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Item 2.03
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Creation of a Direct Financial Obligation or an Obligation
under an Off-Balance Sheet Arrangement of a Registrant.
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We currently operate
restaurants, package liquor stores and combination restaurant/package liquor stores that we either own (16 stores); or have operational
control over and partial ownership in (8 stores) (the “Limited Partnership Stores”). We also franchise an additional
five stores consisting of two restaurants (one of which we operate) and three combination restaurant/package liquor stores (the
“Franchised Stores”) and manage an additional store consisting of a restaurant for an unrelated party (the “Managed
Store”). All of the restaurants, with the exception of the Managed Store, which operates under the name “The Whale’s
Rib”, operate under the name “Flanigan’s Seafood Bar and Grill” and all of the package liquor stores operate
under the name “Big Daddy’s Liquors.”
As previously disclosed
in our Form 8-K dated May 6, 2020, our operations have been materially and adversely affected by the global pandemic caused by
the coronavirus disease (COVID-19) outbreak. In compliance with government mandates, in mid-March 2020, we stopped providing dine-in
service and shifted to a take-out or delivery only operating model in all of our company-owned or operated restaurants, and reduced
the operating hours of our retail package store locations, and laid off a significant number of our employees.
We, as well as certain
of the entities owning the Limited Partnership Stores (the “LP’s”), Franchised Stores (the “Franchisees”)
and the Managed Store (the “Managed Store”) (collectively, the “Borrowers”), applied for and received loans
from Bank of America (the “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 $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
loaned to the Managed Store.
The PPP Loans, which
are in the form of Notes issued by each of the Borrowers, mature two years from the date of funding (dates ranging from May 5,
2022 to May 11, 2022) and bear interest at a rate of 1.00% per annum, payable monthly commencing approximately six months from
the date of issuance of the Notes (dates ranging from April 30, 2020 to May 6, 2020). The Notes may be prepaid by the applicable
Borrower at any time prior to maturity with no prepayment penalties. Proceeds from the PPP Loans will be available to the respective
Borrower to fund designated expenses, including certain payroll costs, group health care benefits and other permitted expenses,
including rent and interest on mortgages and other debt obligations incurred before February 15, 2020. Under the terms of the PPP,
up to the entire amount of principal and accrued interest may be forgiven to the extent the proceeds of the PPP Loans are used
for qualifying expenses as described in the CARES Act and applicable implementing guidance issued by the U.S. Small Business Administration
under the PPP. No assurance can be given that the Borrowers will obtain forgiveness of the PPP Loan in whole or in part.
With respect to any
portion of any of the PPP Loans that is not forgiven under the terms of the PPP, such amounts will be subject to customary provisions
for a loan of this type, including customary events of default relating to, among other things, payment defaults, breaches of the
provisions of the applicable PPP Note and cross-defaults on any other loan with the Lender or other creditors.
As of May 11, 2020,
including the full funding of $13.1 million in borrowings under the PPP Loans and including any amounts held on behalf of the LP’s,
Franchisees and the Managed Store, we have approximately $29.8 million of cash on hand and $32.0 million of outstanding indebtedness.
Forward-Looking Statements
This Current Report
on Form 8-K contains forward-looking statements, which include all statements that do not relate solely to historical or current
facts, such as statements concerning our expectations, anticipations, intentions, or beliefs regarding the PPP Loans. These forward-looking
statements are based on management’s beliefs, as well as assumptions made by, and information currently available to, management.
Because such statements are based on expectations and are not statements of fact, actual results may differ materially from those
projected and are subject to a number of known and unknown risks and uncertainties, including financial market conditions; actions
by the Borrowers and other parties to the PPP Loans; changes by the Small Business Administration or other governmental authorities
regarding the CARES Act, the Payroll Protection Program or related administrative matters; the Borrowers’ ability to comply
with the terms of the PPP Loans and the CARES Act, including to use the proceeds of the PPP Loans as described herein; and other
risks and uncertainties described under the headings “Forward-Looking Statements,” “Risk Factors” and other
sections of the our Annual Report on Form 10-K for our fiscal year ended September 28, 2019 filed with the Securities and Exchange
Commission on December 20, 2019, and subsequent filings. We undertake no obligation to update any forward-looking statements, whether
as a result of new information, future events or otherwise.