Ark Restaurants(ARKR) - 2025 Q2 - Quarterly Report

Part I. Financial Information Item 1. Consolidated Condensed Financial Statements This section presents the Company's unaudited consolidated condensed financial statements, including balance sheets, statements of operations, changes in equity, and cash flows, along with detailed notes explaining the basis of presentation, significant accounting policies, recent developments, and specific financial line items for the periods ended March 29, 2025, and March 30, 2024 Consolidated Condensed Balance Sheets | ASSETS | | | :--- | :--- | | CURRENT ASSETS: | | | Cash and cash equivalents | $11,124 | | Accounts receivable | $3,226 | | Employee receivables | $176 | | Inventories | $2,073 | | Prepaid and refundable income taxes | $292 | | Prepaid expenses and other current assets | $1,607 | | Total current assets | $18,498 | | FIXED ASSETS - Net | $30,918 | | OPERATING LEASE RIGHT-OF-USE ASSETS - Net | $79,456 | | GOODWILL | $— | | TRADEMARKS | $4,220 | | INTANGIBLE ASSETS - Net | $56 | | DEFERRED INCOME TAXES | $— | | INVESTMENT IN AND RECEIVABLE FROM NEW MEADOWLANDS RACETRACK | $6,573 | | OTHER ASSETS | $2,170 | | TOTAL ASSETS | $141,891 | | LIABILITIES AND EQUITY | | | CURRENT LIABILITIES: | | | Accounts payable - trade | $4,663 | | Accrued expenses and other current liabilities | $10,086 | | Current portion of operating lease liabilities | $6,256 | | Notes payable | $4,280 | | Total current liabilities | $25,285 | | OPERATING LEASE LIABILITIES, LESS CURRENT PORTION | $79,055 | | TOTAL LIABILITIES | $104,340 | | EQUITY: | | | Common stock, par value $0.01 per share | $36 | | Additional paid-in capital | $14,036 | | Retained earnings | $24,073 | | Total Ark Restaurants Corp. shareholders' equity | $38,145 | | NON-CONTROLLING INTERESTS | $(594) | | TOTAL EQUITY | $37,551 | | TOTAL LIABILITIES AND EQUITY | $141,891 | Consolidated Condensed Statements of Operations | REVENUES (In Thousands) | 13 Weeks Ended March 29, 2025 | 13 Weeks Ended March 30, 2024 | 26 Weeks Ended March 29, 2025 | 26 Weeks Ended March 30, 2024 | | :-------------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Food and beverage sales | $39,123 | $41,188 | $83,566 | $87,818 | | Other revenue | $602 | $1,069 | $1,148 | $1,925 | | Total revenues | $39,725 | $42,257 | $84,714 | $89,743 | | COSTS AND EXPENSES: | | | | | | Food and beverage cost of sales | $11,484 | $12,138 | $23,591 | $24,209 | | Payroll expenses | $14,415 | $15,512 | $30,823 | $32,488 | | Occupancy expenses | $5,536 | $5,775 | $11,684 | $12,107 | | Other operating costs and expenses | $5,584 | $5,836 | $11,384 | $11,928 | | General and administrative expenses | $3,322 | $3,141 | $6,470 | $6,461 | | Depreciation and amortization | $701 | $1,057 | $1,479 | $2,149 | | (Gain) loss on closure of El Rio Grande | $(140) | $— | $5 | $— | | Gain on termination of Tampa Food Court lease | $— | $— | $(5,235) | $— | | Goodwill impairment | $3,440 | $— | $3,440 | $— | | Total costs and expenses | $44,342 | $43,459 | $83,641 | $89,342 | | OPERATING INCOME (LOSS) | $(4,617) | $(1,202) | $1,073 | $401 | | CONSOLIDATED NET INCOME (LOSS) | $(9,144) | $(1,205) | $(4,069) | $391 | | NET LOSS ATTRIBUTABLE TO ARK RESTAURANTS CORP. | $(9,258) | $(1,449) | $(6,094) | $(79) | | NET LOSS ATTRIBUTABLE TO ARK RESTAURANTS CORP. PER COMMON SHARE: | | | | | | Basic | $(2.57) | $(0.40) | $(1.69) | $(0.02) | | Diluted | $(2.57) | $(0.40) | $(1.69) | $(0.02) | Consolidated Condensed Statements of Changes in Equity For the 26 weeks ended March 29, 2025 (In Thousands): | Category | Common Stock (Shares) | Common Stock (Amount) | Additional Paid-In Capital | Retained Earnings | Total Ark Restaurants Corp. Shareholders' Equity | Non controlling Interests | Total Equity | | :-------------------------------- | :-------------------- | :-------------------- | :------------------------- | :---------------- | :--------------------------------------------- | :------------------------ | :----------- | | BALANCE - September 28, 2024 | 3,604 | $36 | $13,934 | $30,167 | $44,137 | $(496) | $43,641 | | Net income (loss) | — | — | — | $(6,094) | $(6,094) | $2,025 | $(4,069) | | Exercise of stock options | 2 | — | $21 | — | $21 | — | $21 | | Stock-based compensation activity | — | — | $81 | — | $81 | — | $81 | | Distributions to non-controlling interests | — | — | — | — | — | $(2,123) | $(2,123) | | BALANCE - March 29, 2025 | 3,606 | $36 | $14,036 | $24,073 | $38,145 | $(594) | $37,551 | For the 26 weeks ended March 30, 2024 (In Thousands): | Category | Common Stock (Shares) | Common Stock (Amount) | Additional Paid-In Capital | Retained Earnings | Total Ark Restaurants Corp. Shareholders' Equity | Non controlling Interests | Total Equity | | :-------------------------------- | :-------------------- | :-------------------- | :------------------------- | :---------------- | :--------------------------------------------- | :------------------------ | :----------- | | BALANCE - September 30, 2023 | 3,604 | $36 | $14,161 | $36,091 | $50,288 | $1,434 | $51,722 | | Net income (loss) | — | — | — | $(79) | $(79) | $470 | $391 | | Elimination of non-controlling interest upon dissolution of subsidiary | — | — | $692 | — | $692 | $(692) | — | | Stock-based compensation activity | — | — | $145 | — | $145 | — | $145 | | Distributions to non-controlling interests | — | — | — | — | — | $(840) | $(840) | | Dividends paid - $0.3750 per share | — | — | — | $(1,352) | $(1,352) | — | $(1,352) | | BALANCE - March 30, 2024 | 3,604 | $36 | $14,998 | $34,660 | $49,694 | $372 | $50,066 | Consolidated Condensed Statements of Cash Flows | CASH FLOWS (In Thousands) | 26 Weeks Ended March 29, 2025 | 26 Weeks Ended March 30, 2024 | | :-------------------------------- | :---------------------------- | :---------------------------- | | Consolidated net income (loss) | $(4,069) | $391 | | Net cash provided by (used in) operating activities | $(734) | $766 | | Net cash provided by (used in) investing activities | $4,626 | $(596) | | Net cash used in financing activities | $(3,041) | $(3,173) | | NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | $851 | $(3,003) | | CASH AND CASH EQUIVALENTS, Beginning of period | $10,273 | $13,415 | | CASH AND CASH EQUIVALENTS, End of period | $11,124 | $10,412 | | Cash paid for interest | $203 | $303 | | Cash paid for income taxes | $136 | $191 | Notes to Consolidated Condensed Financial Statements BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES - Operating results were impacted by geopolitical and macroeconomic events, causing supply chain challenges and increased commodity and wage inflation. These factors could lead to further shifts in consumer behavior, staffing challenges, and cost inflation in fiscal 2025[24] - The Company recognized a non-cash goodwill impairment charge of $3.44 million for the 13 and 26 weeks ended March 29, 2025, primarily due to a decline in stock price and uncertainty regarding the Bryant Park leases[35] - The Company operates 16 restaurants and bars, 12 fast food concepts, and catering operations, all aggregated into a single operating segment[43] RECENT RESTAURANT EXPANSION AND OTHER DEVELOPMENTS - Extended lease for America at New York-New York Hotel and Casino through December 31, 2033, with a minimum $4 million refresh commitment by December 31, 2025[50] - Extended leases for Village Eateries, Broadway Burger Bar and Grill, and Gonzalez y Gonzalez through December 31, 2034/2033, with a minimum $3.5 million refresh commitment by December 31, 2025[51] - Opened a new concept, Lucky Pig, in the Village Eateries at a cost of approximately $700,000[51] RECENT RESTAURANT DISPOSITIONS AND OTHER DEVELOPMENTS - Terminated the lease for El Rio Grande, which closed permanently on January 3, 2025. The Company recognized a gain of $140,000 for the 13 weeks ended March 29, 2025, due to refinements in estimates related to landlord negotiations[53] - Terminated the lease for the food court at The Hard Rock Hotel and Casino in Tampa, FL, on November 26, 2024. Received a $5.5 million termination payment, resulting in a net gain of $5.235 million[54] INVESTMENT IN AND RECEIVABLE FROM NEW MEADOWLANDS RACETRACK - Total investment in New Meadowlands Racetrack (NMR) is $5.108 million, representing an effective ownership interest of 7.4%[55] - No distributions were received from NMR during the 13 and 26 weeks ended March 29, 2025[56] - The Company holds the exclusive right to operate food and beverage concessions in the gaming facility if casino gaming is approved at the Meadowlands[58] ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES | Category | March 29, 2025 (In thousands) | September 28, 2024 (In thousands) | | :-------------------------------- | :------------------------------ | :-------------------------------- | | Sales tax payable | $874 | $761 | | Accrued wages and payroll related costs | $3,125 | $4,548 | | Customer advance deposits | $3,310 | $4,382 | | Accrued occupancy and other operating expenses | $2,777 | $2,354 | | Total | $10,086 | $12,045 | LEASES - All real estate leases are classified as operating leases, with no finance leases as of March 29, 2025[65] | Lease Expense (In thousands) | 13 Weeks Ended March 29, 2025 | 13 Weeks Ended March 30, 2024 | 26 Weeks Ended March 29, 2025 | 26 Weeks Ended March 30, 2024 | | :-------------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Operating lease expense - occupancy expenses | $3,293 | $3,469 | $6,675 | $6,923 | | Occupancy lease expense - general and administrative expenses | $121 | $122 | $242 | $244 | | Variable lease expense - occupancy expenses | $703 | $747 | $1,955 | $2,124 | | Total lease expense | $4,117 | $4,338 | $8,872 | $9,291 | - Weighted average remaining lease term for operating leases is 11.3 years, with a weighted average discount rate of 6.3% as of March 29, 2025[68] NOTES PAYABLE | Notes Payable (In thousands) | March 29, 2025 | September 28, 2024 | | :-------------------------------- | :------------- | :----------------- | | Promissory Note - Rustic Inn purchase | $2,474 | $2,617 | | Promissory Note - JB's on the Beach purchase | $1,250 | $1,750 | | Promissory Note - Sequoia renovation | $571 | $800 | | Promissory Note - Blue Moon Fish Company | $— | $68 | | Total | $4,295 | $5,235 | | Less: Current maturities | $(4,280) | $(5,193) | | Less: Unamortized deferred financing costs | $(15) | $(42) | | Long-term portion | $— | $— | - The Company has a $10 million revolving credit facility with Bank Hapoalim B.M. (BHBM) maturing on June 1, 2025. No advances were outstanding as of March 29, 2025, and the weighted average interest on outstanding BHBM indebtedness was approximately 8.0%[70][71] COMMITMENTS AND CONTINGENCIES - The leases for Bryant Park Grill & Cafe and The Porch at Bryant Park expired on April 30, 2025, and March 31, 2025, respectively. The Company is operating as a holdover tenant and has filed a lawsuit challenging the landlord's bid process[79][80][81] - These Bryant Park locations collectively accounted for $12.7 million (15.0%) of total revenues for the 26 weeks ended March 29, 2025, and their non-renewal could materially adversely affect the Company's financial condition[82] STOCK OPTIONS - On December 2, 2024, 10,000 options were granted under the 2022 Stock Option Plan at an exercise price of $9.99 per share, with a grant date fair value of $2.94 per share[84] | Stock Option Activity (2025) | Shares | | :-------------------------------- | :----- | | Outstanding, beginning of period | 415,750 | | Granted | 10,000 | | Exercised | (2,000) | | Canceled or expired | — | | Outstanding and expected to vest, end of period | 423,750 | | Exercisable, end of period | 336,875 | | Shares available for future grant | 336,875 | - As of March 29, 2025, there was approximately $411,000 of unrecognized compensation cost related to unvested stock options, expected to be recognized over 3.7 years[88] INCOME TAXES - The provision for income taxes for the 26-week period ended March 29, 2025, was $4.938 million, with an effective tax rate of 94%[90] - A discrete tax provision of $4.799 million was recorded due to a valuation allowance on net deferred tax assets, as the Company is now in a cumulative loss position following the goodwill impairment[90] INCOME PER SHARE OF COMMON STOCK | EPS (In Thousands) | 13 Weeks Ended March 29, 2025 | 13 Weeks Ended March 30, 2024 | 26 Weeks Ended March 29, 2025 | 26 Weeks Ended March 30, 2024 | | :-------------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Basic EPS | $(2.57) | $(0.40) | $(1.69) | $(0.02) | | Diluted EPS | $(2.57) | $(0.40) | $(1.69) | $(0.02) | - The dilutive effect of 423,750 stock options for the 26-week period ended March 29, 2025, was not included in diluted EPS calculation as their impact would be anti-dilutive[94] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial performance, condition, and future outlook for the periods ended March 29, 2025, and March 30, 2024. It highlights key factors such as the ongoing dispute over the Bryant Park leases, the impact of inflation on operating costs, and detailed analysis of revenues, expenses, and cash flows. The discussion also covers liquidity, capital resources, and critical accounting estimates Recent Developments - The Company's leases for Bryant Park Grill & Cafe and The Porch at Bryant Park expired on April 30, 2025, and March 31, 2025, respectively. The Company is currently operating as a holdover tenant and has filed a lawsuit challenging the landlord's bid process[99][100][101] - These Bryant Park locations accounted for approximately 15.0% ($12.7 million) of total revenues for the 26 weeks ended March 29, 2025, and the inability to extend or renew these leases could have a material adverse effect on the business[102] - Operating results continue to be impacted by increased commodity prices, wage inflation, and staffing challenges due to geopolitical and macroeconomic events[103] Overview - As of March 29, 2025, the Company owned and operated 16 restaurants and bars, 12 fast food concepts, and catering operations, all aggregated into a single operating segment[104] - The business is highly seasonal, with the second fiscal quarter (January, February, March) typically being the poorest performing, partially offset by increased results from Florida locations during winter months[106] Results of Operations - Operating loss for the 13 weeks ended March 29, 2025, increased 284.1% to $(4.617) million, including a $3.44 million goodwill impairment charge[107] - Operating income for the 26 weeks ended March 29, 2025, increased 167.6% to $1.073 million, including a $5.235 million gain on Tampa Food Court lease termination and a $3.44 million goodwill impairment charge[108] | Metric (In thousands) | 13 Weeks Ended March 29, 2025 | 13 Weeks Ended March 30, 2024 | Variance ($) | Variance (%) | | :-------------------------------- | :---------------------------- | :---------------------------- | :----------- | :----------- | | Total revenues | $39,725 | $42,257 | $(2,532) | -6.0 % | | Food and beverage cost of sales | $11,484 | $12,138 | $(654) | -5.4 % | | Payroll expenses | $14,415 | $15,512 | $(1,097) | -7.1 % | | Occupancy expenses | $5,536 | $5,775 | $(239) | -4.1 % | | Other operating costs and expenses | $5,584 | $5,836 | $(252) | -4.3 % | | General and administrative expenses | $3,322 | $3,141 | $181 | 5.8 % | | Depreciation and amortization | $701 | $1,057 | $(356) | -33.7 % | | (Gain) Loss on closure of El Rio Grande | $(140) | $— | $(140) | N/A | | Gain on termination of Tampa Food Court lease | $— | $— | $— | N/A | | Goodwill impairment | $3,440 | $— | $3,440 | N/A | | OPERATING INCOME (LOSS) | $(4,617) | $(1,202) | $(3,415) | 284.1 % | | Same-Store Sales (In thousands) | 13 Weeks Ended March 29, 2025 | 13 Weeks Ended March 30, 2024 | Variance ($) | Variance (%) | | :-------------------------------- | :---------------------------- | :---------------------------- | :----------- | :----------- | | Las Vegas | $13,975 | $13,799 | $176 | 1.3 % | | New York | $4,040 | $4,394 | $(354) | -8.1 % | | Washington, D.C. | $1,377 | $1,438 | $(61) | -4.2 % | | Atlantic City, NJ | $677 | $763 | $(86) | -11.3 % | | Alabama | $3,453 | $3,567 | $(114) | -3.2 % | | Florida | $15,512 | $14,936 | $576 | 3.9 % | | Same-store sales | $39,034 | $38,897 | $137 | 0.4 % | | Same-Store Sales (In thousands) | 26 Weeks Ended March 29, 2025 | 26 Weeks Ended March 30, 2024 | Variance ($) | Variance (%) | | :-------------------------------- | :---------------------------- | :---------------------------- | :----------- | :----------- | | Las Vegas | $28,254 | $28,643 | $(389) | -1.4 % | | New York | $15,201 | $15,733 | $(532) | -3.4 % | | Washington, D.C. | $3,392 | $3,901 | $(509) | -13.0 % | | Atlantic City, NJ | $1,230 | $1,318 | $(88) | -6.7 % | | Alabama | $6,743 | $6,644 | $99 | 1.5 % | | Florida | $26,340 | $25,780 | $560 | 2.2 % | | Same-store sales | $81,160 | $82,019 | $(859) | -1.0 % | - Goodwill impairment charge of $3.44 million was recognized for the 13 and 26 weeks ended March 29, 2025, due to a decline in stock price and uncertainty regarding the Bryant Park leases[123][124] Liquidity and Capital Resources - Cash and cash equivalents totaled $11.124 million as of March 29, 2025[126] - The working capital deficit decreased to $6.787 million at March 29, 2025, from $10.659 million at March 30, 2024, primarily due to the payment received from the Tampa Food Court lease termination[126] - Net cash used in operating activities for the 26 weeks ended March 29, 2025, was $734,000, a decrease from $766,000 provided in the prior year, mainly due to a decrease in operating income (excluding specific gains/impairments)[129] - Net cash provided by investing activities for the 26 weeks ended March 29, 2025, was $4.626 million, an increase from $596,000 used in the prior year, primarily due to the $5.5 million payment from the Tampa Food Court lease termination[130] - The Company's $10 million credit facility with Bank Hapoalim B.M. matures on June 1, 2025, and the Company is currently working with its lender on a new credit agreement[132][133] - A discrete tax provision of $4.799 million was recorded for net deferred tax assets, as the Company concluded they were no longer realizable due to being in a cumulative loss position from the goodwill impairment[136] Critical Accounting Estimates - Critical accounting estimates include projected cash flows for fixed asset impairments, allowances for potential bad debts, assumptions for lease accounting discount rates, useful lives and recoverability of long-lived assets, fair values of financial instruments, and the realizable value of tax assets[142][143] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section states that there are no material quantitative or qualitative disclosures about market risk applicable to the Company for the reporting period - This item is not applicable[145] Item 4. Controls and Procedures Management, including the principal executive and financial officers, evaluated the effectiveness of the Company's disclosure controls and procedures, concluding they were effective as of March 29, 2025. No material changes in internal control over financial reporting occurred during the second quarter of fiscal 2025 - Disclosure controls and procedures were evaluated and deemed effective as of March 29, 2025[146] - No material changes in internal control over financial reporting occurred during the second quarter of fiscal 2025[147] Part II. Other Information Item 1. Legal Proceedings This section incorporates by reference the information regarding legal proceedings from Note 8 – Commitments and Contingencies to the Consolidated Condensed Financial Statements - Information regarding legal proceedings is incorporated by reference from Note 8 - Commitments and Contingencies[150] Item 1A. Risk Factors This section states that there are no new material risk factors to report for the current period - This item is not applicable[151] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports that there were no unregistered sales of equity securities or use of proceeds during the reporting period - None[152] Item 3. Defaults upon Senior Securities This section confirms that there were no defaults upon senior securities during the reporting period - None[153] Item 4. Mine Safety Disclosures This section states that mine safety disclosures are not applicable to the Company - This item is not applicable[154] Item 5. Other Information This section reports that no directors or executive officers adopted or terminated Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the second quarter of fiscal 2025 - No directors or executive officers adopted or terminated Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the second quarter of 2025[155] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO, and XBRL interactive data files - Exhibits include certifications (31.1, 31.2, 32) and XBRL Instance Document (101.INS) and related taxonomy extension documents[157] SIGNATURES - The report is signed by Michael Weinstein, Chairman of the Board and Chief Executive Officer, and Anthony J. Sirica, President, Chief Financial Officer and Director[160]