiscal 2021, occupancy and other expenses increased $28,225 to $791,220 (12.0% of sales) from $817,243 (13.5% of restaurant sales) in the similar period in 2020.

Many of these costs are fixed and the lower percentage reflect the increase in restaurant sales, this was offset by an increased focus on maintenance projects resulting from high volume at our stores impacting our major systems such as HVAC and refrigeration.

Depreciation and Amortization Expense:

Depreciation and amortization expense in the first half of fiscal 2021 increased by $22,474 to $113,394 (2.6% of sales) from $90,920 (2.4% of sales) in the first half of fiscal 2020 and is the result of capital additions at several of our locations.

Depreciation and amortization expense in the first three quarters of fiscal 2021 increased by $33,211 to $173,799 (2.6% of sales) from $140,588 (2.3% of sales) in the fiscal 2020 period and is the result of capital additions at several of our locations.

General and Administrative Costs

General and administrative costs increased 20.6%, or $37,819, from $183,163 (5.0% of sales) in the first half of fiscal 2020 to $220,982 (5.1% of sales) for the first half of fiscal 2021.

General and administrative costs decreased 25.7%, or $76,058, from $371,455 (6.1% of sales) in the first three quarters of fiscal 2020 to $295,397 (4.5% of sales) for the fiscal 2021 period.

In part from the result of lower management headcount

Income from Operations

Income from operations was $610,672 in the first half of fiscal 2021 compared to $270,379 in the first half of fiscal 2020.

The change in income from operations in the first half of fiscal 2021 compared to fiscal 2020 was due primarily to the impact of the 2020 impairment charge, continued robust sales activity and the matters discussed in the “Net Revenues” and “Restaurant Operating Costs” sections above.

Income from operations was $969,415 in the 39-week period of fiscal 2021 compared to $626,244 in the fiscal 2020 period.

The change in income from operations in the fiscal 2021 period compared to fiscal 2020 was due primarily to the impact of the 2020 impairment charge, continued robust sales activity and the matters discussed in the “Net Revenues” and “Restaurant Operating Costs” sections above.

Restaurant-level EBITDA :

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Depreciation and amortization and impairment charges are excluded because they are not ongoing controllable cash expenses, and they are not related to the health of ongoing operations.

26 Weeks Ended,

39-Week Period

September 27,

Reconciliation:

Income from operations

Depreciation and amortization and impairment charge

Depreciation and amortization

General and administrative, corporate level expenses

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Since March of 2020, the Covid-19 pandemic has had a positive impact of the Company’s sales and liquidity.

For the 26 weeks ended July 4, 2021, the Company earned an after-tax profit of $347,440.

On July 4, 2021, the Company had $1,720,917 in cash and working capital of $898,303 an increase of $526,610 from January 3, 2021.

The is partially the result of Company completing a refinancing of the mortgages covering all its Burger Time properties including approximately $185,000 of current maturities of long-term debt from the Company’s which was included in the long-term refinancing.

In the 13-week period ending July 4, 2021, the Company continued to benefit from excellent results and positive operating cash flow even as government restriction on dining requirement were eased.

COVID-19, and its variants, including what has been described as the fast-spreading “Delta” variant, likely will to continue to have a significant impact on the United States economy.

For the 39 weeks ended October 3, 2021, the Company earned an after-tax profit of $583,268.

On October 3, 2021, the Company had $2,078,812 in cash and working capital of $1,1760,68 an increase of $765,794 from January 3, 2021.

The increase is partially the result of Company completing a refinancing of the mortgages covering all its Burger Time properties including approximately $185,000 of current maturities of long-term debt which was included in the long-term refinancing.

In the 39-week period ending October 3, 2021, the Company continued to benefit from excellent results and positive operating cash flow even as government restrictions on inside dining were eased.

Covid-19, and its variants, the various variants, likely will to continue to have a significant impact on the United States economy.

It is difficult to predict either the ultimate impact of the COVID-19 pandemic or the impact of governmental responses on the United States economy in general, and specifically the impact on the quick service drive-through segment of the food service industry and on Company’s operating results and financial condition as the situation is evolving.

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Our primary requirements for liquidity are to fund our working capital needs, capital expenditures, and general corporate needs, as well as to invest in or acquire businesses that are synergistic with or complimentary to our business.

Our operations do not require significant working capital, and, like many restaurant companies, we generally operate with negative working capital.

We anticipate that working capital deficits may be incurred in the future and possibly increase.

Our operations do not require significant working capital, and, like many restaurant companies, we able operate with negative working capital.

We anticipate that working capital deficits may be incurred in the future.

Our primary sources of liquidity and cash flows are operating cash flows and cash on hand.

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Cash Flows Provided by Operating Activities

Operating cash flow in 2020 included $466,758 of “other income” in operating cash flow which did not reoccur in 2021 contributing to a decline in cash flow from operations in the first six months of 2021 compared to 2020.

As a result of the strong sales increase over the prior year, we generated $496,251 in cash flow for operations in the 26-week period ending July 4, 2021.

Operating cash flow in 2020 included $466,758 of Paycheck Protection loan forgiveness “other income” in operating cash flow which did not reoccur in 2021 contributing to a decline in cash flow from operations in the first six months of 2021 compared to 2020.

As a result continued strong sales over the prior year, we generated $931,322 in pre-tax cash flow from operations in the 39-week period ending October 3, 2021.

The winter months have historically been seasonally the slowest part of the Company’s business generating a lower level of cash flow in comparison to the balance of the year.

Cash Flows Used in Investing Activities

In 2020 through the second quarter of 2021 the Company has focused on its primary business and building its working capital reserves.

In 2020 through the third quarter of 2021 the Company has focused on its primary business and building its working capital reserves.

Cash Flows Used in Financing Activities

A significant portion of the Company’s cash flow is allocated to service the Company’s debt.

Contractual Obligati

As of July 4, 2021, we had $3,268,000 in contractual obligations relating principally to amounts due under mortgages on the real property on which are stores are situated.

Contractual Obligations

As of October 3, 2021, we had approximately $3,210,000 in contractual obligations relating principally to amounts due under mortgages on the real property on which are stores are situated.

Our monthly required payment is approximately $24,000.

In the second quarter of fiscal 2021, the Company refinanced most of its outstanding mortgage debt with a new lender lowering its nominal interest cost from 4.75% to 3.45% fixed for the next ten years.

At the end the second quarter of fiscal 2021, the Company refinanced most of its outstanding mortgage debt with a new lender lowering its nominal interest cost from 4.75% to 3.45% fixed for the next ten years.

Qualitative and Quantitative Disclosure about Market Risk

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We do not currently manage this risk with commodity future and option contracts.

A ten percent increase in the cost of beef would result in approximately $175,000 of additional food costs for the Company annually.

Assuming there was no corresponding menu price increase, a ten percent increase in the cost of beef would result in approximately $150,000 of additional food costs for the Company annually.

Seasonality and Inflation

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In the past, however, the Company generally has been able to increase menu prices or modify its operating procedures to substantially offset increases in its operating costs.

The cost of construction has also increased in recent history.

We expect that costs to construct new restaurants in our existing and contiguous markets will be more expensive than several years ago, but we expect to achieve higher restaurant sales volumes and/or margin improvements to offset these or addition construction cost increases.

Construction cost increases could have an adverse effect on our business and operations, particularly for new restaurant development.

Our business is subject to a wide range of federal, state and local regulations, which are subject to change in ways we cannot now anticipate.

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Off-Balance Sheet Arrangements

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission.

During the periods presented, and currently, we do not have, any off-balance sheet arrangements, as defined in the rules and regulations of the Securities and Exchange Commission.

Recent Accounting Pronouncements

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis