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.
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.
See notes to consolidated financial statements.
See notes to consolidated financial statements.
See notes to consolidated financial statements.
See notes to consolidated financial statements.
See notes to consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED OCTOBER 1, 2022 AND OCTOBER 2, 2021
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 October 1, 2022, we (i) operated 30 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 2022 and 2021 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.
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Use of Estimates
The consolidated financial statements and related disclosures are prepared in conformity with accounting principles generally accepted in the United States. 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 period 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.
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. We have not experienced any losses on such accounts.
Inventories
Our inventories, which consist primarily of package liquor products, are stated at the lower of average cost or net realizable value.
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 11).
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 store in N. Miami, Florida, and our shopping center in Miami, Florida, all of which we own, are being depreciated over forty years. Building improvements are being depreciated over 20 years.
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
Major Suppliers
Throughout our fiscal years 2022 and 2021, we purchased a significant portion of our food products from one major supplier. This major supplier represents 42% and 41% of our cost of goods sold and 22% and 24% of our accounts payable and accrued expenses as of October 1, 2022 and October 2, 2021, respectively. We believe that several other alternative vendors are available, if necessary.
Throughout our fiscal years 2022 and 2021, we purchased the majority of our alcoholic beverages from three local distributors. One of these three local distributors represents 23% and 26% of our cost of goods sold for the years ended October 1, 2022 and October 2, 2021, respectively and 2% of our accounts payable and accrued expenses as of both October 1, 2022 and October 2, 2021. 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.
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
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.
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 October 1, 2022 we expensed $65,000 for CIC Investors #25, Ltd, and $388,000 for CIC Investors #85, Ltd
Advertising Costs
Our advertising costs are expensed as incurred. Advertising costs incurred during our fiscal years ended October 1, 2022 and October 2, 2021 were approximately $209,000 and $218,000, respectively.
General Liability Insurance
We have general liability insurance which incorporates a deductible of $10,000 per occurrence for both us and the limited partnerships. Our insurance carrier is responsible for $1,000,000 coverage per occurrence above our deductible, up to a maximum aggregate of $2,000,000 per year. During our fiscal year ended October 1, 2022, we were able to purchase excess liability insurance, whereby our excess insurance carrier is responsible for $10,000,000 coverage above our primary general liability insurance coverage. We are un-insured against liability claims in excess of $11,000,000 per occurrence and in the aggregate (See Note 20. Subsequent Events for a discussion of general liability and excess liability insurance for the period commencing December 30, 2022)
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, any expense incurred by us in defending a claim, including attorney's fees, are a part of our $10,000 deductible.
Fair Value of Financial Instruments
The respective carrying value of certain of our on-balance-sheet financial instruments approximated 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.
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Fair Value of Financial Instruments (Continued)
In accordance with FASB ASC Topic 820-10-50-1, we utilized a valuation model to determine the fair value of our swap agreements. As the valuation models for the swap agreements were based upon observable inputs, they are classified as Level 2 (see Note 15).
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 do not recognize changes in fair value through earnings because we currently have two derivatives which we have designated as effective hedges (See Note 15).
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. We applied these changes to tax positions for our fiscal years ended October 1, 2022 and October 2, 2021. 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 October 1, 2022. We do not expect that unrecognized tax benefits will increase within the next twelve months. We recognize accrued interest and penalties related to uncertain tax positions as income tax expense.
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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.
Comparative Amounts
Certain
amounts presented in the financial statements previously issued for the fiscal year ended October 2, 2021 have been reclassified to
conform to the current year's presentation.
Recently Adopted and Recently Issued Accounting Pronouncements
Adopted
There are no accounting pronouncements that we have recently adopted.
Recently Issued
The FASB issued guidance, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedient and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In response to the concerns about structural risks of interbank offered rates (“IBORs”) and, particularly, the risk of cessation of the LIBOR, regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. This accounting standards update provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. LIBOR rates will be published until June 30, 2023. All principal and interest of the Term Loan was paid in full subsequent to October 1, 2022 so the discontinuance of LIBOR rates will have no impact on us.
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.
NOTE 2. PROPERTY AND EQUIPMENT, NET
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
Furniture and equipment
|
|
$
|
14,600,000 |
|
|
$
|
12,970,000 |
|
|
Leasehold improvements
|
|
|
28,114,000 |
|
|
|
26,456,000 |
|
|
Land and land improvements
|
|
|
25,930,000 |
|
|
|
25,922,000 |
|
|
Building and improvements
|
|
|
23,931,000 |
|
|
|
20,418,000 |
|
|
Vehicles
|
|
|
1,958,000 |
|
|
|
1,856,000 |
|
|
|
|
|
94,533,000 |
|
|
|
87,622,000 |
|
|
Less accumulated depreciation and amortization
|
|
|
(38,786,000 |
)
|
|
|
(36,181,000 |
)
|
|
|
|
|
55,747,000 |
|
|
|
51,441,000 |
|
|
Construction in progress
|
|
|
7,517,000 |
|
|
|
5,445,000 |
|
|
|
|
$
|
63,264,000 |
|
|
$
|
56,886,000 |
|
Depreciation and amortization expense for the fiscal years ended October 1, 2022 and October 2, 2021 was approximately $2,990,000 and $2,981,000, respectively.
NOTE 3. LEASEHOLD INTERESTS
|
|
|
2022
|
|
|
2021
|
|
|
|
|
|
|
|
|
|
|
Leasehold interests, at cost
|
|
$
|
3,024,000 |
|
|
$
|
3,024,000 |
|
|
Less accumulated amortization
|
|
|
2,938,000 |
|
|
|
2,906,000 |
|
|
|
|
$
|
86,000 |
|
|
$
|
118,000 |
|
Future leasehold amortization as of October 1, 2022 is as follows:
|
2023
|
|
$
|
22,000 |
|
|
2024
|
|
|
22,000 |
|
|
2025
|
|
|
22,000 |
|
|
2026
|
|
|
18,000 |
|
|
2027
|
|
|
2,000 |
|
|
Total
|
|
$
|
86,000 |
|
Leasehold amortization expense for the fiscal years ended October 1, 2022 and October 2, 2021 was approximately $32,000 and $82,000, respectively.
NOTE 4. INVESTMENT IN LIMITED PARTNERSHIPS
We have invested along with others (some of whom are affiliated with our officers and directors) in ten limited partnerships which currently own and operate nine 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 the restaurants except for the restaurant located in Fort Lauderdale, Florida where we only hold a limited partnership interest.
NOTE 4. INVESTMENT IN LIMITED PARTNERSHIPS (Continued)
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 October 1, 2022, all limited partnerships, with the exception of the 2022 Sunrise Restaurant, which opened for business in March, 2022 and the 2023 Miramar Restaurant, which we anticipate will open for business in February, 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 the service mark “Flanigan’s Seafood Bar and Grill” or “Flanigan’s”. In addition to our receipt of distributable amounts from the limited partnerships, we receive a fee equal to 3% of gross sales for use of our “Flanigan’s Seafood Bar and Grill” or “Flanigan’s” service marks, 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 under development 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 remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. This limited partnership has returned to its investors all of their initial cash invested and we receive an annual management fee equal to one-half (½) of the cash available for distribution by the limited partnership. This entity is consolidated in the accompanying 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 remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. This limited partnership has returned to its investors all of their initial cash invested and we receive an annual management fee equal to one-half (½) of the cash available for distribution by the limited partnership. This entity is consolidated in the accompanying consolidated financial statements.
NOTE 4. INVESTMENT IN LIMITED PARTNERSHIPS (Continued)
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 remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. This limited partnership has returned to its investors all of their initial cash invested and we receive an annual management fee equal to one-half (½) of the cash available for distribution by the limited partnership. This entity is consolidated in the accompanying consolidated financial statements.
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. 22.4% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. This limited partnership has returned to its investors all of their initial cash invested and we receive an annual management fee equal to one-half (½) of the cash available for distribution by the limited partnership. This entity is consolidated in the accompanying 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. 20.2% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. This limited partnership has returned to its investors all of their initial cash invested and we receive an annual management fee equal to one-half (1/2) of the cash available for distribution by this limited partnership. This entity is consolidated in the accompanying consolidated financial statements.
NOTE 4. INVESTMENT IN LIMITED PARTNERSHIPS (Continued)
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. 23.8% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. This limited partnership has returned to its investors all of their initial cash invested and we receive an annual management fee equal to one-half (1/2) of the cash available for distribution by this limited partnership. 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. 12.3% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. This limited partnership has returned to its investors all of their initial cash invested and we receive an annual management fee equal to one-half (1/2) 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. 26.8% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. This limited partnership has returned to its investors all of their initial cash invested and we receive an annual management fee equal to one-half (½) of the cash available for distribution by this limited partnership. This entity is consolidated in the accompanying consolidated financial statements.
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 20, 2022. 31.3% of the remaining 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 2022, this limited partnership has returned to its investors approximately 2.0% 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.
NOTE 4. INVESTMENT IN LIMITED PARTNERSHIPS (Continued)
Miramar, Florida
We are the sole general partner in this limited partnership which is developing a restaurant in Miramar, Florida under our “Flanigan’s” service mark. No units of limited partnership interest were purchased by the Company. 24.0% of the limited partnership interest is owned by persons who are either our officers, directors or their family members. We anticipate that this new restaurant will commence operations in February, 2023. 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. 31.9% of the remaining limited partnership interest is owned by persons who are either our officers, directors or their family members. We have a franchise arrangement with this limited partnership. For accounting purposes, we do not consolidate the operations of this limited partnership into our operations. 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:
|
|
|
Oct. 1, 2022
|
|
|
Oct. 2, 2021
|
|
|
Financial Position:
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
$
|
534,000 |
|
|
$
|
624,000 |
|
|
Non-Current Assets
|
|
|
743,000 |
|
|
|
701,000 |
|
|
Total Assets
|
|
|
1,277,000 |
|
|
|
1,325,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
280,000 |
|
|
|
259,000 |
|
|
Non-Current Liabilities
|
|
|
—
|
|
|
|
—
|
|
|
Total Liabilities
|
|
|
280,000 |
|
|
|
259,000 |
|
|
Equity
|
|
|
997,000 |
|
|
|
1,066,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Equity
|
|
$
|
1,277,000 |
|
|
$
|
1,325,000 |
|
| |
|
|
|
|
|
|
|
|
|
Operating Results:
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
|
4,735,000 |
|
|
|
4,172,000 |
|
|
Gross profit
|
|
|
3,017,000 |
|
|
|
2,735,000 |
|
|
Net income
|
|
|
59,000 |
|
|
|
495,000 |
|
NOTE 5. PRIVATE OFFERINGS:
CIC Investors #85, Ltd. (Flanigan’s, Sunrise, Florida)
On February 15, 2022, a Florida limited partnership (CIC Investors #85, Ltd.) in which the Company serves as general partner, completed a private placement of 1,000 Units of limited partnership interests at $5,000 per Unit for proceeds of $5,000,000, 74 Units of which ($370,000) were purchased by the Company upon the same terms and conditions as all other investors. The Company’s investment is eliminated in consolidation. The proceeds of the private placement were used to satisfy (including reimbursement to us for advances we have made), build-out and renovation expenses and the purchase of such furniture, fixtures and equipment necessary for operation of our Sunrise, Florida restaurant under the service mark “Flanigan’s”, which commenced operations on March 22, 2022. Capital raised from private investors is credited to sale of noncontrolling interests in our Statements of Stockholders’ Equity.
Under ASC 810, Consolidation, the Company, which is the entity issuing financial statements, is required to consolidate CIC Investors #85, Ltd. as we have a controlling interest in CIC Investors #85, Ltd. as general partner, although the Company only has a 7.40% ownership.
CIC Investor #25, Ltd. (Flanigan’s, Miramar, Florida)
On February 15, 2022, a Florida limited partnership (CIC Investors #25, Ltd.) in which the Company serves as general partner, completed a private placement of 800 Units of limited partnership interests at $5,000 per Unit for gross proceeds of $4,000,000. No units of limited partnership interest were purchased by the Company. The proceeds of the private placement are being used to satisfy (including reimbursement to us for advances we have made), build-out and renovation expenses and the purchase of such furniture, fixtures and equipment necessary for operation of our Miramar, Florida restaurant under the service mark “Flanigan’s”, which we believe will commence operations in February, 2023. Capital raised from private investors is credited to sale of noncontrolling interests in our Statements of Stockholders’ Equity.
Under ASC 810, Consolidation, the Company, which is the entity issuing financial statements, is required to consolidate CIC Investors #25, Ltd. as we have a controlling interest in CIC Investors #25, Ltd. as general partner, although the Company has no direct ownership.
NOTE 6. PURCHASE OF 4 COP LIQUOR LICENSE
During our fiscal year 2022, we purchased a 4 COP quota liquor license for Broward County, Florida from an unrelated third party for $446,000. The liquor license is currently inactive, but we intend to use it in connection with the operation of the package liquor store we are developing in Miramar, Florida. The 4COP quota liquor license for Broward County, Florida which we purchased during the third quarter of our fiscal year 2021 and was inactive, was transferred for use in our operation of “Brendan’s Sports Pub”.
NOTE 7. EXECUTION OF LEASE FOR NEW LOCATION; BUSINESS ACQUISITION OF “BRENDAN’S SPORTS PUB”
Lease
Pompano Beach, Florida (Brendan’s Sports Pub)
During the third quarter of our fiscal year 2022, we entered into a Lease (the “BSP Lease”) with a non-affiliated third party from whom we rented approximately 3,556 square feet of commercial space located at 868 South Federal Highway, Pompano Beach, Florida, from where we operate the existing “Brendan’s Sports Pub” business (Store #30), the assets of which we simultaneously purchased. The term of the BSP Lease is for fifty (50) years, triple net to the landlord with fixed rent of $78,000 per year, with two (2%) percent annual increases commencing in year five.
Assets
Brendan’s Sports Pub, Pompano Beach, Florida
During the third quarter of our fiscal year 2022 and simultaneously with the execution of the BSP Lease, we purchased the assets of the business known as “Brendan’s Sports Pub” located at 868 South Federal Highway, Pompano Beach, Florida for a purchase price of $75,000, including but not limited to the furniture, fixtures, equipment and service mark, “Brendan’s Sports Pub”, but excluding the 4 COP liquor license used in the operation of the business. We did not assume any obligations of the business.
We accounted for the purchase of the assets of the business known as "Brendan's Sports Pub" as a business combination that is insignificant for purposes of all of the disclosuress required under ASC 805
NOTE 8. RE-FINANCING OF EXISTING MORTGAGES; FINANCED INSURANCE PREMIUMS:
Re-Finance of Mortgage on Real Property – Fort Lauderdale, Florida
During our fiscal year 2022, we requested and received an advance of $697,000 from the payee of an entity managed by a member of our Board of Directors and who is also our Chief Financial Officer, which holds a mortgage note in the original principal amount of $1,000,000 (the “$1,000,000 Note”), resulting in a principal amount outstanding thereunder of $1,100,000 as of August 1, 2022. Our repayment obligations under the $1,000,000 Note continue to be secured by a first mortgage on the real property and improvements where our restaurant located at 2600 West Davie Boulevard, Fort Lauderdale, Florida operates. The terms of the $1,000,000 Note are that it bears interest at 6% annually (increased from 5% annually), is amortizable over 15 years with monthly installments of principal and interest of approximately $9,300 required to be made and a final balloon payment of approximately $487,000 required to be made August 1, 2032.
Re-Finance of Mortgage on Real Property – Hallandale Beach, Florida
During our fiscal year 2022, we re-financed our debt with our non-affiliated third-party lender secured by our real property located at 4 N. Federal Highway, Hallandale, Florida where our combination package liquor store and restaurant (Store #31) operates and borrowed an additional $8,012,000 raising the principal balance to $8,900,000, (the “$8.90M Mortgage”). The $8.90M Mortgage bears interest at a variable rate equal to the BSBY Screen Rate – 1 Month plus 1.50%. We entered into an interest rate swap agreement to hedge the interest rate risk, which fixed the interest rate on the $8.90M Mortgage at 4.90% per annum throughout its term. The $8.90M Mortgage is fully amortized over fifteen (15) years, with our monthly payment of principal and interest totaling $33,000.
Financed Insurance Premiums
During our fiscal year 2022, we financed the premiums on the following property, general liability, excess liability and terrorist policies, totaling approximately $2.54 million, which property, general liability, excess liability and terrorist insurance includes coverage for our franchises which are not included in our consolidated financial statements:
(i) For the policy year beginning December 30, 2021, our general liability insurance, excluding limited partnerships, is a one (1) year policy with our insurance carriers. The one (1) year general liability insurance premium is in the amount of $467,000;
(ii) For the policy year beginning December 30, 2021, our general liability insurance for our limited partnerships is a one (1) year policy with our insurance carriers. The one (1) year general liability insurance premium is in the amount of $589,000;
(iii) For the policy year beginning December 30, 2021, our automobile insurance is a one (1) year policy. The one (1) year automobile insurance premium is in the amount of $194,000;
(iv) For the policy year beginning December 30, 2021, our property insurance is a one (1) year policy. The one (1) year property insurance premium is in the amount of $700,000;
(v) For the policy year beginning December 30, 2021, our excess liability insurance are two (2) one (1) year policies. The aggregate one (1) year excess liability insurance premiums are in the amount of $576,000;
(vi) For the policy year beginning December 30, 2021, our terrorist insurance is a one (1) year policy. The one (1) year terrorist insurance premium is in the amount of $8,900; and
(vii) For the policy year beginning December 30, 2021, our equipment breakdown insurance is a one (1) year policy. The one (1) year equipment breakdown insurance premium is in the amount of $6,800.
Of the $2,542,000 annual premium amounts, which includes coverage for our franchises which are not included in our consolidated financial statements, we financed $2,328,000 through an unaffiliated third party lender. The finance agreement obligates us to repay the amounts financed together with interest at the rate of 2.55% per annum, over 11 months, with monthly payments of principal and interest of $215,000. The finance agreement is secured by a first priority security interest in all insurance policies, all unearned premium, return premiums, dividend payments and loss payments thereof.
As of October 1, 2022, the aggregate principal balance owed from the financing of our property and general liability insurance policies, excluding coverage for our franchises (of approximately $136,000), which are not included in our consolidated financial statements is $507,000.
NOTE 9. CORONAVIRUS PANDEMIC:
In March 2020, a novel strain of coronavirus was declared a global pandemic and a National Public Health Emergency. The novel coronavirus pandemic and related “shelter-in- place” orders and other governmental mandates relating thereto (collectively, “COVID-19”) adversely affected and will, in all likelihood continue to adversely affect, our restaurant operations and financial results for the foreseeable future.
During the third quarter of our fiscal year 2020, we, certain of the entities owning the limited partnership stores (the “LP’s”), franchised stores (the “Franchisees”) as well as the store we manage but do not own (the “Managed Store”), collectively (the “Borrowers”), applied for and received loans from an unrelated third party lender pursuant to the Paycheck Protection Program (the “PPP”) under the United States Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) enacted March 27, 2020, in the aggregate principal amount of approximately $13.1 million, (the “PPP Loans”), of which approximately: (i) $5.9 million was loaned to us; (ii) $4.1 million was loaned to 8 of the LP's; (iii) $2.6 million was loaned to 5 of the Franchisees; and (iv) $0.5 million was loanted to the Managed Store. The PPP Loans to the Franchisees and Managed Store are not included in our consolidated financial statements. During the first quarter of our fiscal year 2021, the entire amount of principal and accrued interest for all PPP Loans was forgiven
During the second quarter of our fiscal year 2021, certain of the entities owning the limited partnership stores (the “LP’s”), as well as the store we manage but do not own (the “Managed Store”), applied for and received loans from an unrelated third party lender pursuant to the Paycheck Protection Program (the “PPP”) under the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) enacted March 27, 2020, in the aggregate principal amount of approximately $3.98 million, (the “2nd PPP Loans”), of which approximately: (i) $3.35 million was loaned to six of the LP’s; and (ii) $0.63 million was loaned to the Managed Store. The 2nd PPP Loan to the Managed Store is not included in our consolidated financial statements. During the first quarter of our fiscal year 2022, we applied for and received forgiveness of the entire amount of principal and accrued interest for all 2nd PPP Loans, including the Managed Store.
COVID-19 has had a material adverse effect on our access to supplies or labor and there can be no assurance that there will not be a significant adverse impact on our supply chain or access to labor in the future. We are actively monitoring our food suppliers to assess how they are managing their operations to mitigate supply flow and food safety risks. To ensure we mitigate potential supply availability risk, we are building additional inventory back stock levels when appropriate and we have also identified alternative supply sources in key product categories including but not limited to food, sanitation and safety supplies.
NOTE 10. 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. Due to the damage caused by the fire, we determined that Store #19 should be demolished and rebuilt and as a result, the package liquor store and restaurant were closed for our fiscal years 2022, 2021, 2020 and 2019. The package liquor store re-opened for business subsequent to the end of our fiscal year 2022. We also expect to receive building permits to construct the new building for our restaurant and expect to open for business during our fiscal year 2023.
NOTE 11. 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 October 1, 2022, 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 October 1, 2022 and October 2, 2021, the total carrying amount of our liquor licenses was $1,268,000 and $822,000, respectively. In our fiscal year 2022, we acquired a 4 COP Quota Liquor License for $446,000 for use in Broward County, Florida which we intend to use in connection with the operation of a package liquor store we are developing in Miramar, Florida. During our fiscal year 2021, we acquired a 4 COP Quota Liquor License for $192,200 for use in Broward County, Florida which we currently use in the operation of “Brendan’s Sports Pub”, the restaurant/bar in Pompano Beach, Florida we purchased during our fiscal year 2022.
NOTE 12. INCOME TAXES
The components of our provision for income taxes for our fiscal years 2022 and 2021 are as follows:
|
|
|
2022
|
|
|
2021
|
|
|
Current:
|
|
|
|
|
|
|
|
Federal
|
|
$
|
302,000 |
|
|
$
|
251,000 |
|
|
State
|
|
|
262,000 |
|
|
|
176,000 |
|
|
Deferred:
|
|
|
564,000 |
|
|
|
427,000 |
|
|
Federal
|
|
|
172,000 |
|
|
|
649,000 |
|
|
State
|
|
|
27,000 |
|
|
|
109,000 |
|
|
|
|
|
199,000 |
|
|
|
758,000 |
|
|
|
|
$
|
763,000 |
|
|
$
|
1,185,000 |
|
A reconciliation of income tax computed at the statutory federal rate to income tax expense is as follows:
|
|
|
2022
|
|
|
2021
|
|
|
Tax provision at the statutory rate
|
|
$
|
2,061,000 |
|
|
$
|
3,770,000 |
|
|
Non-controlling interests
|
|
|
(575,000 |
)
|
|
|
(1,046,000 |
)
|
|
State income taxes, net of federal income tax
|
|
|
210,000 |
|
|
|
196,000 |
|
|
FICA tip credit
|
|
|
(744,000 |
)
|
|
|
(297,000 |
)
|
|
True up adjustment
|
|
|
43,000 |
|
|
|
115,000 |
|
|
Tax effect of rate change due to Tax Reform
|
|
|
—
|
|
|
|
(1,000 |
)
|
|
PPP forgiveness
|
|
|
(252,000 |
)
|
|
|
(1,576,000 |
)
|
|
Other permanent items, net
|
|
|
20,000 |
|
|
|
24,000 |
|
|
|
|
$
|
763,000 |
|
|
$
|
1,185,000 |
|
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 not redeemed within twelve months of issuance, allowances for uncollectable receivables, unfunded limited retirement commitments and FICA tax credit.
The components of our deferred tax assets (liabilities) at October 1, 2022 and October 2, 2021 were as follows:
|
|
|
|
2022
|
|
|
|
2021
|
|
|
Reversal of aged payables
|
|
$
|
18,000 |
|
|
$
|
18,000 |
|
|
Capitalized inventory costs
|
|
|
26,000 |
|
|
|
26,000 |
|
|
Accrued bonuses
|
|
|
84,000 |
|
|
|
96,000 |
|
|
Accruals for potential uninsured claims
|
|
|
19,000 |
|
|
|
34,000 |
|
|
Gift cards
|
|
|
198,000 |
|
|
|
195,000 |
|
|
Limited partnership management fees
|
|
|
(862,000 |
)
|
|
|
(720,000 |
)
|
|
Tip credit
|
|
|
71,000 |
|
|
|
85,000 |
|
|
Book/tax differences in property and equipment
|
|
|
(1,106,000 |
)
|
|
|
(886,000 |
)
|
|
Book/tax differences in operating leases
|
|
|
488,000 |
|
|
|
428,000 |
|
|
Limited partnership investments
|
|
|
394,000 |
|
|
|
264,000 |
|
|
Accrued limited retirement
|
|
|
65,000 |
|
|
|
54,000 |
|
|
Total Deferred Tax Liabilities, Net
|
|
$
|
(605,000) |
|
|
$
|
(406,000) |
|
NOTE 13. DEBT
Debt consists of the following as of October 1, 2022 and October 2, 2021:
Long-Term Debt
|
|
|
|
2022
|
|
|
|
2021
|
|
| 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 $43,000, with a balloon payment of approximately $5,373,000 due on November 27, 2026. As of October 1, 2022, the net book value of the collateral securing this mortgage was $5,473,000. |
|
|
6,563,000 |
|
|
|
6,821,000 |
|
|
|
|
|
|
|
|
|
|
|
| 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 $31,000, with a final payment on July 1, 2036. As of October 1, 2022, the net book value of the collateral securing this mortgage was $11,349,000. |
|
|
4,044,000 |
|
|
|
4,246,000 |
|
|
|
|
|
|
|
|
|
|
|
| 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 $15,950, with a final payment on March 2, 2036. As of October 1, 2022, the net book value of the collateral securing this mortgage was $4,524,000. |
|
|
2,031,000 |
|
|
|
2,145,000 |
|
|
|
|
|
|
|
|
|
|
|
| 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%, (3.40% at October 1, 2022), but with the interest fixed at 4.90% pursuant to a swap agreement, amortized over fifteen (15) years, payable in monthly installments of principal and interest of approximately $33,000. From the re-financing of this mortgage, we withdrew $8,012,000 during our fiscal year ended October 1, 2022. As of October 1, 2022, the net book value of the collateral securing this mortgage was $3,477,000. |
|
|
8,900,000 |
|
|
|
954,000 |
|
|
|
|
|
|
|
|
|
|
|
| Revolving credit line/term loan payable to institutional lender, which entitled the Company to borrow, from time to time through December 28, 2017, up to $5,500,000, (the “Credit Line”), secured by a blanket lien on all Company assets, bearing interest through December 28, 2017 at LIBOR – Daily Floating Rate + 2.25%, (3.40% at October 1, 2022). Effective December 28, 2017, an interest rate swap agreement requires us to pay interest for a five (5) year period at a fixed rate of 4.61% on an initial amortizing notional principal amount of $5,500,000, while receiving interest for the same period at LIBOR, Daily Floating Rate, plus 2.25%, per annum (3.40% at October 1, 2022) on the same notional principal amount, with a final payment on December 28, 2022. On December 21, 2017, we borrowed the remaining $3,500,000 and on December 28, 2017 the entire principal balance under the Credit Line ($5,500,000) converted to the Term Loan. On December 28, 2022, we paid the outstanding principal balance ($367,000) and accrued interest ($-0-) in full. |
|
|
550,000 |
|
|
|
1,650,000 |
|
|
|
|
|
|
|
|
|
|
|
| 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 $6,384, with a final payment on December 28, 2031. As of October 1, 2022, the net book value of the collateral securing this mortgage was $810,000. |
|
|
585,000 |
|
|
|
633,000 |
|
NOTE 13. 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 due in August, 2032. As of October 1, 2022, the net book value of the collateral securing this mortgage was $1,589,000. |
|
|
1,096,000 |
|
|
|
442,000 |
|
|
|
|
|
|
|
|
|
|
|
| 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 $6,519, with a final payment on December 28, 2031. As of October 1, 2022, the net book value of the collateral securing this mortgage was $936,000. |
|
|
598,000 |
|
|
|
647,000 |
|
|
|
|
|
|
|
|
|
|
|
| Financed insurance premiums, secured by all insurance policies, bearing interest at 2.55% payable in monthly installments of principal and interest in the aggregate amount of $215,000 a month through November 30, 2022. |
|
|
507,000 |
|
|
|
409,000 |
|
|
|
|
|
|
|
|
|
|
|
| Mortgage payable to unrelated third party, secured by first mortgage on real property and improvements, bearing interest at 7½%, amortized over twenty (20) years, payable in monthly installments of principal and interest of approximately $7,300, with a final payment due in March, 2034. As of October 1, 2022, the net book value of the collateral securing this mortgage was $1,085,000. |
|
|
678,000 |
|
|
|
713,000 |
|
|
|
|
|
|
|
|
|
|
|
| Mortgage payable to related third party, secured by first mortgage on real property and improvements, bearing interest at 4%, amortized over eight (8) years, payable in monthly installments of principal and interest of approximately $3,000, with a final payment due in November, 2026. As of October 1, 2022, the net book value of the collateral securing this mortgage was $498,000. |
|
|
140,000 |
|
|
|
171,000 |
|
|
|
|
|
|
|
|
|
|
|
| Loans from an unrelated third party lender pursuant to the Paycheck Protection Program (the “PPP”) under the United States Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) enacted March 27, 2020, in the aggregate principal amount of approximately $3.46 million, (the “2nd PPP Loans”), which was loaned to 6 of the limited partnerships. The 2nd PPP Loans, which are in the form of Notes issued by each of the Borrowers, mature five years from the date of funding (March 23, 2021) and bear interest at a rate of 1.00% per annum, payable monthly commencing after the U.S. Small Business Administration makes a determination of the forgiveness of the 2nd PPP Loans). Subsequent to the end of our fiscal year 2021, the principal balance and all accrued interest due on the 2nd PPP Loans was forgiven in full. |
|
|
-- |
|
|
|
3,464,000 |
|
|
|
|
|
|
|
|
|
|
|
NOTE 13. DEBT (Continued)
|
Other
|
|
|
44,000 |
|
|
|
74,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Less unamortized loan costs
|
|
|
(347,000 |
)
|
|
|
(254,000 |
)
|
|
|
|
|
25,389,000 |
|
|
|
22,115,000 |
|
|
Less current portion
|
|
|
2,299,000 |
|
|
|
2,555,000 |
|
|
|
|
$
|
23,090,000 |
|
|
$
|
19,560,000 |
|
Long-term debt at October 1, 2022 matures as follows:
|
2023
|
|
$
|
2,299,000 |
|
|
2024
|
|
|
1,295,000 |
|
|
2025
|
|
|
1,356,000 |
|
|
2026
|
|
|
1,413,000 |
|
|
2027
|
|
|
6,555,000 |
|
|
Thereafter
|
|
|
12,818,000 |
|
|
|
|
|
25,736,000 |
|
|
Less unamortized loan costs
|
|
|
(347,000 |
)
|
|
|
|
$
|
25,389,000 |
|
As of October 1, 2022, we are in compliance with the financial covenants contained in our loans with our unrelated third party institutional lender (the “Institutional Lender”). We owe in the aggregate, approximately $23,272,000 (the “Institutional Loans”), as of October 1, 2022.
There can be no assurances that we will be in compliance with our financial covenants thereafter due to, among other things, that our results of operations will likely continue to be materially impacted by the COVID-19 pandemic. Absent a waiver, failure to be in compliance with our financial covenants would constitute a default under the Institutional Loans with our Institutional Lender when reported. Such a default, if not cured or waived, would allow the Institutional Lender to accelerate the maturity of the indebtedness we owe under the Institutional Loans, making it due and payable at the time. If maturity of the Institutional Loans were accelerated, it would have a material adverse impact on our consolidated financial statements and results of operations.
NOTE 14. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS
Construction Contracts
a. 7990 Davie Road Extension, Hollywood, Florida (Store #19 – “Big Daddy’s Wine & Liquors”)
During the third quarter of our fiscal year 2019, we entered into an agreement with a third party unaffiliated general contractor for site work at this location totaling $1,618,000, (i) to connect the real property where this restaurant operated (Store #19) to city sewer and (ii) to construct a new building on the adjacent parcel of real property for the operation of a package liquor store. During our fiscal years 2020, 2021 and 2022, we agreed to change orders to the agreement for additional construction services increasing the total contract price by $624,000 to $2,242,000, of which $1,951,000 has been paid through October 1, 2022 and $-0- has been paid subsequent to the end of our fiscal year 2022 through the date of filing of this annual report.
b. 2505 N. University Drive, Hollywood, Florida (Store #19 – “Flanigan’s”)
During the third quarter of our fiscal year 2019, we entered into an agreement with an unaffiliated third party architect for design and development services totaling $77,000 for the re-build of our restaurant located at 2505 N. University Drive, Hollywood, Florida (Store #19), which has been closed since October 2, 2018 due to damages caused by a fire, of which $62,000 has been paid. During the first quarter of our fiscal year 2022, we entered into an agreement with a third party unaffiliated general contractor to re-build our restaurant at this location for $2,515,000, of which $226,000 has been paid through October 1, 2022 and $75,000 has been paid subsequent to the end of our fiscal year 2022 through the date of filing of this annual report.
NOTE 14. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)
Construction Contracts (Continued)
c. 14301 W. Sunrise Boulevard, Sunrise, Florida (Store #85 – “Flanigan’s”)
During the third quarter of our fiscal year 2019, we entered into an agreement with an unaffiliated third party design group for design and development services of our new location at 14301 W. Sunrise Boulevard, Sunrise, Florida 33323 (Store #85) for a total contract price of $122,000. During our fiscal year 2020, we agreed upon amendments to the $122,000 Contract for additional design and development services which had the effect of increasing the total contract price by $18,000 to $140,000, of which $131,000 has been paid through October 1, 2022. Additionally, during the fourth quarter of our fiscal year 2020, we entered into an agreement with a third party unaffiliated general contractor for interior renovations at this location totaling $1,236,000 and through our fiscal year 2022 we agreed to change orders to the agreement for additional interior renovations increasing the total contract price by $215,000 to $1,451,000, which has been paid in full by the end of our fiscal year 2022. During the second quarter of our fiscal year 2022, we entered into an agreement with a third party unaffiliated general contractor for exterior renovations at this location totaling $343,000 and through our fiscal year 2022 we agreed to change orders to the agreement for additional interior renovations increasing the total contract price by $61,000 to $404,000, of which $353,000 has been paid through October 1, 2022 and $-0- has been paid subsequent to the end of our fiscal year 2022 through the date of filing of this annual report.
d. 11225 Miramar Parkway, #250, Miramar, Florida (“Flanigan’s”)
During the second quarter of our fiscal year 2022, we entered into an agreement with a third party unaffiliated general contractor for interior renovations at this location totaling $1,421,000, and through our fiscal year 2022 we agreed to change orders to the agreement increasing the total contract price by $128,000 to $1,549,000 of which $932,000 has been paid through October 1, 2022 and $226,000 has been paid subsequent to the end of our fiscal year 2022 through the date of filing of this annual report.
e. 11225 Miramar Parkway, #245, Miramar, Florida (“Big Daddy’s Wine and Liquors”)
During the first quarter of our fiscal year 2022, we entered into an agreement with a third party unaffiliated general contractor for interior renovations at this location totaling $317,000, and through our fiscal year 2022 we agreed to change orders to the agreement increasing the total contract price by $45,000 to $362,000 of which $316,000 has been paid through October 1, 2022 and $-0- has been paid subsequent to the end of our fiscal year 2022 through the date of filing of this annual report.
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. We currently have no “dram shop” claims pending.
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.
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 10 years, some of which include options to renew and extend the lease terms for up to an additional 30 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:
|
|
|
52 Weeks
Ended
October 1, 2022
|
|
|
52 Weeks
Ended
October 2, 2021
|
|
Finance Lease Amortization
|
|
$
|
--
|
|
|
$
|
198,000 |
|
|
Finance Lease Expense, which is included in interest expense
|
|
|
--
|
|
|
|
109,000 |
|
|
Operating Lease Expense, which is included in occupancy costs
|
|
|
3,725,000 |
|
|
|
3,601,000 |
|
|
|
|
$
|
3,725,000 |
|
|
$
|
3,908,000 |
|
NOTE 14. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)
Leases (Continued)
Supplemental balance sheet information related to leases is as follows:
|
Classification on the Consolidated Balance Sheet
|
|
October 1, 2022
|
|
|
October 2, 2021
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Operating lease assets
|
|
$
|
29,517,000 |
|
|
$
|
28,559,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Operating current liabilities
|
|
$
|
2,253,000 |
|
|
$
|
2,009,000 |
|
|
Operating lease non-current liabilities
|
|
$
|
28,281,000 |
|
|
$
|
27,183,000 |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Remaining Lease Term:
|
|
|
|
|
|
|
|
|
|
Operating leases
|
|
|
10.82 Years |
|
|
|
8.93 Years |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Discount:
|
|
|
|
|
|
|
|
|
|
Operating leases
|
|
|
4.66 |
%
|
|
|
4.62 |
%
|
The following table outlines the minimum future lease payments for the next five years and thereafter:
|
For fiscal year
|
|
Operating
|
|
2023
|
|
$
|
3,556,000 |
|
|
2024
|
|
|
3,622,000 |
|
|
2025
|
|
|
3,615,000 |
|
|
2026
|
|
|
3,450,000 |
|
|
2027
|
|
|
3,353,000 |
|
|
Thereafter
|
|
|
25,194,000 |
|
|
Total lease payments (Undiscounted cash flows)
|
|
|
42,790,000 |
|
|
Less imputed interest
|
|
|
(12,256,000 |
)
|
|
Total
|
|
$
|
30,534,000 |
|
Purchase Commitments
In order to fix the cost and ensure adequate supply of baby back ribs for our restaurants for calendar years 2022 and 2023, we entered into purchase agreements with our current rib supplier, whereby we agreed to purchase approximately $10.4 million and $ 6.8 million of “2.25 & Down Baby Back Ribs” (industry jargon for the weight range in which slabs of baby back ribs are sold) from this vendor during calendar years 2022 and 2023, at prescribed costs, which we believe are competitive. The decrease in our cost of baby back ribs for calendar year 2023 compared to calendar 2022 is due to a decrease in market price.
While we anticipate purchasing all of our rib supply from this vendor, we believe there are several other alternative vendors available, if needed.
Flanigan’s Fish Company, LLC
As of October 1, 2022, Flanigan’s Fish Company, LLC, a Florida limited liability company (“FFC”) supplies certain of the fish to all of our restaurants. Since we hold the controlling interest of FFC, the balance sheet and operating results of this entity are consolidated into the accompanying consolidated financial statements of the Company. Sales and purchases of fish are recognized in restaurant food sales and restaurant and lounges (cost of merchandise sold), respectively, in the consolidated statements of income at the time of sale to the restaurant. In addition, the 49% of FFC owned by the unrelated third party is recognized as noncontrolling interest in our consolidated financial statements.
Franchise Program
At October 1, 2022 and October 2, 2021, 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).
NOTE 14. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS (Continued)
Franchise Program (Continued)
•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 2022 and 2021, we earned royalties of $1,132,000 and $786,000, 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.
Employment Agreements/Bonuses
As of October 1, 2022 and October 2, 2021, 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 2022 and 2021 amounted to approximately $2,167,000 and $3,730,000, 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 2022 and 2021 amounted to approximately $1,340,000 and $1,530,000, 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 October 1, 2022 and October 2, 2021, we generated $400,000 of revenue from each fiscal year from providing these management services.
NOTE 15. 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.
Interest Rate Swap Agreements
At October 1, 2022, we had two variable rate instruments outstanding that are impacted by changes in interest rates. The interest rate of the first variable rate debt instrument is equal to the lender’s LIBOR Rate plus two and one-quarter percent (2.25%) per annum and the second variable rate debt instrument is equal to the lender’s BSBY Screen Rate plus one and one-half percent (1.50%) per annum. The debt instrument further provides that the “LIBOR Rate” is a rate of interest equal to the British Bankers Association LIBOR Rate or successor thereto approved by the lender if the British Bankers Association is no longer making a LIBOR rate available and the “BSBY Screen Rate is a rate of interest equal to the Bloomberg Short-Term Bank Yield Interest Rate or successor thereto approved by the lender. In December 2016, we closed on a secured revolving line of credit which entitled us to borrow, from time to time through December 28, 2017, up to $5,500,000 (the “Credit Line”), which on December 28, 2017 converted to a term loan (the “Term Loan”). Subsequent to the end of our fiscal year 2022, (December 28, 2022) we paid the balance of the Term Loan in full. 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 “$8.90M Loan”).
NOTE 15. FAIR VALUE MEASUREMENTS OF FINANCIAL INSTRUMENTS (Continued)
Interest Rate Swap Agreements (Continued)
As a means of managing our interest rate risk on these debt instruments, we entered into interest rate swap agreements with our unrelated third party lender to convert these variable rate debt obligations to fixed rates. We are currently party to the following two (2) interest rate swap agreements:
(i) The first interest rate swap agreement entered into in December 2016 and became effective December 28, 2017, relates to the Term Loan (the “Term Loan Swap”). The Term Loan Swap requires us to pay interest for a five (5) year period at a fixed rate of 4.61% on an initial amortizing notional principal amount of $5,500,000, while receiving interest for the same period at LIBOR – 1 Month, plus 2.25%, on the same amortizing notional principal amount. We determined that at October 1, 2022, the interest rate swap agreement is an effective hedging agreement and the fair value was not material. Subsequent to the end of our fiscal year 2022 (December 28, 2022) we paid the balance of the Term Loan in full, which was the same date the swap agreement matured; and
(ii) The second interest rate swap agreement entered into in September 2022 relates to the $8.90M Loan (the “$8.90M Term Loan Swap”). The $8.90M 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. We determined that at October 1, 2022, the interest rate swap agreement is an effective hedging agreement and the fair value was not material.
NOTE 16. COMMON STOCK
Treasury Stock
Purchase of Common Shares
During our fiscal years 2022 and 2021, we did not purchase any shares of our common stock. As of October 1, 2022, 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 will impose a 1.0% tax on stock repurchases after December 31, 2022.
NOTE 17. BUSINESS SEGMENTS
We operate principally in two reportable segments – package stores and restaurants. The operation of package stores consists of retail liquor sales and related items. Information concerning the revenues and operating income for our fiscal years ended 2022 and 2021, and identifiable assets for the two reportable segments in which we operate, are shown in the following table. Operating income is total revenue less cost of merchandise sold and operating expenses relative to each segment. In computing operating income, none of the following items have been included: interest expense, other non-operating income and expense 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.
|
|
|
2022
|
|
2021
|
|
|
Operating Revenues:
|
|
|
|
|
|
|
|
|
Restaurants
|
|
$
|
123,627,000 |
|
$
|
105,298,000 |
|
|
Package stores
|
|
|
31,692,000 |
|
|
29,304,000 |
|
|
Other revenues
|
|
|
2,813,000 |
|
|
2,705,000 |
|
|
Total operating revenues
|
|
$
|
158,132,000 |
|
$
|
137,307,000 |
|
|
Income from Operations Reconciled to Income after
Income Taxes and Net Income Attributable to
Noncontrolling Interests:
|
|
|
|
|
|
|
|
|
Restaurants
|
|
$
|
6,228,000 |
|
$
|
9,424,000 |
|
|
Package stores
|
|
|
2,608,000 |
|
|
1,643,000 |
|
|
|
|
|
8,836,000 |
|
|
11,067,000 |
|
|
Corporate expenses, net of other revenues
|
|
|
(1,907,000 |
)
|
|
(2,417,000 |
)
|
|
Income from Operations
|
|
|
6,929,000 |
|
|
8,650,000 |
|
|
Interest expense
|
|
|
(757,000 |
)
|
|
(938,000 |
)
|
|
Interest and Other Income
|
|
|
131,000 |
|
|
58,000 |
|
|
Gain on forgiveness of debt
|
|
|
3,488,000 |
|
|
10,136,000 |
|
|
Gain on sale of property and equipment
|
|
|
21,000 |
|
|
44,000 |
|
|
Income before provision for income taxes
|
|
$
|
9,812,000 |
|
$
|
17,950,000 |
|
|
Provision for Income Taxes
|
|
|
(763,000 |
)
|
|
(1,185,000 |
)
|
|
Net Income
|
|
|
9,049,000 |
|
|
16,765,000 |
|
|
Net Income Attributable to Noncontrolling Interests
|
|
|
(2,737,000 |
)
|
|
(4,981,000 |
)
|
|
Net Income Attributable to Flanigan’s Enterprises, Inc, Stockholders
|
|
$
|
6,312,000 |
|
$
|
11,784,000 |
|
|
|
|
|
|
|
|
|
|
|
Identifiable Assets:
|
|
|
|
|
|
|
|
|
Restaurants
|
|
$
|
73,596,000 |
|
$
|
67,978,000 |
|
|
Package stores
|
|
|
20,035,000 |
|
|
15,653,000 |
|
|
|
|
|
93,631,000 |
|
|
83,631,000 |
|
|
Corporate
|
|
|
53,861,000 |
|
|
44,371,000 |
|
|
Consolidated Totals
|
|
$
|
147,492,000 |
|
$
|
128,002,000 |
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures
|
|
|
|
|
|
|
|
|
Restaurants
|
|
$
|
6,578,000 |
|
$
|
10,842,000 |
|
|
Package stores
|
|
|
2,038,000 |
|
|
1,240,000 |
|
|
|
|
|
8,616,000 |
|
|
12,082,000 |
|
|
Corporate
|
|
|
826,000 |
|
|
1,173,000 |
|
|
Total Capital Expenditures
|
|
$
|
9,442,000 |
|
$
|
13,255,000 |
|
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization:
|
|
|
|
|
|
|
|
|
Restaurants
|
|
$
|
2,290,000 |
|
$
|
2,332,000 |
|
|
Package stores
|
|
|
316,000 |
|
|
348,000 |
|
|
|
|
|
2,606,000 |
|
|
2,680,000 |
|
|
Corporate
|
|
|
406,000 |
|
|
383,000 |
|
|
Total Depreciation and Amortization
|
|
$
|
3,012,000 |
|
$
|
3,063,000 |
|
NOTE 18. QUARTERLY INFORMATION (UNAUDITED)
The following is a summary of our unaudited quarterly results of operations for the quarters in our fiscal years 2022 and 2021.
|
|
|
Quarter Ended
|
|
|
|
|
Jan. 1,
2022
|
|
April 2,
2022
|
|
July 2,
2022
|
|
Oct. 1,
2022
|
|
|
Revenues
|
|
$
|
37,403,000 |
|
$
|
40,330,000 |
|
$
|
40,675,000 |
|
$
|
39,724,000 |
|
|
Income from operations
|
|
|
765,000 |
|
|
1,850,000 |
|
|
2,083,000 |
|
|
2,231,000 |
|
|
Net income attributable to stockholders
|
|
|
1,564,000 |
|
|
1,660,000 |
|
|
1,835,000 |
|
|
1,253,000 |
|
| Net income per share – basic and diluted |
|
|
0.84 |
|
|
0.89 |
|
|
0.99 |
|
|
0.68 |
|
| Weighted average common stock outstanding – basic and diluted |
|
|
1,858,647 |
|
|
1,858,647 |
|
|
1,858,647 |
|
|
1,858,647 |
|
NOTE 18. QUARTERLY INFORMATION (UNAUDITED) (Continued)
|
|
|
Quarter Ended
|
|
|
|
|
Jan. 2,
2021
|
|
April 3,
2021
|
|
July 3,
2021
|
|
Oct. 2,
2021
|
|
|
Revenues
|
|
$
|
31,380,000 |
|
$
|
34,357,000 |
|
$
|
37,935,000 |
|
$
|
33,635,000 |
|
|
Income from operations
|
|
|
1,270,000 |
|
|
2,793,000 |
|
|
2,609,000 |
|
|
1,978,000 |
|
|
Net income attributable to stockholders
|
|
|
780,000 |
|
|
2,451,000 |
|
|
7,199,000 |
|
|
1,354,000 |
|
| Net income per share – basic and diluted |
|
|
0.42 |
|
|
1.32 |
|
|
3.87 |
|
|
0.73 |
|
| 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 19. 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 October 1, 2022 and October 2, 2021, the Board of Directors approved discretionary matching contributions totaling $71,000 and $59,000, respectively
NOTE 20. SUBSEQUENT EVENTS
Re-Opening of Re-Constructed Package Liquor Store – Hollywood, Florida
Subsequent to the end of our fiscal year 2022, the package liquor store which was formerly a part of our combination package liquor store and restaurant located at 2505 N. University Drive, Hollywood, Florida (Store #19) and was forced to close due to damage from a fire during the first quarter of our fiscal year 2019 re-opened for business in a newly constructed, free-standing building on the adjacent property located at 7990 Dave Road Extension, Hollywood, Florida (Store #19P).
Insurance Premiums
Subsequent to the end of our fiscal year 2022, for the policy year commencing December 30, 2022, we bound coverage on the following property, general liability, excess liability and terrorist policies, with premiums totaling approximately $3.281 million, which property, general liability, excess liability and terrorist insurance includes coverage for our franchises (which is $658,000), which are not included in our consolidated financial statements:
(i) For the policy year beginning December 30, 2022, our general liability insurance, excluding limited partnerships, is a one (1) year policy with our insurance carriers. The one (1) year general liability insurance premium is in the amount of $512,000;
(ii) For the policy year beginning December 30, 2022, our general liability insurance for our limited partnerships is a one (1) year policy with our insurance carriers. The one (1) year general liability insurance premium is in the amount of $672,000;
(iii) For the policy year beginning December 30, 2022, our automobile insurance is a one (1) year policy. The one (1) year automobile insurance premium is in the amount of $190,000;
(iv) For the policy year beginning December 30, 2022, our property insurance is a one (1) year policy. The one (1) year property insurance premium is in the amount of $1,248,000;
(v) For the policy year beginning December 30, 2022, our excess liability insurance is a one (1) year policy. The one (1) year excess liability insurance premium is in the amount of $634,000;
(vi) For the policy year beginning December 30, 2022, our terrorist insurance is a one (1) year policy. The one (1) year terrorist insurance premium is in the amount of $14,000; and
(vii) For the policy year beginning December 30, 2022, our equipment breakdown insurance is a one (1) year policy. The one (1) year equipment breakdown insurance premium is in the amount of $11,000.
Of the $3,281,000 annual premium amounts, which includes coverage for our franchises which are not included in our consolidated financial statements, we paid the annual premium amounts in full with no financing due to high interest rates.
Payoff of Term Loan
Subsequent to the end of our fiscal year 2022, we satisfied the principal balance and all accrued interest due on our $5.5 million term loan to our unrelated lender. The outstanding principal balance ($367,000) and accrued interest ($-0-) was paid in full on December 28, 2022.
Subsequent events have been evaluated through the date these consolidated financial statements were issued and except as disclosed herein, no other events required disclosure.
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