Item 1.01 Entry into a Material Definitive Agreement
To the extent responsive, the information included in Item 2.03 is incorporated
herein by reference.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
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.
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