UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 29, 2019
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-39053
BBQ HOLDINGS, INC.
(Exact Name of Registrant as Specified in its Charter)
|
MMiMinsd |
|
|
|
Minnesota |
|
83-4222776 |
|
State or Other Jurisdiction of Incorporation or Organization |
|
I.R.S. Employer Identification No. |
|
|
|
|
|
12701 Whitewater Drive, Suite 290 Minnetonka, MN |
|
55343 |
|
Address of Principal Executive Offices |
|
Zip Code |
Registrant’s Telephone Number, Including Area Code (952) 294-1300
Securities registered pursuant to Section 12(b) of the Act:
|
DAVE |
|
|
|
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
|
Common Stock, $0.01 par value |
BBQ |
The Nasdaq Global Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
|
|
|
|
Large Accelerated Filer ☐ |
Accelerated Filer ☐ |
|
Non-accelerated Filer ☐ |
Smaller Reporting Company ☒ |
|
Emerging Growth Company ☐ |
|
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of November 8, 2019, 9,273,905 shares of the registrant’s Common Stock were outstanding.
BBQ HOLDINGS, INC.
TABLE OF CONTENTS
|
|
|
|
Page |
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
Consolidated Balance Sheets as of September 29, 2019 and December 30, 2018 |
3 |
|
|
|
|
|
|
|
|
|
|
4 |
||
|
|
|
|
|
|
|
|
|
5 |
||
|
|
|
|
|
|
|
|
|
6 |
||
|
|
|
|
|
|
|
|
|
7 |
||
|
|
|
|
|
|
|
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
20 |
||
|
|
|
|
|
|
|
|
29 |
|||
|
|
|
|
|
|
|
|
29 |
|||
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
29 |
|||
|
|
|
|
|
|
|
|
29 |
|||
|
|
|
|
|
|
|
|
29 |
|||
|
|
|
|
|
|
|
|
30 |
|||
|
|
|
|
|
|
|
|
|
31 |
||
|
|
|
|
|
|
|
|
|
CERTIFICATIONS |
|
|
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BBQ HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 29, 2019 AND DECEMBER 30, 2018
(in thousands, except per share data)
(Unaudited)
See accompanying notes to consolidated financial statements.
- 3 -
CONSOLIDATED STATEMENTS OF OPERATIONS
SEPTEMBER 29, 2019 AND SEPTEMBER 30, 2018
(in thousands, except per share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
September 29, 2019 |
|
September 30, 2018 |
|
September 29, 2019 |
|
September 30, 2018 |
|
||||
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Restaurant sales, net |
$ |
20,114 |
|
$ |
9,903 |
|
$ |
47,326 |
|
$ |
28,571 |
|
|
Franchise royalty and fee revenue |
|
2,909 |
|
|
3,462 |
|
|
9,560 |
|
|
10,623 |
|
|
Franchisee national advertising fund contributions |
|
395 |
|
|
497 |
|
|
1,275 |
|
|
1,495 |
|
|
Licensing and other revenue |
|
261 |
|
|
211 |
|
|
839 |
|
|
766 |
|
|
Total revenue |
|
23,679 |
|
|
14,073 |
|
|
59,000 |
|
|
41,455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs and expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Food and beverage costs |
|
6,383 |
|
|
3,091 |
|
|
15,068 |
|
|
8,907 |
|
|
Labor and benefits costs |
|
7,477 |
|
|
3,601 |
|
|
17,253 |
|
|
10,158 |
|
|
Operating expenses |
|
6,133 |
|
|
3,011 |
|
|
14,489 |
|
|
8,746 |
|
|
Depreciation and amortization expenses |
|
576 |
|
|
281 |
|
|
1,355 |
|
|
983 |
|
|
General and administrative expenses |
|
2,653 |
|
|
1,937 |
|
|
7,547 |
|
|
5,922 |
|
|
National advertising fund expenses |
|
395 |
|
|
497 |
|
|
1,275 |
|
|
1,495 |
|
|
Asset impairment, estimated lease termination charges and other closing costs, net |
|
214 |
|
|
31 |
|
|
718 |
|
|
143 |
|
|
Pre-opening expenses |
|
94 |
|
|
— |
|
|
94 |
|
|
— |
|
|
Net (gain) loss on disposal of property and bargain purchases |
|
(28) |
|
|
— |
|
|
(174) |
|
|
29 |
|
|
Total costs and expenses |
|
23,897 |
|
|
12,449 |
|
|
57,625 |
|
|
36,383 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations |
|
(218) |
|
|
1,624 |
|
|
1,375 |
|
|
5,072 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
(33) |
|
|
(80) |
|
|
(392) |
|
|
(422) |
|
|
Interest income |
|
27 |
|
|
54 |
|
|
114 |
|
|
79 |
|
|
Total other expense |
|
(6) |
|
|
(26) |
|
|
(278) |
|
|
(343) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes |
|
(224) |
|
|
1,598 |
|
|
1,097 |
|
|
4,729 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit (expense) |
|
174 |
|
|
(196) |
|
|
(25) |
|
|
(937) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income |
|
(50) |
|
|
1,402 |
|
|
1,072 |
|
|
3,792 |
|
|
Less: Net loss attributable to non-controlling interest |
|
67 |
|
|
— |
|
|
67 |
|
|
— |
|
|
Net income attributable to shareholders |
$ |
17 |
|
$ |
1,402 |
|
$ |
1,139 |
|
$ |
3,792 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic net (loss) income per share attributable to shareholders |
$ |
0.00 |
|
$ |
0.15 |
|
$ |
0.13 |
|
$ |
0.45 |
|
|
Diluted net (loss) income per share attributable to shareholders |
$ |
0.00 |
|
$ |
0.15 |
|
$ |
0.12 |
|
$ |
0.45 |
|
|
Weighted average shares outstanding - basic |
|
9,105 |
|
|
9,090 |
|
|
9,095 |
|
|
8,435 |
|
|
Weighted average shares outstanding - diluted |
|
9,279 |
|
|
9,111 |
|
|
9,193 |
|
|
8,459 |
|
See accompanying notes to consolidated financial statements.
- 4 -
BBQ HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
SEPTEMBER 29, 2019
(in thousands)
(Unaudited)
See accompanying notes to consolidated financial statements
- 5 -
BBQ HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SEPTEMBER 29, 2019 AND SEPTEMBER 30, 2018
(in thousands)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
||||
|
|
|
September 29, 2019 |
|
September 30, 2018 |
||
|
Cash flows from operating activities: |
|
|
|
|
|
|
|
Net income |
|
$ |
1,072 |
|
$ |
3,792 |
|
Adjustments to reconcile net income to cash flows provided by operations: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
1,355 |
|
|
983 |
|
Stock-based compensation |
|
|
354 |
|
|
225 |
|
Net (gain) loss on disposal of property and bargain purchases |
|
|
(174) |
|
|
29 |
|
Asset impairment and estimated lease termination charges (gain) |
|
|
660 |
|
|
(257) |
|
Bad debts recovery |
|
|
(67) |
|
|
(35) |
|
Deferred income taxes |
|
|
36 |
|
|
(185) |
|
Other non-cash items |
|
|
280 |
|
|
(391) |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
Accounts receivable, net |
|
|
(495) |
|
|
(49) |
|
Other assets |
|
|
(580) |
|
|
918 |
|
Accounts payable |
|
|
1,371 |
|
|
(183) |
|
Accrued and other liabilities |
|
|
(356) |
|
|
(1,023) |
|
Cash flows provided by operating activities |
|
|
3,456 |
|
|
3,824 |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities: |
|
|
|
|
|
|
|
Proceeds from the sale of assets |
|
|
33 |
|
|
1,187 |
|
Purchases of property, equipment and leasehold improvements |
|
|
(3,792) |
|
|
(597) |
|
Payments for acquired restaurants |
|
|
(6,188) |
|
|
(37) |
|
Advances on notes receivable |
|
|
(150) |
|
|
(750) |
|
Purchases of held to maturity securities |
|
|
— |
|
|
(6,995) |
|
Payments received on note receivable |
|
|
20 |
|
|
— |
|
Cash flows used for investing activities |
|
|
(10,077) |
|
|
(7,192) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities: |
|
|
|
|
|
|
|
Payments for debt issuance costs |
|
|
(54) |
|
|
— |
|
Payments on long-term debt and financing lease obligations |
|
|
(176) |
|
|
(6,625) |
|
Proceeds from sale of common stock, net of offering costs |
|
|
— |
|
|
5,120 |
|
Proceeds from exercise of stock options |
|
|
— |
|
|
520 |
|
Cash flows used for financing activities |
|
|
(230) |
|
|
(985) |
|
|
|
|
|
|
|
|
|
Decrease in cash, cash equivalents and restricted cash |
|
|
(6,851) |
|
|
(4,353) |
|
Cash, cash equivalents and restricted cash, beginning of period |
|
|
12,440 |
|
|
10,426 |
|
Cash, cash equivalents and restricted cash, end of period |
|
$ |
5,589 |
|
$ |
6,073 |
See accompanying notes to consolidated financial statements.
- 6 -
(1) Basis of Presentation
Basis of Presentation
On September 17, 2019 a holding company reorganization was completed in which Famous Dave’s of America, Inc. (“FDA”) became a wholly owned subsidiary of the new parent holding company named BBQ Holdings, Inc. (“BBQ Holdings”). As used in this Form 10-Q, “Company”, “we” and “our” refer to BBQ Holdings and its wholly owned subsidiaries. BBQ Holdings was incorporated on March 29, 2019 under the laws of the State of Minnesota, while FDA was incorporated in Minnesota on March 14, 1994. The Company develops, owns, operates and franchises restaurants under the name "Famous Dave’s” and “Clark Crew BBQ." As of September 29, 2019, there were 128 Famous Dave’s restaurants operating in 32 states, Canada, and the United Arab Emirates, including 32 Company-owned restaurants and 96 franchise-operated restaurants. The first Clark Crew BBQ restaurant is under development in Oklahoma City, Oklahoma.
These consolidated financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and Securities and Exchange Commission (“SEC”) Rules and Regulations. These unaudited consolidated financial statements represent the consolidated financial statements of the Company and its subsidiaries as of September 29, 2019 and December 30, 2018, and for the three and nine months ended September 29, 2019 and September 30, 2018. The information furnished in these consolidated financial statements includes normal recurring adjustments and reflects all adjustments, which are, in the opinion of management, necessary for a fair presentation. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in FDA’s Annual Report on Form 10-K for the fiscal year ended December 30, 2018 as filed with the SEC on March 4, 2019.
Due to the seasonality of the Company’s business, revenue and operating results for the three and nine months ended September 29, 2019 are not necessarily indicative of the results to be expected for the full fiscal year or any other interim period.
Reclassifications
Certain prior period amounts have been reclassified to conform to the current period’s presentation. These reclassifications did not have an impact on the reported net income (loss) for any of the periods presented.
Income Taxes
The Company maintains a federal deferred tax asset (“DTA”) in the amount of $5.7 million for each of the periods ended September 29, 2019 and December 30, 2018, respectively. The Company evaluates the DTA on a quarterly basis to determine whether current facts and circumstances indicate that the DTA may not be fully realizable. As of September 29, 2019, the Company concluded that the DTA is fully realizable and that no further valuation allowance was necessary; however, the Company will continue to evaluate the DTA on a quarterly basis until the DTA has been fully utilized.
The following table presents the Company’s effective tax rates for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
|
September 29, 2019 |
|
September 30, 2018 |
|
September 29, 2019 |
|
September 30, 2018 |
|
||||
|
Effective tax rate |
|
|
77.7 |
% |
|
12.3 |
% |
|
2.3 |
% |
|
19.8 |
% |
The Company provides for income taxes based on its estimate of federal and state income tax liabilities. These estimates include, among other items, effective rates for state and local income taxes, allowable tax credits for items such as taxes paid on reported tip income, estimates related to depreciation and amortization expense allowable for tax purposes, and the tax deductibility of certain other items. The Company’s estimates are based on the information available at the time that the Company prepares the income tax provision. The Company generally files its annual income tax returns several months after its fiscal year-end. Income tax returns are subject to audit by federal, state, and local governments, generally years after the tax returns are filed. These returns could be subject to material adjustments or differing interpretations of the tax laws.
- 7 -
Restricted cash and marketing fund
The Company has a system-wide marketing development fund, to which most Company-owned restaurants, in addition to the majority of franchise-operated restaurants, contribute a percentage of net sales for use in public relations and marketing development efforts. The assets held by this fund are considered to be restricted. Accordingly, the Company reflects the cash related to this fund within restricted cash and reflects the liability within accounts payable on the Company’s consolidated balance sheets. The Company had approximately $657,000 and $700,000 in this fund as of September 29, 2019 and December 30, 2018, respectively.
In conjunction with the Company’s credit agreements, the Company was previously required to deposit amounts for undrawn letters of credit in cash collateral accounts. The Company had approximately $143,000 in restricted cash as of December 30, 2018, related to these undrawn letters of credit.
Assets Held for Sale
As of September 29, 2019, the Company had assets held for sale of approximately $2.8 million related to an owned property for which the Company entered into an agreement to sell the property for a contract purchase price of $3.6 million.
Concentrations of Credit Risk
As of September 29, 2019, the Company had an outstanding receivable from one franchisee of approximately $531,000.
Recently Adopted Accounting Pronouncements
In June 2018, the FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718), which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. Under the updated standard, an entity is required to apply the requirements of Topic 718 to nonemployee awards, except for specific guidance on inputs to an option-pricing model and the attribution of cost. The amendments specify that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in the grantor’s own operations by issuing share-based payment awards. The amendments also clarify that Topic 718 does not apply to share-based payments used to effectively provide (1) financing to the issuer or (2) awards granted in conjunction with selling or goods or services as part of a contract accounted for under Topic 606, Revenue from Contracts with Customers. The amendments in this ASU are effective for fiscal years beginning after December 15, 2018 and interim periods within that fiscal year. Early adoption was permitted, but no earlier than an entity’s adoption date of Topic 606. The Company adopted this new standard as of the effective date. Adoption of the new standard did not have a material impact on the Company’s consolidated financial statements.
Beginning in fiscal 2019, the Company adopted Topic 842, Leases, which had a material impact on the Company’s consolidated financial statements. See Note 7 – Leases.
(2) Intangible Assets, net
The Company has intangible assets that consist of liquor licenses, lease interest assets and reacquired franchise rights, net. The liquor licenses are indefinite-lived assets and are not subject to amortization. The lease interest assets are amortized to occupancy costs on a straight-line basis over the remaining term of each respective lease. Reacquired franchise rights are amortized to depreciation and amortization expense on a straight-line basis over the remaining life of the reacquired franchise agreement.
A reconciliation of the Company’s intangible assets as of September 29, 2019 and December 30, 2018, respectively, are presented in the table below:
- 8 -
The following table provides the projected future amortization of reacquired franchise rights, net and lease interest assets for the next five years, as of September 29, 2019:
(3) Long-Term Debt and Financing Lease Obligations
Long-term debt
Long-term debt consisted of the following at:
The weighted-average interest rate of long-term debt outstanding as of September 29, 2019 and December 30, 2018 was 5.31% and 4.41%, respectively.
On June 20, 2019 (the “Effective Date”), the Company entered into a Loan Agreement among the Company and Choice Financial Group (the “Lender”). The Loan Agreement provides for a term loan from the Lender to the borrowers set forth therein in the principal amount of up to $24.0 million and is evidenced by a promissory note (the “First Note”) executed and delivered by the borrowers to the Lender on the Effective Date. The First Note has a maturity date of June 20, 2025. The first year of the First Note (the “Draw Period”) provides for payments of interest only, with the remaining five years requiring payments of interest and principal based on a 60 month amortization period. Interest shall be payable in an amount equal to the Wall Street Journal Prime Rate, but in no circumstances shall the rate of interest be less than 5.00%. The Note may be prepaid, partially or in full, at any time and for no prepayment penalty.
Proceeds from the loan were used to repay the Company’s previous real estate loan, dated December 2, 2016, which had an outstanding balance as of the Effective Date of approximately $2.6 million. The remainder of the First Note may be drawn upon during the Draw Period, provided that there are no uncured events of default.
The Loan Agreement is secured by a mortgage and security agreement and fixture financing statement (the “First Mortgage”) granting to the Lender a security interest in and title to certain real property in the state of Minnesota and as more fully described therein.
The Loan Agreement contains customary representations and warranties and financial and other covenants and conditions, including, among other things, minimum debt service coverage ratio and a post-closing covenant to maintain a complete deposit and cash management relationship with the Lender. The Loan Agreement also places certain restrictions on, among other things, the borrowers’ ability to incur additional indebtedness, to create liens or other encumbrances, to use funds for purposes other than as stated therein, to sell or otherwise dispose of assets without the consent of the Lender.
- 9 -
In addition, the Loan Agreement contains events of default (subject to certain materiality thresholds and grace periods), including, without limitation, payment defaults; breaches of covenants; breaches of representations and warranties; failure to perform remediation of any environmental matters on the mortgaged property, as set forth in the First Mortgage; failure to perform or observe the covenants, conditions or terms of the First Loan Agreement and related agreements; certain bankruptcy events of the borrowers and failure to timely provide financial statements.
Also on the Effective Date, the Company also entered into a Revolving Promissory Note among the Company and the Lender. The Revolving Promissory Note provides for a revolving line of credit from the Lender to the borrowers set forth therein in the principal amount of up to $1.0 million (the “Second Note”) executed and delivered by the borrowers to the Lender on the Effective Date. The Second Note has a maturity date of December 2, 2019. The Second Note provides for monthly payments of interest only, with a balloon payment of the remaining outstanding balance and applicable interest is due on the maturity date. Interest shall be payable in an amount equal to the 30-day London Interbank Offer Rate (“LIBOR”) plus 325 basis points, but in no circumstances shall the rate of interest be less than 3.75%. The Note may be prepaid, partially or in full, at any time and for no prepayment penalty. Proceeds from the revolving line of credit may be used at the Company’s discretion.
The Company is subject to various financial and non-financial covenants on its long-term debt, including a debt-service coverage ratio. As of September 29, 2019, the Company was compliant with all of its covenants.
Financing Lease Obligation
The Company repaid its financing lease obligation during the nine months ended September 29, 2019.
(4) Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following at:
|
|
|
|
|
|
|
|
|
(in thousands) |
|
September 29, 2019 |
|
December 30, 2018 |
||
|
Prepaid expenses and deferred costs |
|
$ |
1,043 |
|
$ |
767 |
|
Prepaid insurance |
|
|
199 |
|
|
596 |
|
Prepaid expenses and other assets |
|
$ |
1,242 |
|
$ |
1,363 |
(5) Other Current Liabilities
Other current liabilities consisted of the following at:
- 10 -
(6) Other Liabilities
Other liabilities consisted of the following at:
(7) Leases
The Company leases the property for its corporate headquarters, most of its Company-owned stores, and certain office and restaurant equipment. The Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of use (“ROU”) assets, current portion of operating lease liabilities, and operating lease liabilities in its consolidated balance sheets.
ROU assets and operating lease liabilities are recognized based on the present value of lease payments over the lease term at the commencement date. Because most of the Company's leases do not provide an implicit rate of return, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. Operating lease ROU assets also exclude lease incentives received. Where the Company is the lessee, at initial adoption, the Company has elected to account for non-lease components associated with its leases (e.g., common area maintenance costs) and lease components separately for substantially all of its asset classes. Subsequent to adoption, the Company will combine lease and non-lease components.
Lease terms for Company-owned stores generally range from 5-20 years with one or more five-year renewal options and generally require the Company to pay a proportionate share of real estate taxes, insurance, common area, and other operating costs in addition to a base or fixed rent. The Company has elected the short term lease exemption for certain qualifying leases with lease terms of twelve months or less and, accordingly, did not record right-of-use assets and lease liabilities. These leases with initial terms of less than 12 months are recorded directly to occupancy expense on a straight-line basis over the term of the lease. Additionally, the Company has decided to utilize the package of practical expedients and the practical expedient to not reassess certain land easements. The Company has decided not to utilize the practical expedient to use hindsight. Certain of the Company’s leases also provide for variable lease payments in the form of percentage rent, in which additional rent is calculated as a percentage of sales in excess of a base amount, and not included in the calculation of the operating lease liability or ROU asset. The Company's leases have remaining lease terms of 0.90 to 20.33 years. For purposes of calculating operating lease liabilities, lease terms may be deemed to include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Economic performance of a store is the primary factor used to estimate whether an option to extend a lease term will be exercised or not.
Lease expense for lease payments is recognized on a straight-line basis over the lease term. The components of lease expense for the period presented is as follows:
- 11 -
Supplemental cash flow information related to leases for the period presented is as follows:
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
(in thousands) |
|
September 29, 2019 |
|
|
|
Cash paid for amounts included in the measurement of lease liabilities: |
|
|
|
|
|
Operating cash flows from operating leases |
|
$ |
3,125 |
|
|
Right-of-use assets obtained in exchange for new operating lease liabilities |
|
|
18,887 |
|
|
Weighted-average remaining lease term of operating leases (in years) |
|
|
9.24 |
|
|
Weighted-average discount rate of operating leases |
|
|
5.49 |
% |
The maturities of the Company’s lease liabilities as of September 29, 2019 is as follows (in thousands):
As of September 29, 2019, the Company had one operating lease that had not commenced for a new restaurant site in Oklahoma City, Oklahoma. The lease has a 15-year term with two five-year renewal options.
(8) Revenue Recognition
The Company recognizes franchise fee revenue on a straight-line basis over the life of the related franchise agreements and any exercised renewal periods. Cash payments are due upon the opening of a new restaurant or upon the execution of a renewal of the related franchise agreement. The Company’s performance obligation with respect to franchise fee revenues consists of a license to utilize the Company’s brand for a specified period of time, which is satisfied equally over the life of each franchise agreement.
Area development fees are deferred until a new restaurant is opened pursuant to the area development agreement, at which time revenue is recognized on a straight-line basis over the life of the franchise agreement. Cash payments for area development agreements are typically due when an area development agreement has been executed. Gift card breakage revenue is recognized proportionately as gift cards are redeemed utilizing an estimated breakage rate based on the Company’s historical experience. Gift card breakage revenue is reported within the licensing and other revenue line item of the consolidated statements of operations.
The Company defers revenue associated with the estimated selling price of reward points, which we refer to as Bones, earned pursuant to the Company’s loyalty program and establishes a corresponding liability. This deferral is based on the estimated value of the product for which the reward is expected to be redeemed, net of estimated unredeemed Bones. When a Guest redeems an earned reward, the Company recognizes revenue for the redeemed product and reduces the deferred revenue. Deferred revenue associated with the Company’s loyalty program was not material as of September 29, 2019 and December 30, 2018.
The Company’s revenue is generally disaggregated within the consolidated statements of operations. Gift card breakage revenue was not material to the Company’s consolidated financial statements. The Company recognized revenue related to gift cards of approximately $208,000 and $369,000 during the three and nine months ended September 29, 2019, respectively, which is reflected in the restaurant sales, net, line item of its consolidated statements of operations. Gift cards payable of approximately $1.5 million is expected to be recognized as revenue over the next 12 months.
- 12 -
The following table illustrates estimated revenues expected to be recognized in the future related to unsatisfied performance obligations as of September 29, 2019:
|
|
|
|
|
|
(in thousands) |
|
|
|
|
Fiscal Year |
|
|
|
|
2019 |
|
$ |
38 |
|
2020 |
|
|
139 |
|
2021 |
|
|
121 |
|
2022 |
|
|
117 |
|
2023 |
|
|
108 |
|
Thereafter |
|
|
848 |
|
Total |
|
$ |
1,371 |
Contract liabilities consist of deferred revenue resulting from franchise fees paid by franchisees. We classify these liabilities within other current liabilities and other liabilities within our consolidated balance sheets based on the expected timing of revenue recognition associated with these liabilities. The following table reflects the change in contract liabilities between December 30, 2018 and September 29, 2019:
|
|
|
|
|
|
(in thousands) |
|
|
|
|
Balance, December 30, 2018 |
|
$ |
1,998 |
|
Revenue recognized |
|
|
(627) |
|
Balance, September 29, 2019 |
|
$ |
1,371 |
(
(9) Stock-based Compensation
Effective May 5, 2015, the Company adopted the 2015 Equity Incentive Plan (the “2015 Plan”), which was assumed by the Company, pursuant to which the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance stock units and other stock and cash awards to eligible participants. The Company also maintains an Amended and Restated 2005 Stock Incentive Plan (the “2005 Plan”). Together, the 2015 Plan and 2005 Plan are referred to herein as the “Plans.” The 2005 Plan prohibits the granting of incentives after May 12, 2015, the tenth anniversary of the date the 2005 Plan was approved by the Company’s shareholders. Nonetheless, the 2005 Plan will remain in effect until all outstanding incentives granted thereunder have either been satisfied or terminated. As of September 29, 2019, there were 105,001 shares available for grant pursuant to the 2015 Plan. For purposes of net income per share, there were approximately 214,000 and 103,000 stock options outstanding as of September 29, 2019 and September 30, 2018, respectively, which were not included in the computation of diluted net income per share because their impact was antidilutive. As of September 29, 2019, the total compensation cost related to unvested stock option awards was approximately $1.3 million which is expected to be recognized over a period of approximately 3.17 years.
Stock options granted to employees and directors generally vest over two to five years, in monthly or annual installments, as outlined in each agreement. Options generally expire ten years from the date of grant. Compensation expense equal to the grant date fair value of the options is recognized in general and administrative expense over the applicable service period.
The Company utilizes the Black-Scholes option pricing model when determining the compensation cost associated with stock options issued using the following significant assumptions:
| ● | Stock price – Published trading market values of the Company’s common stock as of the date of grant. |
| ● | Exercise price – The stated exercise price of the stock option. |
| ● | Expected life – The simplified method as outlined in ASC 718. |
| ● | Expected dividend – The rate of dividends that the Company expects to pay over the term of the stock option. |
| ● | Volatility – Actual volatility over the most recent historical period equivalent to the expected life of the option. |
| ● | Risk-free interest rate – The daily United States Treasury yield curve rate. |
- 13 -
The Company recognized stock-based compensation expense in its consolidated statements of operations for the three and nine months ended September 29, 2019 and September 30, 2018, respectively, as follows:
Information regarding the Company’s stock options is summarized below:
Information regarding the Company’s restricted stock is summarized below:
- 14 -
(10) Asset Impairment, Estimated Lease Termination and Other Closing Costs
The following is a summary of asset impairment, estimated lease termination and other closing costs for the three and nine months ended September 29, 2019 and September 30, 2018. These costs are included in asset impairment, estimated lease termination and other closing costs in the consolidated statements of operations.
(11) Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement framework establishes a three-tier hierarchy. The three levels, in order of priority, are as follows:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date. Level 1 measurements are determined by observable inputs which include data sources and market prices available and visible outside of the entity.
Level 2: Observable inputs other than quoted prices included within Level 1 for the asset or liability, either directly or indirectly.
Level 3: Inputs that are used to estimate the fair value of the asset or liability. Level 3 measurements are determined by unobservable inputs, which include data and analysis developed within the entity to assess the fair value.
For assets and liabilities falling within Level 3 of the fair value hierarchy, a change in the input assumptions used could result in a change in the estimated fair value of the asset or liability. Transfers in and out of levels will be based on the Company’s judgment of the availability of unadjusted quoted prices in active markets, other observable inputs, and non-observable inputs.
The carrying amounts of cash and cash equivalents reported in the consolidated balance sheets approximates fair value based on current interest rates and short-term maturities. The carrying amount of accounts receivable approximates fair value due to the short-term nature of accounts receivable. The Company believes that the carrying amount of long-term debt approximates fair value due to the variable interest rate on the Company’s long-term debt, as well as that there has been no significant change in the credit risk or credit markets since origination.
The Company had no assets measured at fair value in its consolidated balance sheets as of September 29, 2019 and December 30, 2018, except for the assets recorded at fair value in conjunction with restaurant acquisitions. See Note 12 – Restaurant Acquisition.
- 15 -
(12) Restaurant Acquisition
On July 10, 2019, the Company completed the acquisition of the assets and operations of four Famous Dave's restaurants in Arizona (the “Arizona Restaurants”). The sellers of the Arizona Restaurants were Desert Ribs LLC, Famous Charlie LLC, Famous Freddie LLC, Famous Gracie LLC, and Famous George LLC, which were franchisees of the Company. The acquisition of the Arizona Restaurants was pursuant to the Purchase Agreement, as filed on June 26, 2019, resulting from a stalking horse bid in the sale process conducted under Sections 363 and 365 of Chapter 11 of the U.S. Bankruptcy Code. The purchase price of the Arizona Restaurants was approximately $1.6 million in cash and approximately $1.4 million for the assumption of gift card and other liabilities as specified in the Purchase Agreement, settlement of outstanding franchise billings, and fees related to debtor-in-possession financing. The Company incurred acquisition costs of approximately $166,000, which are reflected in general administrative expenses, associated with the purchase of the Arizona Restaurants. Effective as of the closing date of the acquisition, the franchise agreements for the Arizona Restaurants were terminated and outstanding receivables were considered additions to the purchase price.
The acquisition was accounted for using the purchase method of accounting in accordance with ASC 805 “Business Combinations” and, accordingly, these consolidated statements of operations include the results of these operations from the date of acquisition. The assets acquired and the liabilities assumed were provisionally recorded at estimated fair values based on information available.
The following table presents the provisional allocation of assets acquired and liabilities assumed for the Arizona Restaurants during the three months ended September 29, 2019:
The Company expects goodwill to be deductible for tax purposes, subject to amortization.
On March 4, 2019, the Company completed the acquisition of the assets and operations of four Famous Dave's restaurants in Colorado (the “Colorado Restaurants”). The sellers of the Colorado Restaurants were Legendary BBQ, Inc., Quebec Square BBQ, Inc., Cornerstar BBQ, Inc., Razorback BBQ, Inc., and Larkridge BBQ, Inc. Pursuant to the same purchase agreement as the acquisition of the Colorado Restaurants, on June 3, 2019, the Company completed the acquisition of the assets and operations of one Famous Dave's restaurant in Grand Junction, Colorado (the “Grand Junction Restaurant”). The seller of the Grand Junction Restaurant was Mesa Mall BBQ, Inc. The contract purchase price of the Colorado Restaurants and the Grand Junction Restaurant was approximately $4,100,000, exclusive of acquisition costs of approximately $209,000, which are reflected in general and administrative expenses, plus the assumption of the gift card liability associated with the restaurants. Accounts receivable amounts owed to the Company reduced the cash required to be paid for the purchase price. The Company also purchased inventory on hand as of the acquisition dates. Effective as of the closing date of the acquisitions, the franchise agreements for the Colorado Restaurants and the Grand Junction Restaurant were terminated.
The Company provisionally allocated the purchase price of the Colorado Restaurants as of the end of the first quarter of fiscal 2019. As a result of the completion of the acquisition of the Grand Junction Restaurant, the Company provisionally allocated the identifiable tangible and intangible assets associated with the Grand Junction Restaurant, which resulted in the reduction of goodwill of approximately $0.6 million.
- 16 -
The acquisition was accounted for using the purchase method of accounting in accordance with ASC 805 “Business Combinations” and, accordingly, these consolidated statements of operations include the results of these operations from the date of acquisition.
The following table presents the provisional allocation of assets acquired and liabilities assumed for the Colorado Restaurants and the Grand Junction Restaurant during the nine months ended September 29, 2019:
The Company expects goodwill to be deductible for tax purposes, subject to amortization.
During the nine months ended September 29, 2019, the Company completed several individually immaterial acquisitions of previously franchised Famous Dave’s restaurants. The acquisitions were accounted for using the purchase method of accounting in accordance with ASC 805 “Business Combinations” and, accordingly, the consolidated statements of operations include the results of these operations from the dates of the respective acquisitions. The assets acquired and the liabilities assumed were recorded at estimated fair values based on information available. Pursuant to these acquisitions, the Company incurred approximately $244,000 of acquisition costs, which are reflected in general and administrative expenses. As a result of the acquisition of previously franchised restaurants during the nine months ended September 29, 2019, the Company entered into five leases with a current franchisee pursuant to the respective purchase agreements.
The following table presents the provisional allocation of assets acquired and liabilities assumed for the individually immaterial acquisitions during the nine months ended September 29, 2019:
- 17 -
Unaudited pro forma results of operations for the three month and nine month periods ended September 29, 2019 and September 30, 2018, as if the Company had acquired majority ownership of all operations on January 1, 2018 is as follows. The pro forma results include estimates and assumptions which management believes are reasonable. However, pro forma results are not necessarily indicative of the results that would have occurred if the business combination had been in effect on the dates indicated, or which may result in the future.
(13) Variable Interest Entities
A variable interest holder is considered to be the primary beneficiary of a variable interest entity (“VIE”) if it has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and has the obligation to absorb losses of, or the right to receive benefits from, the entity that could potentially be significant to the VIE. Once an entity is determined to be a VIE, the primary beneficiary is required to consolidate the entity. The Company has an installment agreement with one of its franchisees as the result of refranchising its Lincoln, Nebraska restaurant. This franchisee is a VIE; however, the owners of the franchise operations are the primary beneficiaries of the entities, not the Company. Therefore, the franchise operations are not required to be consolidated in the Company’s consolidated financial statements.
On November 1, 2017, the Company sold its Frederick, Maryland restaurant. Pursuant to the terms of the Frederick Agreement, the Company remained the primary obligor of the lease. As of September 29, 2019, the amount of future lease payments for which the Company would be liable in the event of a default are approximately $439,000. An accrual related to the future lease obligation was not considered necessary as of September 29, 2019.
On July 18, 2018, the Company and Clark Championship Products LLC (“Clark”), an entity owned by Travis Clark, became members of Mercury BBQ LLC (“Mercury”) for the purposes of building out and operating the inaugural Clark Crew BBQ restaurant in Oklahoma City, Oklahoma (the “Restaurant”). Clark will own 80% of the units outstanding of Mercury and the Company will own 20% of the units outstanding of Mercury. Mercury shall be governed by three managers, two of which will be appointed by the Company and one of which will be appointed by Clark. Also on July 18, 2018, the Company entered into a secured promissory note in the amount of $1.4 million (the “Loan”) with Mercury, the proceeds of which are required to be used for the build out of the Restaurant. The Loan bears interest at a rate of 10% per annum and requires payments of 100% of the excess monthly cash flows until the Loan and all interest accrued thereon is repaid. The Loan requires a balloon payment of unpaid principal and accrued interest on July 15, 2023 and may be prepaid at any time. Also on July 18, 2018, the Company and Clark entered into an intellectual property license agreement (the “License Agreement”) pursuant to which Clark granted to the Company an exclusive license to use and sublicense the patents, trademarks, trade names, service marks, logos and designs related to Clark Crew BBQ restaurants and products. The term of the License Agreement is indefinite and may only be terminated by mutual written consent, unless the Company breaches the License Agreement. In October 2019, the Company and Clark agreed to increase the amount of the Loan to $2.5 million, reduce the interest rate to 8% and extend the maturity date of the Loan to 2025.
Because the Company will provide more than half of the subordinated financial support of Mercury and controls Mercury via its representation on the board of managers, the Company has concluded that Mercury is a VIE, of which the Company is the primary beneficiary and must consolidate Mercury. The Company has incurred expenses of $84,000 related to Mercury during the nine months ended September 29, 2019, of which $67,000 was allocated to non-controlling interest. As of September 29, 2019, Mercury had assets of $1.6 million, which primarily consists of fixed assets.
- 18 -
(14) Litigation
In the normal course of business, the Company is involved in a number of litigation matters that are incidental to the operation of the business. These matters generally include, among other things, matters with regard to employment and general business-related issues. The Company currently believes that the resolution of any of these pending matters will not have a material adverse effect on its financial position or liquidity, but an adverse decision in more than one of the matters could be material to its consolidated results of operations.
(15) Related Party Transactions
Anand D. Gala is a franchisee of the Company and currently serves as a director of the Company. Mr. Gala is the Founder, President and Chief Executive Officer of Gala Holdings International, a diversified holding company that conducts consulting, restaurant development and management operations.
Charles Davidson is a franchisee of the Company and is the beneficial owner of approximately 18.2% of the Company’s common stock as of the date that these financial statements were available to be issued, by virtue of his ownership interest in Wexford Capital.
The following table outlines amounts received from related parties during the nine months ended September 29, 2019, and September 30, 2018:
The following table outlines accounts receivable from related parties as of September 29, 2019 and December 30, 2018:
|
|
|
|
|
|
|
|
|
(in thousands) |
|
September 29, 2019 |
|
December 30, 2018 |
||
|
Accounts receivable, net - Anand Gala |
|
$ |
152 |
|
$ |
271 |
|
Accounts receivable, net - Charles Davidson |
|
|
37 |
|
|
44 |
(16) Subsequent Events
The Company has evaluated for the occurrence of subsequent events through the issuance date of the Company’s consolidated financial statements. No other recognized or non-recognized subsequent events occurred that require recognition or disclosure in the consolidated financial statements, except as noted below.
In October 2019, the Company and Clark agreed to modify the amount of the Loan to $2.5 million, reduce the interest rate to 8% and extend the maturity date of the Loan to 2025. Also in October 2019, Clark and BBQ Oklahoma, Inc., a wholly owned subsidiary of the Company, formed a new entity, Mercury BBQ Products, LLC (“BBQ Products”), in which Clark owns 51% and BBQ Oklahoma owns 49% of the outstanding units. For its units, BBQ Oklahoma contributed $100,000 and provided a line of credit up to $500,000 to fund the business. Clark contributed certain intellectual properties for its units. In exchange for a payment of $100,000 from BBQ Products, Clark and BBQ Products entered into an exclusive Intellectual Property License Agreement, dated October 16, 2019, whereby Clark grants BBQ Products the right to use and sublicense sauces, seasonings, trademarks, trade name, service marks, logos and related to Clark Crew BBQ restaurants with respect to consumer packaged goods.
On October 29, 2019, we drew $4.3 million on the First Note. As of November 12, 2019, the balance on the First Note was $6.8 million.
In October 2019, FDA, entered into an agreement with Midwest BBQ Ventures, LLC and its wholly owned subsidiaries (“Midwest BBQ and Subsidiaries”) to collect on outstanding receivables owed by Midwest BBQ and Subsidiaries to FDA which is secured by a mortgage in favor of FDA to certain real property owned by FDKC Speedway LLC.
- 19 -
|
Item 2. |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Overview
On September 17, 2019 a holding company reorganization was completed in which Famous Dave’s of America, Inc. became a wholly owned subsidiary of the new parent holding company named BBQ Holdings, Inc. BBQ Holdings, Inc. was incorporated in Minnesota on March 29, 2019 under the laws of the State of Minnesota, while Famous Dave’s of America, Inc. was incorporated in Minnesota on March 14, 1994.
The following table summarizes the changes in the number of Company-owned and franchise-operated restaurants for the periods presented:
During the nine months ended September 29, 2019, we opened one franchise-operated restaurant in Dubai, United Arab Emirates and a small-footprint concept in Tucson, Arizona. We also repurchased 17 stores in the Colorado, Ohio, Wisconsin, Michigan, Iowa, Kentucky and Arizona markets. See Note 12 – Restaurant Acquisition to the accompanying consolidated financial statements.
Fiscal Year
Our fiscal year ends on the Sunday closest to December 31st. Our fiscal year is generally 52 weeks; however, it periodically consists of 53 weeks. The fiscal years ending December 29, 2019 (fiscal 2019) and December 30, 2018 (fiscal 2018) are both 52 week fiscal years.
Revenue
Our revenue consists of restaurant sales, franchise-related revenue, and licensing and other revenue. Our franchise-related revenue is comprised of three separate and distinct earnings processes: area development fees, initial franchise fees, and continuing royalty and national advertising fund payments. Currently, our domestic area development fee consists of a one-time, non-refundable payment of approximately $10,000 per restaurant in consideration for the services we perform in preparation of executing each area development agreement. For our foreign area development agreements, the one time, non-refundable payment is negotiated on a per development basis and is determined based on the costs incurred to arrange for the sale of that development area. Currently, our initial, non-refundable, franchise fee for domestic growth is $45,000 per restaurant. Finally, franchisees are also required to pay us a monthly royalty equal to a percentage of their net sales. Licensing revenue includes royalties from a retail line of business, including sauces, rubs, marinades and seasonings. Other revenue includes opening assistance and training we provide to our franchise partners.
- 20 -
Costs and Expenses
Restaurant costs and expenses include food and beverage costs; labor and benefits costs; and operating expenses, which include occupancy costs, repair and maintenance costs, supplies, advertising and promotion. Certain of these costs and expenses are variable and will increase or decrease with sales volume. The primary fixed costs are restaurant management, operations, and catering support salaries, occupancy and insurance costs.
General and Administrative Expenses
General and administrative expenses include all corporate and administrative functions to support future growth. Salaries and benefits, legal fees, accounting fees, professional consulting fees, travel, rent and general insurance are major items in this category. We also provide franchise services for which the revenue is included in other revenue and the expenses are included in general and administrative expenses.
Results of Operations – the three and nine months ended September 29, 2019 compared to the three and nine months ended September 30, 2018.
The following discussion and analysis of financial condition and results of operations should be read in conjunction with the accompanying unaudited consolidated financial statements and notes, and the audited consolidated financial statements and notes included in our Annual Report on Form 10-K for the fiscal year ended December 30, 2018.
The following table presents items in our unaudited consolidated statements of operations as a percentage of net restaurant sales or total revenue, as indicated, for the periods presented:
| (1) | As a percentage of restaurant sales, net |
| (2) | As a percentage of total revenue |
| (3) | Restaurant level margins are equal to restaurant sales, net, less restaurant level food and beverage costs, labor and benefit costs, and operating expenses. |
Same Store Net Sales
It is our policy to include in our same store net sales base, restaurants that are open year round and have been open at least 24 months. Reacquired and refranchised restaurants are removed from the same store net sales base until the new ownership has been in place for at least 12 months. Same store net sales for Company-owned restaurants for the three and nine months ended September 29, 2019 increased 0.4% and 1.0% compared to the three and nine months ended September 30, 2018, respectively. As of September 29, 2019 and September 30, 2018, there were 14 and 15 restaurants in the same store sales base, respectively.
Same store net sales for franchise-operated restaurants for the three and nine months ended September 29, 2019 increased 2.1% and 1.2% compared to the three and nine months ended September 30, 2018, respectively.
- 21 -
Total Revenue
Our components of and changes in revenue consisted of the following for the three and nine months ended September 29, 2019 and September 30, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|||||||||||
|
(dollars in thousands) |
|
September 29, 2019 |
|
September 30, 2018 |
|
|
$ Change |
|
% Change |
|
||||
|
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restaurant sales, net |
|
$ |
20,114 |
|
$ |
9,903 |
|
|
$ |
10,211 |
|
|
103.1 |
% |
|
Franchise royalty and fee revenue |
|
|
2,909 |
|
|
3,462 |
|
|
|
(553) |
|
|
(16.0) |
% |
|
Franchisee national advertising fund contributions |
|
|
395 |
|
|
497 |
|
|
|
(102) |
|
|
(20.5) |
% |
|
Licensing and other revenue |
|
|
261 |
|
|
211 |
|
|
|
50 |
|
|
23.7 |
% |
|
Total revenue |
|
$ |
23,679 |
|
$ |
14,073 |
|
|
$ |
9,606 |
|
|
68.3 |
% |
Restaurant Sales, net
The increase in year-over-year restaurant sales, net for the three and nine months ended September 29, 2019 was primarily a result of the acquisition of restaurants in the Michigan, Ohio, Wisconsin, Colorado, Indiana, Iowa, Kentucky and Arizona markets as well as an increase in same-store sales.
On a weighted basis, for the three months ended September 29, 2019 compared to the three months ended September 30, 2018, Dine-In sales decreased by 3.3%, while Catering and To-Go same store net sales increased by 2.2% and 1.5%, respectively, driven by third-party delivery sales and catering events. On a weighted basis, for the nine months ended September 29, 2019 compared to the nine months ended September 30, 2018, Dine-In same store net sales decreased by 2.5%, while To-Go and Catering same store net sales increased by 2.4% and 1.1%, respectively. The increase in the Catering line of business for the comparable restaurant base was driven by a concentrated effort to increase sales in this area and To-Go is driven by third-party delivery sales and marketing efforts aimed at increasing traffic.
Line of Business Summary
The following table summarizes the Company-owned restaurants by line of business for the three months ended September 29, 2019:
|
|
|
|
|
|
|
|
|
|
Dine In |
To Go |
Catering |
TOTAL |
|
% of sales |
|
47% |
33% |
20% |
100% |
|
|
|
|
|
|
|
|
Comparable sales % |
|
-6.7% |
4.7% |
12.7% |
0.4% |
|
Comparable sales "contribution" |
|
-3.3% |
1.5% |
2.2% |
0.4% |
|
|
|
|
|
|
|
|
Average party size |
|
2.0 |
2.1 |
58.5 |
2.7 |
|
Per person average |
|
$ 16.40 |
$ 13.80 |
$ 11.00 |
$ 14.10 |
|
Average check size |
|
$ 32.80 |
$ 29.00 |
$ 642.00 |
$ 38.20 |
- 22 -
The following table summarizes the Company-owned restaurants by line of business for the nine months ended September 29, 2019:
|
|
|
|
|
|
|
|
|
|
Dine In |
To Go |
Catering |
TOTAL |
|
% of sales |
|
50% |
36% |
14% |
100% |
|
|
|
|
|
|
|
|
Comparable sales % |
|
-4.8% |
7.1% |
8.4% |
1.0% |
|
Comparable sales "contribution" |
|
-2.5% |
2.4% |
1.1% |
1.0% |
|
|
|
|
|
|
|
|
Average party size |
|
2.0 |
2.1 |
50.2 |
2.5 |
|
Per person average |
|
$ 16.50 |
$ 13.50 |
$ 10.90 |
$ 14.30 |
|
Average check size |
|
$ 33.20 |
$ 28.80 |
$ 545.10 |
$ 35.80 |
Franchise-Related Revenue, including national advertising fund contributions
Franchise-related same store net sales increased by 2.1% and 1.2%, respectively, for the three and nine months ended September 29, 2019 compared to the three and nine months ended September 30, 2018. The increase year over year was primarily related to continued franchisee adoption of brand initiatives to drive traffic and awareness of the brand as well as the closures of underperforming franchise stores.
In fiscal 2018, we rolled out several initiatives, aimed at driving traffic and improving sales, to our Company-owned stores that are in various stages of implementation throughout our franchise system. Additionally, we continue to focus our resources on innovations to provide new avenues for our franchisees to improve their net sales and operating performance.
Licensing and Other Revenue
For the three months ended September 29, 2019, licensing and other revenue grew 23.7% to $261,000 compared to the same period of fiscal 2018. For the nine months ended September 29, 2019, licensing and other revenue was $839,000 as compared to $766,000 in fiscal 2018, an increase of 9.5%. Licensing and other revenue is primarily related to royalties earned on the sale of Famous Dave’s branded sauces, rubs, and other consumer packaged goods.
Average Weekly Net Sales and Operating Weeks
The following table shows Company-owned and franchise-operated average weekly net sales and Company-owned and franchise-operated operating weeks for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||
|
|
|
September 29, 2019 |
|
September 30, 2018 |
|
September 29, 2019 |
|
September 30, 2018 |
||||
|
Average Weekly Net Sales (AWS): |
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchise-Operated(1) |
|
$ |
49,444 |
|
$ |
46,724 |
|
$ |
49,909 |
|
$ |
47,692 |
|
Company-Owned |
|
|
48,511 |
|
|
48,813 |
|
|
48,412 |
|
|
46,913 |
|
Full-Service |
|
|
49,717 |
|
|
52,530 |
|
|
50,437 |
|
|
50,475 |
|
Counter-Service |
|
|
42,015 |
|
|
40,929 |
|
|
40,273 |
|
|
39,351 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Weeks: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchise-Operated |
|
|
1,281 |
|
|
1,743 |
|
|
4,274 |
|
|
5,240 |
|
Company-Owned |
|
|
415 |
|
|
203 |
|
|
979 |
|
|
609 |
| (1) | AWS for franchise-operated restaurants are not our revenues and are not included in our consolidated financial statements. We believe that disclosure of comparable restaurant net sales for franchise-operated restaurants provides useful information to investors because historical performance and trends of Famous Dave’s franchisees relate directly to trends in franchise royalty revenues that we receive from such franchisees and have an impact on the perceived success and value of the Famous Dave’s brand. It also provides a comparison against which management and investors can analyze the extent to which Company-owned restaurants are realizing their revenue potential. |
- 23 -
Food and Beverage Costs
Our food and beverage costs consisted of the following for the three and nine months ended September 29, 2019 and September 30, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|||||||||||
|
(dollars in thousands) |
|
September 29, 2019 |
|
September 30, 2018 |
|
|
$ Change |
|
% Change |
|
||||
|
Food and beverage costs |
|
$ |
6,383 |
|
$ |
3,091 |
|
|
$ |
3,292 |
|
|
106.5 |
% |
Food and beverage costs for the three months ended September 29, 2019 and September 30, 2018 represented approximately 31.7% and 31.2% of net restaurant sales, respectively. Food and beverage costs for the nine months ended September 29, 2019 and September 30, 2018 represented approximately 31.8% and 31.2% of net restaurant sales, respectively. This year-over-year increase, as a percentage of net restaurant sales, was primarily driven by the acquisition of 18 restaurants over the past twelve months, which stores experienced higher food costs than our comparable stores. Acquired stores in Michigan, Wisconsin, and Ohio were the main driver of our elevated food and beverage costs during the three and nine months ended September 29, 2019. Each of these items have been identified and are being addressed by management, and the company anticipates that actions taken and being implemented will result in margins recovering to more normalized levels in the coming quarters.
Labor and Benefits Costs
Our labor and benefits costs consisted of the following for the three and nine months ended September 29, 2019 and September 30, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|||||||||||
|
(dollars in thousands) |
|
September 29, 2019 |
|
September 30, 2018 |
|
|
$ Change |
|
% Change |
|
||||
|
Labor and benefits costs |
|
$ |
7,477 |
|
$ |
3,601 |
|
|
$ |
3,876 |
|
|
107.6 |
% |
Labor and benefits costs for the three months ended September 29, 2019 and September 30, 2018 represented approximately 37.2% and 36.4% of net restaurant sales, respectively. Labor and benefits costs for the nine months ended September 29, 2019 and September 30, 2018 represented approximately 36.5% and 35.6% of net restaurant sales, respectively. The year-over-year increase during the three and nine months ended September 29, 2019, as a percentage of net restaurant sales, was primarily driven by the acquisitions of 18 restaurants over the past twelve months, which stores experienced higher labor and benefits than our comparable stores. Acquired stores in Michigan, Wisconsin, and Ohio were the main driver of our elevated labor and benefits costs during the three and nine months ended September 29, 2019. Each of these items have been identified and are being addressed by management, and the company anticipates that actions taken and being implemented will result in margins recovering to more normalized levels in the coming quarters.
- 24 -
Operating Expenses
Our operating expenses consisted of the following for the three and nine months ended September 29, 2019 and September 30, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|||||||||||
|
(dollars in thousands) |
|
September 29, 2019 |
|
September 30, 2018 |
|
|
$ Change |
|
% Change |
|
||||
|
Operating expenses |
|
$ |
6,133 |
|
$ |
3,011 |
|
|
$ |
3,122 |
|
|
103.7 |
% |
Operating expenses for the three months ended September 29, 2019 and September 30, 2018 represented approximately 30.5% and 30.4% of net restaurant sales, respectively. Operating expenses for the nine months ended September 29, 2019 and September 30, 2018 and represented approximately 30.6% and 30.6% and of net restaurant sales for each period, respectively.
Depreciation and Amortization
Depreciation and amortization expense for the three months ended September 29, 2019 and September 30, 2018 represented approximately 2.4% and 2.0% of total revenues, respectively. Depreciation and amortization expense for the nine months ended September 29, 2019 and September 30, 2018 represented approximately 2.3% and 2.4% of total revenues, respectively.
General and Administrative Expenses
Our general and administrative expenses consisted of the following for the three and nine months ended September 29, 2019 and September 30, 2018:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|||||||||||
|
(dollars in thousands) |
|
September 29, 2019 |
|
September 30, 2018 |
|
|
$ Change |
|
% Change |
|
||||
|
General and administrative expenses |
|
$ |
2,653 |
|
$ |
1,937 |
|
|
$ |
716 |
|
|
37.0 |
% |
General and administrative expenses for the three months ended September 29, 2019 and September 30, 2018 represented approximately 11.2% and 13.8% of total revenues, respectively. General and administrative expenses for the nine months ended September 29, 2019 and September 30, 2018 represented approximately 12.8% and 14.3% of total revenues, respectively. The increase to general and administrative expenses primarily related savings in the prior year that did not recur during the three and nine month periods ended September 29, 2019 and acquisition costs.
- 25 -
Asset Impairment, Estimated Lease Termination and Other Closing Costs
The following is a summary of the asset impairment, estimated lease termination and other closings costs we incurred for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
||||||||
|
(dollars in thousands) |
|
September 29, 2019 |
|
September 30, 2018 |
|
September 29, 2019 |
|
September 30, 2018 |
||||
|
Asset impairments, net |
|
$ |
129 |
|
$ |
21 |
|
$ |
479 |
|
$ |
173 |
|
Lease termination charges (income) and related costs |
|
|
65 |
|
|
(11) |
|
|
156 |
|
|
(354) |
|
Restaurant closure expenses |
|
|
20 |
|
|
21 |
|
|
83 |
|
|
324 |
|
Asset impairment, estimated lease termination charges and other closing costs |
|
$ |
214 |
|
$ |
31 |
|
$ |
718 |
|
$ |
143 |
During the nine months ended September 29, 2019, we recognized an impairment charge on the lease right-of-use asset for a restaurant that is expected to close during fiscal 2019 of approximately $344,000. Asset impairments, net are expenses incurred for other charges related to closing restaurants, as well as ongoing expenses incurred after a restaurant is fully closed. In the third quarter of fiscal 2019, we closed two restaurants.
Income Tax Expense
Income tax benefit for the three months ended September 29, 2019 was approximately $174,000, or 77.7% of our pretax loss. Income tax expense for the three months ended September 30, 2018 was approximately $196,000, or 12.3% of our pretax income. Income tax expense for the nine months ended September 29, 2019 was approximately $25,000, or 2.3% of our pretax income. Income tax expense for the nine months ended September 30, 2018 was approximately $937,000, or 19.8% of our pretax income.
Basic and Diluted Net Income (Loss) per Common Share Attributable to Shareholders
Net income attributable to shareholders for the three months ended September 29, 2019 was approximately $17,000, or $0.00 per basic and diluted share. The basic and diluted weighted-average number of common shares outstanding for the three months ended September 29, 2019 were approximately 9,105,000 and 9,279,000, respectively. Net income for the three months ended September 30, 2018 was approximately $1.4 million, or $0.15 per basic and diluted share. The basic and diluted weighted-average number of common shares outstanding for the three months ended September 30, 2018 was approximately 9,090,000 and 9,111,000, respectively.
Net income attributable to shareholders for the nine months ended September 29, 2019 was approximately $1.1 million, or $0.13 per basic and $0.12 per diluted share. The basic and diluted weighted-average number of common shares outstanding for the nine months ended September 29, 2019 was approximately 9,095,000 and 9,193,000, respectively. Net income for the nine months ended September 30, 2018 was approximately $3.8 million, or $0.45 per basic and diluted share. The basic and diluted weighted-average number of common shares outstanding for the nine months ended September 30, 2018 was approximately 8,435,000 and 8,459,000, respectively.
Financial Condition, Liquidity and Capital Resources
Our balance of unrestricted cash and cash equivalents was approximately $4.9 million and $11.6 million September 29, 2019 and December 30, 2018, respectively. We used cash to purchase five stores in Colorado, six stores in the Michigan, Wisconsin, and Ohio markets, one store in Iowa, one store in Kentucky, and four stores in Arizona. We expect to utilize cash on hand to reinvest into our brand, including refreshing current corporate stores, repurchasing select franchisee owned stores, and developing a new concept. We have also been investing in the build out of the inaugural Clark Crew BBQ restaurant.
On June 20, 2019 we entered into a loan agreement with our lender, Choice Financial Group. The loan agreement provides for a term loan in the principal amount of up to $24.0 million. The term loan has a maturity date of June 20, 2025. The first year of the term loan provides for payments of interest only, with the remaining five years requiring payments of interest and principal based on a 60 month amortization period. Interest will be payable in an amount equal to the Wall Street Journal Prime Rate, but in no circumstances will the rate of interest be less than 5.00%. The term loan may be prepaid, partially or in full, at any time and for no prepayment penalty.
Proceeds from the term loan were used to repay our previous real estate loan, dated December 2, 2016, which had an outstanding balance as of June 20, 2019 of approximately $2.6 million.
- 26 -
Also on June 20, 2019, we also entered into a revolving promissory note with our lender. The revolving promissory note provides for a revolving line of credit from our lender in the principal amount of up to $1.0 million. The revolving promissory note has a maturity date of December 2, 2019, which provides for monthly payments of interest only, with a balloon payment of the remaining outstanding balance and applicable interest due on the maturity date. Interest will be payable in an amount equal to the 30-day London Interbank Offer Rate (“LIBOR”) plus 325 basis points, but in no circumstances will the rate of interest be less than 3.75%. The revolving promissory note may be prepaid, partially or in full, at any time and for no prepayment penalty. Proceeds from the revolving line of credit may be used at our discretion.
Our current ratio, which measures our immediate short-term liquidity, was 1.02 as of September 29, 2019, compared to 2.15 as of December 30, 2018. The current ratio is computed by dividing total current assets by total current liabilities. The decrease in our current ratio was primarily due to increases in our current liabilities related to the current portion of lease liabilities and cash paid for the acquisitions in the Colorado, Michigan, Ohio, Wisconsin, Iowa, Kentucky, and Arizona markets as well as capital expenditures.
Net cash provided by operating activities for the nine months ended September 29, 2019 was approximately $3.5 million, which reflects net income of approximately $1.1 million increased by non-cash charges of approximately $2.4 million. Changes in operating assets and liabilities for the nine months ended September 29, 2019 primarily included cash inflows from an increase in accounts payable of $1.4 million. These cash inflows were partially offset by cash outflows related to a decrease in accounts receivable of $495,000 and an increase in other assets of $580,000.
Net cash provided by operating activities for the nine months ended September 30, 2018 was approximately $3.8 million, reflecting net income of approximately $3.8 million increased by non-cash charges of approximately $369,000. Changes in operating assets and liabilities included cash outflows from a decrease in accounts payable of $183,000 and a decrease in accrued and other liabilities of $1.0 million. These cash outflows were partially offset by a decrease in other assets of $918,000.
Net cash used for investing activities was approximately $10.1 million for the nine months ended September 29, 2019, related to payments for acquired restaurants of $6.2 million, advances on notes receivable of $150,000 and the purchase of property, equipment and leasehold improvements of $3.8 million. Net cash provided by investing activities was $7.2 million for the nine months ended September 30, 2018, related to proceeds from the sale of assets of $1.2 million, partially offset by the purchases of property and equipment of $597,000 and purchases of held-to-maturity securities of $7.0 million.
Net cash used for financing activities for the nine months ended September 30, 2019 of $230,000, primarily related to the debt repayments of $176,000 and payments for debt issuance costs of $54,000. Net cash used for financing activities for the nine months ended September 30, 2018 of $985,000, primarily related to debt repayments of $6.6 million partially offset by proceeds from the sales of common stock of $5.1 million and the proceeds from exercise of stock options of $520,000.
We are subject to various financial and non-financial covenants on our long-term debt, including a debt-service coverage ratio. As of September 29, 2019, we were in compliance with all of our covenants.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that either have, or are reasonably likely to have, a current or future effect on our financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Critical Accounting Policies
Our significant accounting policies are described in Note 1 – Nature of Business and Significant Accounting Policies to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 30, 2018. Except as disclosed in Note 1 “Basis of Presentation” to the accompanying notes to the consolidated financial statements, there have been no updates to our critical accounting policies.
- 27 -
Forward-Looking Information
BBQ Holdings makes written and oral statements from time to time, including statements contained in this Quarterly Report on Form 10-Q regarding its business and prospects, such as projections of future performance, statements of management’s plans and objectives, forecasts of market trends and other matters that are forward-looking statements within the meaning of Sections 27A of the Securities Act of 1933 and Section 21E of the Securities Act of 1934. Statements containing the words or phrases “will likely result”, “anticipates”, “are expected to”, “will continue”, “is anticipated”, “estimates”, “projects”, “believes”, “expects”, “intends”, “target”, “goal”, “plans”, “objective”, “should” or similar expressions identify forward-looking statements which may appear in documents, reports, filings with the SEC, news releases, written or oral presentations made by our officers or other representatives to analysts, shareholders, investors, news organizations, and others, and discussions with our management and other Company representatives. For such statements, including those contained in this report, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.
Our future results, including results related to forward-looking statements, involve a number of risks and uncertainties that are difficult to predict, including but not limited to those identified herein under Part II, Item 1A. “Risk Factors” and under Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 30, 2018. No assurance can be given that the results reflected in any forward-looking statements will be achieved. Any forward-looking statements made by us or on our behalf speak only as of the date on which such statement is made. Our forward-looking statements are based upon assumptions that are sometimes based upon estimates, data, communications and other information from suppliers, government agencies and other sources that may be subject to revision. We do not undertake any obligation to update or keep current either (i) any forward-looking statements to reflect events or circumstances arising after the date of such statement, or (ii) the important factors that could cause our future results to differ materially from historical results or trends, results anticipated or planned by us, or which are reflected from time to time in any forward-looking statement which may be made by us or on our behalf.
Additional Information on BBQ Holdings
We are currently subject to the informational requirements of the Securities Exchange Act of 1934, as amended. As a result, we are required to file periodic reports and other information with the SEC, such as annual, quarterly and current reports, proxy and information statements. You are advised to read this Quarterly Report on Form 10-Q in conjunction with the other reports, proxy statements and other documents we file from time to time with the SEC. If you would like more information regarding BBQ Holdings, our SEC filings are also available to the public free of charge at the SEC’s website. The address of this website is http://www.sec.gov. Our most current SEC filings, such as our annual, quarterly and current reports, proxy statements and press releases are available to the public free of charge on our website.
The address of our website is http://www.bbqholdco.com. Our website is not intended to be, and is not, a part of this Quarterly Report on Form 10-Q. We will provide electronic or paper copies of our SEC filings (excluding exhibits) to any BBQ Holdings shareholder free of charge upon receipt of a written request for any such filing. All requests for our SEC filings should be sent to the attention of Investor Relations at BBQ Holdings, Inc., 12701 Whitewater Drive, Suite 290, Minnetonka, MN 55343.
- 28 -
Item 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable to smaller reporting companies.
Item 4.CONTROLS AND PROCEDURES
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective.
There has been no change in our internal control over financial reporting during the quarterly period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting, except for the following.
PART II. OTHER INFORMATION
Item 1.LEGAL PROCEEDINGS.
The information contained in Note 14 – Litigation of the notes to the accompanying consolidated financial statements included in this Quarterly Report on Form 10-Q is incorporated by reference into this Item 1. Except as set forth therein, as of the end of the period covered by this Quarterly Report on Form 10-Q, we are not a party to any material pending legal proceedings.
Item 1A.RISK FACTORS.
The most significant risk factors applicable to the Company are described in Part I, Item 1A. “Risk Factors” of our Annual Report on Form 10-K for the year ended December 30, 2018, filed with the SEC on March 4, 2019, as updated by this Part II, Item 1A “Risk Factors” and our subsequent filings with the Securities and Exchange Commission. There have been no material changes from the risk factors previously disclosed in our Annual Report on Form 10-K except as noted below.
Our business strategy of acquisitions may not achieve anticipated results.
We expect to continue to apply a business strategy that includes acquisition of stores from franchisees as the opportunity arises. Many of the stores that we reacquired have experienced declining same store sales and elevated operating costs. If we are unable to curtail the declining same store sales and reduce operating costs, we may not achieve our expected results from these acquisitions. We may also seek to add new brands to our portfolio through acquisitions. There can be no assurance that this business strategy of acquisitions will be suitable or will achieve favorable results. Additionally, our strategic initiatives may subject us and our franchisees to new and additional risks.
Item 5.OTHER INFORMATION
None.
- 29 -
Item 6.EXHIBITS
|
|
|
|
|
Exhibit
|
|
Description |
|
10.1 |
|
|
|
|
|
|
|
10.2 |
|
|
|
|
|
|
|
10.3 |
|
Secured Promissory Note, dated October 2, 2019 between Mercury BBQ LLC and BBQ Oklahoma, Inc. |
|
|
|
|
|
31.1 |
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
31.2 |
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
|
|
|
|
|
32.1 |
|
|
|
|
|
|
|
101.INS |
|
Inline XBRL Instance Document |
|
|
|
|
|
101.SCH |
|
Inline XBRL Schema Document |
|
|
|
|
|
101.CAL |
|
Inline XBRL Calculation Linkbase Document |
|
|
|
|
|
101.LAB |
|
Inline XBRL Label Linkbase Document |
|
|
|
|
|
101.PRE |
|
Inline XBRL Presentation Linkbase Document |
|
|
|
|
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
- 30 -
SIGNATURES
Pursuant to the requirements 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.
BBQ HOLDINGS, INC.
(“Registrant”)
|
|
|
|
|
|
|
|
|
Dated: November 12, 2019 |
By: |
/s/ Jeffery Crivello |
|
|
|
Jeffery Crivello |
|
|
|
Chief Executive Officer and Director |
|
|
|
(Principal Executive Officer) |
|
|
|
|
|
|
|
|
|
Dated: November 12, 2019 |
|
/s/ Paul M. Malazita |
|
|
|
Paul M. Malazita |
|
|
|
Chief Financial Officer and Secretary |
|
|
|
(Principal Financial Officer and Principal Accounting Officer) |
- 31 -