NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
As of October 2, 2021, Ark Restaurants Corp. and Subsidiaries (the “Company”) owned and operated 17 restaurants and bars, 17 fast food concepts and catering operations, exclusively in the United States, that have similar economic characteristics, nature of products and service, class of customers and distribution methods. The Company believes it meets the criteria for aggregating its operating segments into a single reporting segment in accordance with applicable accounting guidance.
The Company operates four restaurants in New York City, one in Washington, D.C., five in Las Vegas, Nevada, one in Atlantic City, New Jersey, four in Florida and two on the gulf coast of Alabama. The Las Vegas operations include four restaurants within the New York-New York Hotel & Casino Resort and operation of the hotel’s room service, banquet facilities, employee dining room and six food court concepts and one restaurant within the Planet Hollywood Resort and Casino. In Atlantic City, New Jersey, the Company operates a restaurant in the Tropicana Hotel and Casino. The operation at the Foxwoods Resort Casino consists of one fast food concept. The Florida operations include The Rustic Inn in Dania Beach, Shuckers in Jensen Beach, JB's on the Beach in Deerfield Beach, The Blue Moon Fish Company in Fort Lauderdale and the operation of four fast food facilities in Tampa and six fast food facilities in Hollywood, each at a Hard Rock Hotel and Casino. In Alabama, the Company operates two Original Oyster Houses, one in Gulf Shores and one in Spanish Fort.
COVID-19 PANDEMIC — We are subject to continued risks and uncertainties as a result of the outbreak of, and local, state and federal governmental responses to, the COVID-19 pandemic which was declared a National Public Health Emergency in March 2020. We experienced significant disruptions to our business as suggested and mandated social distancing and shelter-in-place orders led to the temporary closure of all of our restaurants. In the third quarter of fiscal 2020, certain jurisdictions began allowing the reopening of restaurant dining rooms, and we began to reopen dining rooms. While restrictions on the type of permitted operating model and occupancy capacity may continue to change, as of October 2, 2021, all of our restaurants were operating with no indoor dining restrictions. We cannot predict how long the COVID-19 pandemic will last, whether vaccines will be effective at eliminating or slowing the spread of the virus or variants, whether it will reoccur or whether variants will spike, what additional restrictions may be enacted, to what extent we can maintain sales volumes during or following any resumption of mandated social distancing protocols or vaccination or mask mandates and what long-lasting effects the COVID-19 pandemic may have on the restaurant industry as a whole. The ongoing effects of the COVID-19 pandemic, including, but not limited to, labor-related impacts, supply chain disruption and consumer behavior, will determine the continued significance of the impact of the COVID-19 pandemic to our operating results and financial position.
Basis of Presentation — The accompanying consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and accounting principles generally accepted in the United States of America (“GAAP”). The Company’s reporting currency is the United States dollar.
Accounting Period — The Company’s fiscal year ends on the Saturday nearest September 30. The fiscal years ended October 2, 2021 and October 3, 2020 included 52 and 53 weeks, respectively.
Use of Estimates — The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities, at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The accounting estimates that require management’s most difficult and subjective judgments include projected cash flow, allowances for potential bad debts on receivables, assumptions regarding discount rates related to lease accounting, the useful lives and recoverability of its assets, such as property and intangibles, fair values of financial instruments and share-based compensation, the realizable value of its tax assets and determining when investment impairments are other-than-temporary. Because of the uncertainty in such estimates, actual results may differ from these estimates.
Principles of Consolidation — The consolidated financial statements include the accounts of Ark Restaurants Corp. and all of its wholly-owned subsidiaries, partnerships and other entities in which it has a controlling interest. Also included in the consolidated financial statements are certain variable interest entities (“VIEs”). All significant intercompany balances and transactions have been eliminated in consolidation.
Non-Controlling Interests — Non-controlling interests represent capital contributions, distributions and income and loss attributable to the shareholders of less than wholly-owned and consolidated entities.
Seasonality — The Company has substantial fixed costs that do not decline proportionally with sales. Although our business is highly seasonal, our broader geographical reach as a result of recent acquisitions mitigates some of the risk. For instance, the second quarter of our fiscal year, consisting of the non-holiday portion of the cold weather season in New York and Washington (January, February and March), is the poorest performing quarter; however, in recent years this has been partially offset by our locations in Florida as they experience increased results in the winter months. We generally achieve our best results during the warm weather, attributable to our extensive outdoor dining availability, particularly at Bryant Park in New York and Sequoia in Washington, D.C. (our largest restaurants) and our outdoor cafes. However, even during summer months these facilities can be adversely affected by unusually cool or rainy weather conditions. Our facilities in Las Vegas are indoor and generally operate on a more consistent basis throughout the year.
Fair Value of Financial Instruments — The carrying amount of cash and cash equivalents, receivables, accounts payable and accrued expenses approximate fair value due to the immediate or short-term maturity of these financial instruments. The fair values of notes receivable and payable are determined using current applicable rates for similar instruments as of the balance sheet date and approximate the carrying value of such debt instruments.
Cash and Cash Equivalents — Cash and cash equivalents include cash on hand, deposits with banks and highly liquid investments with original maturities of three months or less. Outstanding checks in excess of account balances, typically vendor payments, payroll and other contractual obligations disbursed after the last day of a reporting period are reported as a current liability in the accompanying consolidated balance sheets.
Concentrations of Credit Risk — Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company reduces credit risk by placing its cash and cash equivalents with major financial institutions with high credit ratings. At times, such amounts may exceed Federally insured limits. Accounts receivable are primarily comprised of normal business receivables, such as credit card receivables, that are collected in a short period of time and amounts due from the hotel operators where the Company has a location, and are recorded upon satisfaction of the performance obligation. The Company reviews the collectability of its receivables on an ongoing basis, and provides for an allowance when it considers the counterparty unable to meet its obligation. The concentration of credit risk with respect to accounts receivable is generally limited due to the short payment terms extended by the Company and the number of customers comprising the Company’s customer base.
As of October 2, 2021, the Company had accounts receivable balances due from one hotel operator totaling 37% of total accounts receivable. As of October 3, 2020, the Company had accounts receivable balances due from two hotel operators totaling 46% of total accounts receivable.
For the year ended October 2, 2021, the Company made purchases from two vendors that accounted for 21% of total purchases. For the year ended October 3, 2020, the Company made purchases from one vendor that accounted for 11% of total purchases.
As of October 2, 2021, all debt outstanding, other than Paycheck Protection Program loans and the note payable to the sellers of The Blue Moon Fish Company, is with one lender (see Note 10 – Notes Payable).
Inventories — Inventories are stated at the lower of cost (first-in, first-out) or net realizable value, and consist of food and beverages, merchandise for sale and other supplies.
Fixed Assets — Fixed assets are stated at cost less accumulated depreciation and amortization. Depreciation is determined using the straight-line method over the estimated useful lives of the assets. Estimated lives range from three to seven years for furniture, fixtures and equipment and up to 40 years for buildings and related improvements. Amortization of improvements to leased properties is computed using the straight-line method based upon the initial term of the applicable lease or the estimated useful life of the improvements, whichever is less, and ranges from 5 to 30 years. For leases with renewal periods at the Company’s option, if failure to exercise a renewal option imposes an economic penalty to the Company, management may determine at the inception of the lease that renewal is reasonably assured and include the renewal option period in the determination of appropriate estimated useful lives. Routine expenditures for repairs and maintenance are charged to expense when incurred. Major replacements and improvements are capitalized. Upon retirement or disposition of fixed assets, the cost and related accumulated depreciation are removed from the consolidated balance sheets and any resulting gain or loss is recognized in the consolidated statements of operations.
The Company includes in construction in progress, improvements to restaurants that are under construction or are undergoing substantial renovations. Once the projects have been completed, the Company begins depreciating and amortizing the assets. Start-up costs incurred during the construction period of restaurants, including rental of premises, training and payroll, are expensed as incurred.
Long-Lived and Right-Of-Use Assets — Long-lived assets, such as property and plant and equipment subject to amortization, and right-of-use assets ("ROU assets") are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In the evaluation of the fair value and future benefits of long-lived assets, the Company performs an analysis of the anticipated undiscounted future net cash flows of the related long-lived assets. If the carrying value of the related asset exceeds the undiscounted cash flows, the carrying value is reduced to its fair value. Various factors including estimated future sales growth and estimated profit margins are included in this analysis.
The Company considers a triggering event related to long-lived assets or ROU assets in a net asset position to have occurred related to a specific restaurant if the restaurant’s cash flows for the last 12 months are less than a minimum threshold or if consistent levels of undiscounted cash flows for the remaining lease period are less than the carrying value of the restaurant’s assets. Additionally, the Company considers a triggering event related to ROU assets to have occurred related to a specific lease if the location has been subleased and future estimated sublease income is less than current lease payments. If the Company concludes that the carrying value of certain long-lived and ROU assets will not be recovered based on expected undiscounted future cash flows, an impairment loss is recorded to reduce the long-lived or ROU assets to their estimated fair value. The fair value is measured on a nonrecurring basis using unobservable (Level 3) inputs. There is uncertainty in the projected undiscounted future cash flows used in the Company's impairment review analysis, which requires the use of estimates and assumptions. If actual performance does not achieve the projections, or if the assumptions used change in the future, the Company may be required to recognize impairment charges in future periods, and such charges could be material.
The Company recognized impairment charges related to long-lived and ROU assets during the years ended October 2, 2021 and October 1, 2020 as described in Note 4 – Recent Restaurant Dispositions. Given the inherent uncertainty in projecting results of restaurants under the current circumstances, particularly taking into account the projected impact of the COVID-19 pandemic, the Company is monitoring the recoverability of the carrying value of the assets of several restaurants on an ongoing basis. For these restaurants, if expected performance is not realized, an impairment charge may be recognized in future periods, and such charge could be material.
Intangible Assets — Intangible assets consist principally of purchased leasehold rights, operating rights and covenants not to compete. Costs associated with acquiring leases and subleases, principally purchased leasehold rights, and operating rights have been capitalized and are being amortized on the straight-line method based upon the initial terms of the applicable lease agreements. Covenants not to compete arising from restaurant acquisitions are amortized over the contractual period, typically five years.
Goodwill and Trademarks — Goodwill and trademarks are not amortized, but are subject to impairment analysis. We assess the potential impairment of goodwill and trademarks annually (at the end of our fourth quarter) and on an interim basis whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If we determine through the impairment review process that goodwill or trademarks are impaired, we record an impairment charge in our consolidated statements of operations.
Due to the recent impact of the COVID-19 pandemic to the global economy, including but not limited to, the volatility of the Company's stock price, temporary closure of the Company's restaurants and the challenging environment for the restaurant industry in general, the Company determined that there were indicators of potential impairment of its goodwill and trademarks during the years ended October 2, 2021 and October 3, 2020. As such, the Company performed a qualitative and quantitative assessment for both goodwill and its trademarks and concluded that the fair value of these assets exceeded their carrying values. Accordingly, the Company did not record any impairment to its goodwill or trademarks during the years ended October 2, 2021 and October 3, 2020. The ultimate severity and longevity of the COVID-19 pandemic is unknown, and therefore, it is possible that impairments could be identified in future periods, and such amounts could be material.
Investments – Each reporting period, the Company reviews its investments in equity and debt securities, except for those classified as trading, to determine whether a significant event or change in circumstances has occurred that may have an adverse effect on the fair value of such investment. When such events or changes occur, the Company evaluates the fair value compared to cost basis in the investment. For investments in non-publicly traded companies, management’s assessment of fair value is based on valuation methodologies including discounted cash flows, estimates of sales proceeds, and appraisals, as appropriate. The Company considers the assumptions that it believes hypothetical marketplace participants would use in evaluating estimated future cash flows when employing the discounted cash flow or estimates of sales proceeds valuation methodologies.
In the event the fair value of an investment declines below the Company’s cost basis, management is required to determine if the decline in fair value is other than temporary. If management determines the decline is other than temporary, an impairment charge is recorded. Management’s assessment as to the nature of a decline in fair value is based on, among other
things, the length of time and the extent to which the market value has been less than the cost basis; the financial condition and near-term prospects of the issuer; and the Company’s intent and ability to retain the investment for a period of time sufficient to allow for any anticipated recovery in market value.
Leases — We determine if an arrangement contains a lease at inception. An arrangement contains a lease if it implicitly or explicitly identifies an asset to be used and conveys the right to control the use of the identified asset in exchange for consideration. As a lessee, we include operating leases in Operating lease right-of-use assets and Operating lease liabilities in our consolidated balance sheet. Right-of-use assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized upon commencement of the lease based on the present value of the lease payments over the lease term. As most of our leases do not provide an implicit interest rate, we use our incremental borrowing rate based on the information available at commencement date to determine the present value of lease payments. Our lease terms may include options to extend or terminate the lease. Options are included when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Amendments or modifications to lease terms are accounted for as variable lease payments. Leases with a lease term of 12 months or less are accounted for using the practical expedient which allows for straight-line rent expense over the remaining term of the lease.
Revenue Recognition — The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a restaurant guest or other customer. Revenues from restaurant operations are presented net of discounts, coupons, employee meals and complimentary meals and recognized when food, beverage and retail products are sold. Sales tax collected from customers is excluded from sales and the obligation is included in sales tax payable until the taxes are remitted to the appropriate taxing authorities. Catering service revenue is generated through contracts with customers whereby the customer agrees to pay a contract rate for the service. Revenues from catered events are recognized in income upon satisfaction of the performance obligation (the date the event is held). All customer payments, including nonrefundable upfront deposits, are deferred as a liability until such time. The Company recognized $3,240,000 and $7,358,000 in catering services revenue for the years ended October 2, 2021 and October 3, 2020, respectively. Unearned revenue which is included in accrued expenses and other current liabilities on the consolidated balance sheets as of October 2, 2021 and October 3, 2020 was $4,988,000 and $3,661,000, respectively.
Revenues from gift cards are deferred and recognized upon redemption. Deferrals are not reduced for potential non-use as we generally have a legal obligation to remit the value of unredeemed gift cards to the relevant jurisdictions in which they are sold. As of October 2, 2021 and October 3, 2020, the total liability for gift cards in the amounts of approximately $252,000 and $227,000, respectively, are included in accrued expenses and other current liabilities in the consolidated balance sheets.
Other revenues include purchase service fees which represent commissions earned by a subsidiary of the Company for providing services to other restaurant groups, as well as license fees, property management fees and other rentals.
Occupancy Expenses — Occupancy expenses include rent, rent taxes, real estate taxes, insurance and utility costs.
Defined Contribution Plan — The Company offers a defined contribution savings plan (the “Plan”) to all of its full-time employees. Eligible employees may contribute pre-tax amounts to the Plan subject to the Internal Revenue Code limitations. Company contributions to the Plan are at the discretion of the Board of Directors. During the years ended October 2, 2021 and October 3, 2020, the Company did not make any contributions to the Plan.
Income Taxes — Income taxes are accounted for under the asset and liability method whereby deferred tax assets and liabilities are recognized for future tax consequences attributable to the temporary differences between the financial statement carrying amounts of assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period that includes the enactment date. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The Company has recorded a liability for unrecognized tax benefits resulting from tax positions taken, or expected to be taken, in an income tax return. It is the Company’s policy to recognize interest and penalties related to uncertain tax positions as a component of income tax expense. Uncertain tax positions are evaluated and adjusted as appropriate, while taking into account the progress of audits of various taxing jurisdictions.
Non-controlling interests relating to the income or loss of consolidated partnerships includes no provision for income taxes as any tax liability related thereto is the responsibility of the individual minority investors.
Income Per Share of Common Stock — Basic net income per share is calculated on the basis of the weighted average number of common shares outstanding during each period. Diluted net income per share reflects the additional dilutive effect of potentially dilutive shares (principally those arising from the assumed exercise of stock options). The dilutive effect of stock options is reflected in diluted earnings per share by application of the treasury stock method. Under the treasury stock method, if the average market price of a share of common stock increases above the option’s exercise price, the proceeds that would be assumed to be realized from the exercise of the option would be used to acquire outstanding shares of common stock. The dilutive effect of awards is directly correlated with the fair value of the shares of common stock.
Stock-based Compensation — Stock-based compensation represents the cost related to stock-based awards granted to employees and non-employee directors. The Company measures stock-based compensation at the grant date based on the estimated fair value of the award and recognize the cost (net of estimated forfeitures) as compensation expense on a straight-line basis over the requisite service period. Upon exercise of options, all excess tax benefits and tax deficiencies resulting from the difference between the deduction for tax purposes and the stock-based compensation cost recognized for financial reporting purposes are included as a component of income tax expense.
Recently Adopted Accounting Standards — In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standard Update ("ASU") No. 2016-02, Leases (Topic 842), which amends the existing accounting standards for lease accounting, including requiring lessees to recognize assets and liabilities for leases with lease terms of more than 12 months. The new guidance also requires additional disclosures about leases. The Company adopted the new standard on September 29, 2019 (the first day of fiscal year 2020) using the modified retrospective approach, without restating comparative periods for those lease contracts for which we had taken possession of the property as of September 28, 2019. Accordingly, prior period amounts were not revised and continue to be reported in accordance with ASC Topic 840 (“ASC 840”), the accounting standard then in effect. As part of our adoption we elected the "package of practical expedients", as well as the hindsight practical expedient, permitted under the new guidance, which, among other things, allowed the Company to continue utilizing historical classifications of leases as well as allowing us to combine lease and non-lease components of our real estate leases. We also elected to adopt the short-term lease exception for all leases with terms of 12 months or less and account for them using straight-line rent expense over the remaining life of the lease. As a result of the adoption of this guidance, we recorded ROU assets of $62,330,000 and lease liabilities related to our real estate operating leases of $63,943,000. The adoption of this standard did not materially impact retained earnings or our consolidated statement of operations and had no impact on cash flows.
In June 2018, the FASB issued ASU 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting, which simplifies the accounting for share-based payments granted to non-employees for goods and services. Under this ASU, the guidance on share-based payments to non-employees would be aligned with the requirements for share-based payments granted to employees, with certain exceptions. The Company adopted this guidance in the first quarter of fiscal 2020. Such adoption did not have a material impact on our consolidated financial statements.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350)—Simplifying the Test for Goodwill Impairment (“ASU 2017-04”). ASU 2017-04 simplifies the accounting for goodwill impairments by eliminating the requirement to compare the implied fair value of goodwill with its carrying amount as part of step two of the goodwill impairment test referenced in Accounting Standards Codification (“ASC”) 350, Intangibles - Goodwill and Other (“ASC 350”). As a result, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. An impairment charge should be recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value. However, the impairment loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The Company adopted this guidance in the first quarter of fiscal 2021. Such adoption did not have a material impact on our consolidated financial statements.
New Accounting Standards Not Yet Adopted — In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which modifies Topic 740 to simplify the accounting for income taxes. ASU 2019-12 is effective for financial statements issued for annual periods beginning after December 15, 2020, and for the interim periods therein. The Company is currently evaluating the effect of adopting ASU 2019-12 to determine the impact on the Company’s consolidated financial position and results of operations.
2. CONSOLIDATION OF VARIABLE INTEREST ENTITIES
The Company consolidates any variable interest entities in which it holds a variable interest and is the primary beneficiary. Generally, a variable interest entity, or VIE, is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) as a group the holders of the equity investment at risk lack (i) the ability to make decisions about an entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The primary beneficiary of a VIE is generally the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.
The Company has determined that it is the primary beneficiary of three VIEs and, accordingly, consolidates the financial results of these entities. Following are the required disclosures associated with the Company’s consolidated VIEs:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2,
2021
|
|
October 3,
2020
|
|
|
(in thousands)
|
|
Cash and cash equivalents
|
$
|
785
|
|
|
$
|
567
|
|
|
Accounts receivable
|
358
|
|
|
162
|
|
|
Inventories
|
35
|
|
|
27
|
|
|
Prepaid and refundable income taxes
|
278
|
|
|
274
|
|
|
Prepaid expenses and other current assets
|
277
|
|
|
13
|
|
|
Due from Ark Restaurants Corp. and affiliates (1)
|
187
|
|
|
419
|
|
|
Fixed assets - net
|
218
|
|
|
241
|
|
|
Operating lease right-of-use assets - net
|
2,342
|
|
|
2,658
|
|
|
Other assets
|
82
|
|
|
82
|
|
|
Total assets
|
$
|
4,562
|
|
|
$
|
4,443
|
|
|
|
|
|
|
|
Accounts payable - trade
|
$
|
213
|
|
|
$
|
119
|
|
|
Accrued expenses and other current liabilities
|
374
|
|
|
331
|
|
|
Current portion of operating lease liabilities
|
249
|
|
|
226
|
|
|
Current portion of notes payable
|
95
|
|
|
—
|
|
|
Operating lease liabilities, less current portion
|
2,193
|
|
|
2,442
|
|
|
Notes payable, less current portion
|
101
|
|
|
723
|
|
|
Total liabilities
|
3,225
|
|
|
3,841
|
|
|
Equity of variable interest entities
|
1,337
|
|
|
602
|
|
|
Total liabilities and equity
|
$
|
4,562
|
|
|
$
|
4,443
|
|
(1)Amounts due from Ark Restaurants Corp. and affiliates are eliminated upon consolidation.
The liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets; rather, they represent claims against the specific assets of the consolidated VIEs. Conversely, assets recognized as a result of consolidating these VIEs do not represent additional assets that could be used to satisfy claims against the Company’s general assets.
3. RECENT RESTAURANT EXPANSION AND OTHER DEVELOPMENTS
On December 1, 2020, the Company, through a newly formed, wholly-owned subsidiary, acquired the assets of Bear Ice, Inc. and File Gumbo Inc., which collectively operated a restaurant and bar named Blue Moon Fish Company located in Lauderdale-by-the-Sea, FL. The total purchase price of $2,820,000, as set out below, was paid with cash in the amount of $1,820,000 and a four-year note held by the sellers in the amount of $1,000,000 payable monthly with 5% interest. The acquisition was accounted for as a business combination. Concurrent with the acquisition, the Company assumed the related lease which expires in 2026 and has four five-year extension options. Rent payments under the lease are approximately $360,000 per year and increase by 15% as each option is exercised.
The fair values of the assets acquired were allocated as follows (amounts in thousands):
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|
|
|
|
|
|
|
Cash
|
$
|
3
|
|
|
Inventory
|
39
|
|
|
Security deposit
|
30
|
|
|
Trademarks
|
500
|
|
|
Non-compete agreement
|
380
|
|
|
Goodwill
|
1,870
|
|
|
Liabilities assumed
|
(2)
|
|
|
|
$
|
2,820
|
|
Goodwill recognized in connection with this transaction represents the residual amount of the purchase price over separately identifiable intangible assets and is expected to be deductible for tax purposes.
The consolidated statement of operations for the year ended October 2, 2021 includes revenues and net income of approximately $5,929,000 and $981,000, respectively, related to Blue Moon Fish Company. The unaudited pro forma financial information set forth below is based upon the Company’s historical consolidated statements of operations for the years ended October 2, 2021 and October 3, 2020 and includes the results of operations for Blue Moon Fish Company for the period prior to acquisition. The unaudited pro forma financial information (which is presented in thousands except per share and share data), which has been adjusted for interest expense on the above-mentioned note, is presented for informational purposes only and may not be indicative of what actual results of operations would have been had the acquisition of Blue Moon Fish Company occurred on the dates indicated, nor does it purport to represent the results of operations for future periods.
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
October 2,
2021
|
|
October 3,
2020
|
|
|
(unaudited)
|
|
|
|
|
|
|
Total revenues
|
$
|
132,547
|
|
|
$
|
110,700
|
|
|
Net income (loss)
|
$
|
12,926
|
|
|
$
|
(4,303)
|
|
|
Net income (loss) per share - basic
|
$
|
3.68
|
|
|
$
|
(1.23)
|
|
|
Net income (loss) per share - diluted
|
$
|
3.59
|
|
|
$
|
(1.23)
|
|
|
|
|
|
|
|
Shares - Basic
|
3,516
|
|
|
3,500
|
|
|
Shares - Diluted
|
3,604
|
|
|
3,500
|
|
On January 26, 2021, the Company exercised its right-of-first-refusal to acquire the land, building and parking lot associated with JB’s on the Beach and immediately contributed such rights and interest to an unrelated entity ("Newco") that purchased the properties on March 22, 2021. In exchange, the Company received a 5% interest in Newco, which plans future development of the sites. In addition, all rights and privileges under the current lease were assigned to Newco, as landlord and the lease terms remain unchanged.
Prior to the COVID-19 pandemic, the Company was in the process of developing three restaurants at a large outdoor mall in Easton, Ohio in partnership with the landlord. In connection therewith, the Company had capitalized costs of approximately $400,000, of which $200,000 was reimbursed by the landlord in October 2020. The Company does not expect this project to continue. Accordingly, the balance of the unreimbursed costs in the amount of $200,000 were written off and are included in general and administrative expenses for the year ended October 3, 2020.
4. RECENT RESTAURANT DISPOSITIONS
On April 2, 2020, the Company advised the landlord of a catering space in New York, NY that we would be terminating the lease. In connection with this notification, the Company recorded a loss of $364,000 during the year ended October 3, 2020 consisting of (i) rent accrued in accordance with the termination provisions of the lease, (ii) the write-off of the unamortized balance of purchased leasehold rights, (iii) the write-off of our security deposit, (iv) the write-off of ROU assets and related lease liabilities, and (v) the write-off of the net book value of fixed assets.
On November 13, 2020, the Company was advised by the landlord that it would have to vacate Gallagher’s Steakhouse and Gallagher’s Burger Bar at the Resorts Casino Hotel located in Atlantic City, NJ which were on a month-to-month, no rent lease. The closure of these properties occurred on January 2, 2021 and did not result in a material charge to the Company’s operations.
As of January 2, 2021, the Company determined that it would not reopen Thunder Grill in Washington, D.C. which had been closed since March 20, 2020. This closure did not result in a material charge to the Company’s operations.
On September 1, 2021, the Company advised the landlord of Clyde Frazier's Wine and Dine that we would be closing the property permanently and terminating the lease. In connection with this notification, the Company recorded a gain of $810,000 during the year ended October 2, 2021 consisting of: (i) rent and other costs incurred in accordance with the termination provisions of the lease in the amount of $318,000, (ii) impairment of long-lived assets in the amount of $69,000 and (iii) the write-off of our security deposit in the amount of $121,000 offset by the write-off of ROU assets and related lease liabilities in the net amount of $1,318,000.
5. INVESTMENT IN AND RECEIVABLE FROM NEW MEADOWLANDS RACETRACK
On March 12, 2013, the Company made a $4,200,000 investment in the New Meadowlands Racetrack LLC (“NMR”) through its purchase of a membership interest in Meadowlands Newmark, LLC, an existing member of NMR with a then 63.7% ownership interest. On November 19, 2013, the Company invested an additional $464,000 in NMR through a purchase of an additional membership interest in Meadowlands Newmark, LLC resulting in a total ownership of 11.6% of Meadowlands Newmark, LLC, and an effective ownership interest in NMR of 7.4%, subject to dilution. In 2015, the Company invested an additional $222,000 in NMR and on February 7, 2017, the Company invested an additional $222,000 in NMR, both as a result of capital calls, bringing its total investment to $5,108,000 with no change in ownership. The Company accounts for this investment at cost, less impairment, adjusted for subsequent observable price changes in accordance with ASU No. 2016-01. There are no observable prices for this investment.
Due to the impacts of the COVID-19 pandemic on the global economy, the Company evaluated its investment in NMR for impairment and concluded that its fair value exceeds the carrying value. Accordingly, the Company did not record any impairment for the years ended October 2, 2021 and October 3, 2020. The ultimate severity and longevity of the COVID-19 pandemic is unknown, and therefore, it is possible that impairments could be identified in future periods, and such amounts could be material. Any future changes in the carrying value of our Investment in NMR will be reflected in earnings.
In addition to the Company’s ownership interest in NMR through Meadowlands Newmark, LLC, if casino gaming is approved at the Meadowlands and NMR is granted the right to conduct said gaming, neither of which can be assured, the Company shall be granted the exclusive right to operate the food and beverage concessions in the gaming facility with the exception of one restaurant.
In conjunction with this investment, the Company, through a 97% owned subsidiary, Ark Meadowlands LLC (“AM VIE”), also entered into a long-term agreement with NMR for the exclusive right to operate food and beverage concessions serving the new raceway facilities (the “Racing F&B Concessions”) located in the new raceway grandstand constructed at the Meadowlands Racetrack in northern New Jersey. Under the agreement, NMR is responsible to pay for the costs and expenses incurred in the operation of the Racing F&B Concessions, and all revenues and profits thereof inure to the benefit of NMR. AM VIE receives an annual fee equal to 5% of the net profits received by NMR from the Racing F&B Concessions during each calendar year. AM VIE is a variable interest entity; however, based on qualitative consideration of the contracts with AM VIE, the operating structure of AM VIE, the Company’s role with AM VIE, and that the Company is not obligated to absorb expected losses of AM VIE, the Company has concluded that it is not the primary beneficiary and not required to consolidate the operations of AM VIE.
The Company’s maximum exposure to loss as a result of its involvement with AM VIE is limited to a receivable from AM VIE’s primary beneficiary (NMR, a related party). As of October 2, 2021 and October 3, 2020, no amounts were due AM VIE by NMR.
On April 25, 2014, the Company loaned $1,500,000 to Meadowlands Newmark, LLC. The note bears interest at 3%, compounded monthly and added to the principal, and is due in its entirety on January 31, 2024. The note may be prepaid, in whole or in part, at any time without penalty or premium. On July 13, 2016, the Company made an additional loan to Meadowlands Newmark, LLC in the amount of $200,000. Such amount is subject to the same terms and conditions as the original loan discussed above. The principal and accrued interest related to this note, after a $500,000 payment made in July 2021, in the amounts of $1,317,000 and $1,766,000, are included in Investment In and Receivable From New Meadowlands Racetrack in the consolidated balance sheets at October 2, 2021 and October 3, 2020, respectively.
6. FIXED ASSETS
Fixed assets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2,
2021
|
|
October 3,
2020
|
|
|
(in thousands)
|
|
Land and building
|
$
|
18,033
|
|
|
$
|
18,033
|
|
|
Leasehold improvements
|
42,200
|
|
|
40,777
|
|
|
Furniture, fixtures and equipment
|
36,143
|
|
|
39,085
|
|
|
Construction in progress
|
38
|
|
|
1,352
|
|
|
|
96,414
|
|
|
99,247
|
|
|
Less: accumulated depreciation and amortization
|
60,240
|
|
|
61,565
|
|
|
Fixed Assets - Net
|
$
|
36,174
|
|
|
$
|
37,682
|
|
Depreciation and amortization expense related to fixed assets for the years ended October 2, 2021 and October 3, 2020 was $3,577,000 and $3,910,000, respectively.
Management continually evaluates unfavorable cash flows, if any, related to underperforming restaurants. Periodically it is concluded that certain properties have become impaired based on their existing and anticipated future economic outlook in their respective markets. In such instances, we may impair assets to reduce their carrying values to fair values. Estimated fair values of impaired properties are based on comparable valuations, cash flows and/or management judgment. Included in the year ended October 2, 2021 is an impairment charge of $69,000 related to Clyde Frazier's Wine and Dine (see Note 4).
7. INTANGIBLE ASSETS, GOODWILL AND TRADEMARKS
Intangible assets consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2,
2021
|
|
October 3,
2020
|
|
|
(in thousands)
|
|
Purchased leasehold rights (a)
|
$
|
1,995
|
|
|
$
|
1,995
|
|
|
Noncompete agreements and other
|
633
|
|
|
253
|
|
|
|
2,628
|
|
|
2,248
|
|
|
Less accumulated amortization
|
2,252
|
|
|
2,199
|
|
|
Intangible Assets - Net
|
$
|
376
|
|
|
$
|
49
|
|
(a)Purchased leasehold rights arose from acquiring leases and subleases of various restaurants.
Amortization expense related to intangible assets for the years ended October 2, 2021 and October 3, 2020 was $53,000 and $146,000, respectively, which includes the write-off of the unamortized balance of leasehold rights related to a catering space in New York in the amount of $137,000 for the year ended October 3, 2020. Amortization expense for each of the next five years is expected to be $85,000.
Goodwill is the excess of cost over fair market value of tangible and intangible net assets acquired. Goodwill is not presently amortized but tested for impairment annually or when the facts or circumstances indicate a possible impairment of goodwill as a result of a continual decline in performance or as a result of fundamental changes in a market. Trademarks, which have indefinite lives, are not currently amortized and are tested for impairment annually or when facts or circumstances indicate a possible impairment as a result of a continual decline in performance or as a result of fundamental changes in a market.
The changes in the carrying amount of goodwill and trademarks for the years ended October 2, 2021 and October 3, 2020 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
Trademarks
|
|
|
(in thousands)
|
|
Balance as of September 28, 2019
|
$
|
15,570
|
|
|
$
|
3,720
|
|
|
Acquired during the year
|
—
|
|
|
—
|
|
|
Impairment losses
|
—
|
|
|
—
|
|
|
Balance as of October 3, 2020
|
15,570
|
|
|
3,720
|
|
|
Acquired during the year
|
1,870
|
|
|
500
|
|
|
Impairment losses
|
—
|
|
|
—
|
|
|
Balance as of October 2, 2021
|
$
|
17,440
|
|
|
$
|
4,220
|
|
8. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2,
2021
|
|
October 3,
2020
|
|
|
(in thousands)
|
|
Sales tax payable
|
$
|
910
|
|
|
$
|
477
|
|
|
Accrued wages and payroll related costs
|
4,758
|
|
|
3,302
|
|
|
Customer advance deposits
|
4,988
|
|
|
3,661
|
|
|
Accrued occupancy and other operating expenses
|
3,023
|
|
|
5,248
|
|
|
|
$
|
13,679
|
|
|
$
|
12,688
|
|
9. LEASES
Other than locations where we own the underlying property, we lease our restaurant locations as well as our corporate office under various non-cancelable real-estate lease agreements that expire on various dates through 2046. We evaluate whether we control the use of the asset, which is determined by assessing whether we obtain substantially all economic benefits from the use of the asset, and whether we have the right to direct the use of the asset. If these criteria are met and we have identified a lease, we account for the contract under the requirements of ASC 842.
Upon taking possession of a leased asset, we determine its classification as an operating or finance lease. All of our real estate leases are classified as operating leases. We do not have any finance leases as of October 2, 2021 or October 3, 2020. Generally, our real estate leases have initial terms ranging from 10 to 25 years and typically include renewal options. Renewal options are recognized as part of the ROU assets and lease liabilities if it is reasonably certain at the date of adoption that we would exercise the options to extend the lease. Our real estate leases typically provide for fixed minimum rent payments and/or contingent rent payments based upon sales in excess of specified thresholds. When the achievement of such sales thresholds are deemed to be probable, variable lease expense is accrued in proportion to the sales recognized during the period. For operating leases that include rent holidays and rent escalation clauses, we recognize lease expense on a straight-line basis over the lease term from the date we take possession of the leased property. We record the straight-line lease expense and any contingent rent, if applicable, in occupancy expenses in the consolidated statements of operations.
Many of our real estate leases also require us to pay real estate taxes, common area maintenance costs and other occupancy costs (“non-lease components”) which are included in occupancy related expenses in the consolidated statements of operations. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
As there were no explicit rates provided in our leases, we used our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.
During the third quarter of 2020, the Company suspended the vast majority of lease payments while its restaurants were closed by government mandated shutdowns as a result of the COVID-19 pandemic. The Company was able to negotiate rent concessions, abatements and deferrals with landlords on many of our operating leases. In July 2020, the FASB issued a clarification to accounting for lease concessions in response to the COVID-19 pandemic to reduce the operational challenges and complexity of lease accounting. The Company used the relief provisions provided by FASB and made an election to account for the lease concessions as if they were part of the original lease agreement. As a result of the finalization of several
concession agreements with landlords, the Company recognized a reduction of rent expense in the amount of $800,000 in the current year. The recognition of rent concessions did not have a material impact on the prior year.
The components of lease expense in the consolidated statements of operations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2, 2021
|
|
October 3, 2020
|
|
|
(in thousands)
|
|
Operating lease expense - occupancy expenses (1)
|
$
|
7,557
|
|
|
$
|
9,449
|
|
|
Occupancy lease expense - general and administrative expenses
|
396
|
|
|
635
|
|
|
Variable lease expense
|
2,970
|
|
|
2,960
|
|
|
Total lease expense
|
$
|
10,923
|
|
|
$
|
13,044
|
|
____________________
(1) Includes short-term leases, which are immaterial.
Supplemental cash flow information related leases:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2, 2021
|
|
October 3, 2020
|
|
|
(in thousands)
|
|
Cash paid for amounts included in the measurement of lease liabilities:
|
|
|
|
|
Operating cash flows related to operating leases
|
$
|
10,485
|
|
|
$
|
9,500
|
|
|
Non-cash investing activities:
|
|
|
|
|
ROU assets obtained in exchange for new operating lease liabilities
|
$
|
8,712
|
|
|
$
|
62,330
|
|
The weighted average remaining lease terms and discount rate as of October 2, 2021 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Remaining Lease Term
|
|
Weighted Average Discount Rate
|
|
Operating leases
|
13.5 years
|
|
5.2
|
%
|
The annual maturities of our lease liabilities as of October 2, 2021 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Year Ending
|
|
|
Operating Leases
|
|
|
|
|
(in thousands)
|
|
October 1, 2022
|
|
|
$
|
9,026
|
|
|
September 30, 2023
|
|
|
7,543
|
|
|
September 28, 2024
|
|
|
7,143
|
|
|
September 27, 2025
|
|
|
6,116
|
|
|
October 3, 2026
|
|
|
5,385
|
|
|
Thereafter
|
|
|
47,529
|
|
|
Total future lease payments
|
|
|
82,742
|
|
|
Less imputed interest
|
|
|
(24,025)
|
|
|
Present value of lease liabilities
|
|
|
$
|
58,717
|
|
10. NOTES PAYABLE
Long-term debt consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2,
2021
|
|
October 3,
2020
|
|
|
(in thousands)
|
|
Promissory Note - Rustic Inn purchase
|
$
|
3,473
|
|
|
$
|
3,758
|
|
|
Promissory Note - Shuckers purchase
|
3,995
|
|
|
4,335
|
|
|
Promissory Note - Oyster House purchase
|
3,492
|
|
|
4,109
|
|
|
Promissory Note - JB's on the Beach purchase
|
4,750
|
|
|
5,750
|
|
|
Promissory Note - Sequoia renovation
|
2,171
|
|
|
2,629
|
|
|
Promissory Note - Revolving Facility
|
9,166
|
|
|
9,666
|
|
|
Promissory Note - Blue Moon Fish Company (see Note 3)
|
827
|
|
|
—
|
|
|
Paycheck Protection Program Loans
|
4,722
|
|
|
14,995
|
|
|
|
32,596
|
|
|
45,242
|
|
|
Less: Current maturities
|
(6,973)
|
|
|
(9,001)
|
|
|
Less: Unamortized deferred financing costs
|
(114)
|
|
|
(173)
|
|
|
Long-term debt
|
$
|
25,509
|
|
|
$
|
36,068
|
|
Notes Payable - Bank
On June 1, 2018, the Company refinanced (the "Refinancing") its then existing indebtedness with its current lender, Bank Hapoalim B.M. (“BHBM”), by entering into an amended and restated credit agreement (the “Revolving Facility”), which was to mature on May 19, 2022 (as extended). The Revolving Facility provided for total availability of the lesser of (i) $10,000,000 and (ii) $35,000,000 less the then aggregate amount of all indebtedness and obligations to BHBM. On July 26, 2021, all outstanding Revolver Borrowings, in the amount of $9,666,000, were converted to a promissory note with quarterly principal payments of $500,000 commencing on September 1, 2021, with a balloon payment of $2,166,000 on June 1, 2025. Such note bears interest at LIBOR plus 3.5% per annum. We expect that the LIBOR rate will be discontinued at some point during 2022 and to work with BHBM to identify a suitable replacement rate and amend our debt agreements to reflect this new reference rate accordingly. We do not expect the discontinuation of LIBOR as a reference rate in our debt agreements to have a material adverse effect on our financial position or materially affect our interest expense.
The Revolving Facility, which includes all of the promissory notes, also requires, among other things, that the Company meet minimum quarterly tangible net worth amounts, maintain a minimum fixed charge coverage ratio and meet minimum annual net income amounts. The Revolving Facility contains customary representations, warranties and affirmative covenants as well as customary negative covenants, subject to negotiated exceptions on liens, relating to other indebtedness, capital expenditures, liens, affiliate transactions, disposal of assets and certain changes in ownership.
Borrowings under the Revolving Facility are secured by all tangible and intangible personal property (including accounts receivable, inventory, equipment, general intangibles, documents, chattel paper, instruments, letter-of-credit rights, investment property, intellectual property and deposit accounts) and fixtures of the Company.
On June 12, 2020 and again on February 15, 2021, as a result of the impact of the COVID-19 pandemic on our business, BHBM agreed to modified financial covenants through fiscal Q2 2022. The Company was in compliance with all of its financial covenants under the Revolving Facility as of October 2, 2021.
In connection with the Refinancing, the Company also amended the principal amounts and payment terms of its then outstanding term notes with BHBM as follows:
•Promissory Note – Rustic Inn purchase – On February 25, 2013, the Company issued a promissory note to BHBM for $3,000,000. The note bore interest at LIBOR plus 3.5% per annum, and was payable in 36 equal monthly installments of $83,333, commencing on March 25, 2013. On February 24, 2014, in connection with the acquisition of The Rustic Inn, the Company borrowed an additional $6,000,000 from BHBM under the same terms and conditions as the original loan which was consolidated with the remaining principal balance from the original borrowing at that date. The new loan was payable in 60 equal monthly installments of $134,722, which commenced on March 25, 2014. In connection with the above refinancing, this note was amended and restated and increased by
$2,783,333 of credit facility borrowings. The new principal amount of $4,400,000, which is secured by a mortgage on The Rustic Inn real estate, is payable in 27 equal quarterly installments of $71,333, which commenced on September 1, 2018, with a balloon payment of $2,474,000 on June 1, 2025 and bears interest at LIBOR plus 3.5% per annum.
•Promissory Note – Shuckers purchase – On October 22, 2015, in connection with the acquisition of Shuckers, the Company issued a promissory note to BHBM for $5,000,000. The note bore interest at LIBOR plus 3.5% per annum, and was payable in 60 equal monthly installments of $83,333, commencing on November 22, 2015. In connection with the above refinancing, this note was amended and restated and increased by $2,433,324 of credit facility borrowings. The new principal amount of $5,100,000, which is secured by a mortgage on the Shuckers real estate, is payable in 27 equal quarterly installments of $85,000, which commenced on September 1, 2018, with a balloon payment of $2,805,000 on June 1, 2025 and bears interest at LIBOR plus 3.5% per annum.
•Promissory Note – Oyster House purchase – On November 30, 2016, in connection with the acquisition of the Oyster House properties, the Company issued a promissory note under the Revolving Facility to BHBM for $8,000,000. The note bore interest at LIBOR plus 3.5% per annum, and was payable in 60 equal monthly installments of $133,273, commencing on January 1, 2017. In connection with the above refinancing, this note was amended and restated and separated into two notes. The first note, in the principal amount of $3,300,000, is secured by a mortgage on the Oyster House Gulf Shores real estate, is payable in 19 equal quarterly installments of $117,857, which commenced on September 1, 2018, with a balloon payment of $1,060,716 on June 1, 2023 and bears interest at LIBOR plus 3.5% per annum. The second note, in the principal amount of $2,200,000, is secured by a mortgage on the Oyster House Spanish Fort real estate, is payable in 27 equal quarterly installments of $36,667, which commenced on September 1, 2018, with a balloon payment of $1,210,000 on June 1, 2025 and bears interest at LIBOR plus 3.5% per annum.
•Promissory Note - JB's on the Beach purchase – On May 15, 2019, in connection with the previously discussed acquisition of JB’s on the Beach, the Company issued a promissory note under the Revolving Facility to BHBM for $7,000,000 which is payable in 23 equal quarterly installments of $250,000, commencing on September 1, 2019, with a balloon payment of $1,250,000 on June 1, 2025 and bears interest at LIBOR plus 3.5% per annum.
•Promissory Note - Sequoia renovation – Also on May 15, 2019, the Company converted $3,200,000 of Revolving Facility borrowings incurred in connection with the Sequoia renovation to a promissory note which is payable in 23 equal quarterly installments of $114,286, commencing on September 1, 2019, with a balloon payment of $571,429 on June 1, 2025 and bears interest at LIBOR plus 3.5% per annum.
Paycheck Protection Program Loans
During the year ended October 3, 2020, subsidiaries (the “Borrowers”) of the Company received loan proceeds from several banks (the “Lenders”) in the aggregate amount of $14,995,000 (the “PPP Loans”) under the Paycheck Protection Program (the “PPP”) of the CARES Act, which was enacted March 27, 2020. In addition, during the 13 weeks ended April 3, 2021, one of our consolidated VIEs received a second draw PPP Loan in the amount of $111,000. The PPP Loans are evidenced by individual promissory notes of each of the Borrowers (together, the “Notes”) in favor of the Lender, which Notes bear interest at the rate of 1.00% per annum. Funds from the PPP Loans may be used only for payroll and related costs, costs used to continue group health care benefits, mortgage payments, rent, utilities, and interest on other debt obligations that were incurred by a Borrower prior to February 15, 2020 (the “Qualifying Expenses”). Under the terms of the PPP Loans, some or all of the amounts thereunder, including accrued interest, may be forgiven if they are used for Qualifying Expenses as described in and in compliance with the CARES Act. Each Note may be prepaid by the respective Borrower at any time prior to maturity with no prepayment penalties. No payments of principal or interest are due under the Notes until the date on which the amount of loan forgiveness (if any) under the CARES Act for each respective Note is remitted to the Lender and a forgiveness decision is received by the Borrower. Forgiveness applications can be submitted up to 10 months after the end of the related notes covered period (which is defined as 24 weeks after the date of the loan) (the “Deferral Period”) and the ultimate forgiveness decisions can be made by the Lenders up to 60 days after submitting the applications and possibly longer if forgiveness is fully or partially denied and the Borrower appeals the decision. While the Company believes that it and each Borrower used the PPP Loan proceeds exclusively for Qualifying Expenses, it is unclear and uncertain whether the conditions for forgiveness of the PPP Loans outstanding at October 2, 2021 will be met under the current guidelines of the CARES Act. Therefore, we cannot make any assurances that the Company, or any of the Borrowers, will be eligible for forgiveness of the remaining PPP Loans, in whole or in part. Accordingly, based on the above, we have classified $2,032,000 of the PPP Loans as short-term in the consolidated balance sheet as of October 2, 2021.
During the year ended October 2, 2021, $10,400,000 (including $84,000 of accrued interest) of PPP Loans were forgiven. To the extent, if any, that any of the remaining PPP Loans are not forgiven, beginning one month following expiration of the Deferral Period, and continuing monthly for 10 months (the “Maturity Date”), each respective Borrower is obligated to make monthly payments of principal and interest to the Lender with respect to any unforgiven portion of the Notes, in such equal amounts required to fully amortize the principal amount outstanding on such Notes as of the last day of the applicable Deferral Period by the applicable Maturity Date.
Deferred Financing Costs
Deferred financing costs incurred in the amount of $271,000 are being amortized over the life of the agreements using the effective interest rate method and included in interest expense. Amortization expense of $60,000 and $51,000 is included in interest expense for the years ended October 2, 2021 and October 3, 2020, respectively.
Maturities
As of October 2, 2021, the aggregate amounts of notes payable maturities (excluding borrowings under the Revolving Facility) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BHBM
|
|
PPP Loans
|
|
Blue Moon Note
|
|
Total
|
|
2022
|
$
|
4,701
|
|
|
$
|
2,032
|
|
|
$
|
240
|
|
|
$
|
6,973
|
|
|
2023
|
5,526
|
|
|
1,917
|
|
|
253
|
|
|
7,696
|
|
|
2024
|
4,229
|
|
|
773
|
|
|
266
|
|
|
5,268
|
|
|
2025
|
12,591
|
|
|
—
|
|
|
68
|
|
|
12,659
|
|
|
|
$
|
27,047
|
|
|
$
|
4,722
|
|
|
$
|
827
|
|
|
$
|
32,596
|
|
11. COMMITMENTS AND CONTINGENCIES
Leases — In connection with one of our leases, the Company obtained and delivered an irrevocable letter of credit in the amount of approximately $238,000 as a security deposit under such lease.
Legal Proceedings — In the ordinary course its business, the Company is a party to various lawsuits arising from accidents at its restaurants and workers’ compensation claims, which are generally handled by the Company’s insurance carriers. The employment by the Company of management personnel, waiters, waitresses and kitchen staff at a number of different restaurants has resulted in the institution, from time to time, of litigation alleging violation by the Company of employment discrimination laws. Management believes, based in part on the advice of counsel, that the ultimate resolution of these matters will not have a material adverse effect on the Company’s consolidated financial position, results of operations or cash flows.
On May 1, 2018, two former tipped service workers (the “Plaintiffs”), individually and on behalf of all other similarly situated personnel, filed a putative class action lawsuit (the “Complaint”) against the Company and certain subsidiaries as well as certain officers of the Company (the “Defendants”). Plaintiffs alleged, on behalf of themselves and the putative class, that the Company violated certain of the New York State Labor Laws and related regulations. The Complaint sought unspecified money damages, together with interest, liquidated damages and attorney fees. In December 2020, the parties reached a settlement agreement resolving all issues alleged in the Complaint, which received preliminary approval by the New York State Supreme Court, for approximately the amount which was previously accrued. It is anticipated the parties will shortly submit a joint application to the New York State Supreme Court seeking final approval of the settlement.
12. STOCK OPTIONS
The Company has options outstanding under two stock option plans: the 2010 Stock Option Plan (the “2010 Plan”) and the 2016 Stock Option Plan (the “2016 Plan”). Options granted under both plans are exercisable at prices at least equal to the fair market value of such stock on the dates the options were granted and expire ten years after the date of grant.
During the year ended October 2, 2021, options to purchase 110,500 shares of common stock at an exercise price of $10.65 per share were granted to employees and directors of the Company (the "2021 Grant"). Such options are exercisable as to 50% of the shares commencing on the second anniversary of the date of grant and as to 50% on the fourth anniversary of the date of grant. The grant date fair value of these stock options was $2.22 per share and totaled approximately $246,000.
During the year ended October 3, 2020, options to purchase 266,500 shares of common stock at an exercise price of $21.90 per share were granted to employees, directors of the Company and other service providers. Such options are exercisable as to 50% of the shares commencing on the second anniversary of the date of grant and as to the remaining 50% commencing on the fourth anniversary of the date of grant. The grant date fair value of these stock options was $3.35 per share and totaled approximately $894,000.
The Company generally issues new shares upon the exercise of employee stock options.
The fair value of each of the Company’s stock options is estimated on the date of grant using a Black-Scholes option-pricing model that uses assumptions that relate to the expected volatility of the Company’s common stock, the expected dividend yield of the Company’s stock, the expected life of the options and the risk-free interest rate. The assumptions used for the 2021 Grant include a risk-free interest rate of 0.86%, volatility of 37.1%, a dividend yield of 3.0% and an expected life of 10 years. The assumptions used for the 2020 grants include a risk-free interest rate of 1.54%, volatility of 30.3%, a dividend yield of 5.2% and an expected life of 10 years.
The following table summarizes stock option activity under all plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
2020
|
|
|
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Contractual
Term
|
|
Aggregate
Intrinsic
Value
|
|
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, beginning of
period
|
626,500
|
|
|
$
|
20.41
|
|
|
6.1 years
|
|
|
|
363,500
|
|
|
$
|
19.25
|
|
|
|
|
Options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
110,750
|
|
|
$
|
10.65
|
|
|
|
|
|
|
266,500
|
|
|
$
|
21.90
|
|
|
|
|
Exercised
|
(49,149)
|
|
|
$
|
14.40
|
|
|
|
|
|
|
(3,500)
|
|
|
$
|
14.40
|
|
|
|
|
Canceled or expired
|
(91,625)
|
|
|
$
|
19.64
|
|
|
|
|
|
|
—
|
|
|
|
|
|
Outstanding and expected to
vest, end of period
|
596,476
|
|
|
$
|
19.21
|
|
|
6.3 years
|
|
$
|
583,000
|
|
|
626,500
|
|
|
$
|
20.41
|
|
|
$
|
—
|
|
|
Exercisable, end of period
|
246,976
|
|
|
$
|
20.33
|
|
|
3.1 years
|
|
$
|
61,000
|
|
|
351,750
|
|
|
$
|
19.28
|
|
|
$
|
—
|
|
Shares available for future
grant
|
63,750
|
|
|
|
|
|
|
|
|
174,500
|
|
|
|
|
|
Compensation cost charged to operations for the years ended October 2, 2021 and October 3, 2020 for share-based compensation programs was approximately $280,000 and $176,000, respectively. The compensation cost recognized is classified as a general and administrative expense in the consolidated statements of operations.
As of October 2, 2021, there was approximately $737,000 of unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a period of three years.
The following table summarizes information about stock options outstanding as of October 2, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
Options Exercisable
|
|
Range of Exercise Prices
|
|
Number of
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
contractual
life (in years)
|
|
Number of
Shares
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
contractual
life (in years)
|
|
$10.65
|
|
107,500
|
|
|
$
|
10.65
|
|
|
9.1
|
|
—
|
|
|
$
|
10.65
|
|
|
9.1
|
|
$14.40
|
|
55,851
|
|
|
$
|
14.40
|
|
|
0.7
|
|
55,851
|
|
|
$
|
14.40
|
|
|
0.7
|
|
$21.90
|
|
236,500
|
|
|
$
|
21.90
|
|
|
8.4
|
|
—
|
|
|
$
|
21.90
|
|
|
8.4
|
|
$22.50
|
|
142,625
|
|
|
$
|
22.50
|
|
|
2.7
|
|
142,625
|
|
|
$
|
22.50
|
|
|
2.7
|
|
$19.61
|
-
|
$22.30
|
|
54,000
|
|
|
$
|
20.69
|
|
|
7.2
|
|
48,500
|
|
|
$
|
20.81
|
|
|
7.2
|
|
|
|
|
|
596,476
|
|
|
$
|
19.21
|
|
|
6.3
|
|
246,976
|
|
|
$
|
20.33
|
|
|
3.1
|
The Company also maintains a Section 162(m) Cash Bonus Plan. Under the Section 162(m) Cash Bonus Plan, compensation paid in excess of $1,000,000 to any employee who is the chief executive officer, or one of the three highest paid executive officers on the last day of that tax year (other than the chief executive officer or the chief financial officer) is not tax deductible.
13. INCOME TAXES
On March 27, 2020, the CARES Act was enacted to provide economic relief to those impacted by the COVID-19 pandemic. In addition to the PPP loans, the CARES Act made various tax law changes including among other things (i) modifications to the federal net operating loss rules including permitting federal net operating losses incurred in 2018, 2019, and 2020 tax years to be carried back to the five preceding taxable years in order to generate a refund of previously paid income taxes, (ii) enhanced recoverability of AMT tax credit carryforwards, (iii) increased the limitation under Internal Revenue Code ("IRC") Section 163(j) for 2019 and 2020 to permit additional expensing of interest, and (iv) enacted a technical correction so that qualified improvement property can be immediately expensed under IRC Section 168(k).
On December 27, 2020, the Consolidated Appropriations Act of 2021 (“CAA”) was enacted and provided clarification on the tax deductibility of expenses funded with PPP loans as fully deductible for tax purposes. During the year ended October 2, 2021, the Company recorded income of $10,400,000 (including $84,000 of accrued interest) for financial reporting purposes related to the forgiveness of its PPP loans. The forgiveness of these amounts is not taxable. .
As a result of the CARES Act and the CAA, the Company carried back taxable losses from fiscal year 2020 and is expected to carryback taxable losses from fiscal 2021 to generate a refund of previously paid income taxes. As a result of these carrybacks, the Company recorded income tax benefits as the taxable losses from fiscal 2020 and fiscal 2021 are being carried back to tax years in which the Company was subject to a higher federal corporate income tax rate. Included in Prepaid and Refundable Income Taxes at October 2, 2021 is $3,766,000 related these carryback claims.
The provision for income taxes consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
October 2,
2021
|
|
October 3,
2020
|
|
|
(in thousands)
|
|
Current provision (benefit):
|
|
|
|
|
Federal
|
$
|
(1,093)
|
|
|
$
|
(2,652)
|
|
|
State and local
|
77
|
|
|
58
|
|
|
|
(1,016)
|
|
|
(2,594)
|
|
|
Deferred provision (benefit):
|
|
|
|
|
Federal
|
946
|
|
|
(780)
|
|
|
State and local
|
1,251
|
|
|
(1,011)
|
|
|
|
2,197
|
|
|
(1,791)
|
|
|
|
$
|
1,181
|
|
|
$
|
(4,385)
|
|
The effective tax rate differs from the U.S. income tax rate as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
October 2,
2021
|
|
October 3,
2020
|
|
|
(in thousands)
|
|
|
|
|
|
|
Provision at Federal statutory rate (21%)
|
$
|
3,240
|
|
|
$
|
(1,891)
|
|
|
State and local income taxes, net of tax benefits
|
433
|
|
|
(919)
|
|
|
Gain on forgiveness of PPP Loans
|
(1,974)
|
|
|
—
|
|
|
Tax credits
|
(741)
|
|
|
(542)
|
|
|
Income (loss) attributable to non-controlling interest
|
(287)
|
|
|
(15)
|
|
|
Changes in tax rates
|
33
|
|
|
(65)
|
|
|
Net operating loss carryback Federal rate benefit
|
(159)
|
|
|
(1,022)
|
|
|
Change in valuation allowance
|
845
|
|
|
21
|
|
|
Other
|
(209)
|
|
|
48
|
|
|
|
$
|
1,181
|
|
|
$
|
(4,385)
|
|
Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and tax purposes. Significant components of the Company’s deferred tax assets and liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2,
2021
|
|
October 3,
2020
|
|
|
(in thousands)
|
|
Deferred tax assets:
|
|
|
|
|
State net operating loss carryforwards
|
$
|
5,595
|
|
|
$
|
5,427
|
|
|
Lease liabilities
|
12,116
|
|
|
10,729
|
|
|
Deferred compensation
|
310
|
|
|
358
|
|
|
Tax credits
|
2,777
|
|
|
1,862
|
|
|
Partnership investments
|
—
|
|
|
346
|
|
|
Other
|
492
|
|
|
550
|
|
|
Deferred tax assets, before valuation allowance
|
21,290
|
|
|
19,272
|
|
|
Valuation allowance
|
(1,258)
|
|
|
(413)
|
|
|
Deferred tax assets, net of valuation allowance
|
20,032
|
|
|
18,859
|
|
|
Deferred tax liabilities:
|
|
|
|
|
Depreciation and amortization
|
(15,308)
|
|
|
(12,440)
|
|
|
Partnership investments
|
(566)
|
|
|
—
|
|
|
Prepaid expenses
|
(458)
|
|
|
(522)
|
|
|
Deferred tax liabilities
|
(16,332)
|
|
|
(12,962)
|
|
|
Net deferred tax assets
|
$
|
3,700
|
|
|
$
|
5,897
|
|
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income. In the assessment of the valuation allowance, appropriate consideration was given to all positive and negative evidence including forecasts of future earnings and the duration of statutory carryforward periods. The Company recorded a valuation allowance of $1,258,000 and $413,000 as of October 2, 2021 and October 3, 2020, respectively, attributable to state and local net operating loss carryforwards which are not realizable on a more-likely-than-not basis. During the years ended October 2, 2021 and October 3, 2020, the Company’s valuation allowance increased by approximately $845,000 and $81,000, respectively, as the Company determined that certain state net operating losses became unrealizable on a more-likely-than-not basis due to certain restaurant closures in the related period.
As of October 2, 2021, the Company had General Business Credit carryforwards of approximately $2,777,000 which expire through fiscal 2041. In addition, as of October 2, 2021, the Company has New York State net operating loss carryforwards of approximately $28,039,000 and New York City net operating loss carryforwards of approximately $26,364,000 that expire through fiscal 2041.
A reconciliation of the beginning and ending amount of unrecognized tax benefits excluding interest and penalties is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
October 2,
2021
|
|
October 3,
2020
|
|
|
(in thousands)
|
|
Balance at beginning of year
|
$
|
102
|
|
|
$
|
158
|
|
|
Additions based on tax positions taken in current and prior years
|
76
|
|
|
19
|
|
|
Settlements
|
—
|
|
|
—
|
|
|
Lapse in statute of limitations
|
—
|
|
|
—
|
|
|
Decreases based on tax positions taken in prior years
|
—
|
|
|
(75)
|
|
|
Balance at end of year
|
$
|
178
|
|
|
$
|
102
|
|
The entire amount of unrecognized tax benefits if recognized would reduce our annual effective tax rate. For the years ended October 2, 2021 and October 3, 2020, there are no amounts accrued for the payment of interest and penalties. The Company does not expect a significant change to its unrecognized tax benefits within the next 12 months.
The Company files tax returns in the U.S. and various state and local jurisdictions with varying statutes of limitations. The 2018 through 2021 fiscal years remain subject to examination by the Internal Revenue Service and most state and local tax authorities.
14. INCOME PER SHARE OF COMMON STOCK
Basic earnings per share is computed by dividing net income attributable to Ark Restaurants Corp. by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is computed similarly to basic earnings per share, except that it reflects the effect of common shares issuable upon exercise of stock options, using the treasury stock method in periods in which they have a dilutive effect.
A reconciliation of shares used in calculating earnings per basic and diluted share follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
October 2,
2021
|
|
October 3,
2020
|
|
|
|
|
(in thousands)
|
|
Basic
|
|
|
3,516
|
|
3,500
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
Stock options
|
|
|
88
|
|
—
|
|
|
Diluted
|
|
|
3,604
|
|
3,500
|
|
|
|
|
|
|
|
For the year ended October 3, 2020, all options were excluded from diluted earnings per share as their impact would have been anti-dilutive.
For the year ended October 2, 2021, the dilutive effect of options to purchase 443,500 shares of common stock at exercise prices ranging from $21.90 per share to $22.50 per share were not included in diluted earnings per share as their impact would have been anti-dilutive.
15. DIVIDENDS
On November 26, 2019, the Board of Directors declared a quarterly dividend of $0.25 per share on the Company’s common stock which was paid on January 7, 2020, to shareholders of record at the close of business on December 16, 2019.
On March 13, 2020, the Company announced that, in light of the unprecedented circumstances and rapidly changing situation with respect to COVID-19, as part of an overall plan to preserve cash flow, the Board of Directors determined that it was appropriate for the Company to defer payment of the dividend that was declared on March 2, 2020. Payment of such dividend, which was scheduled for April 6, 2020 to shareholders of record on March 16, 2020, was canceled on July 1, 2020.
The payment of future dividends is at the discretion of the Company’s Board of Directors and is based on future earnings, cash flow, financial condition, capital requirements and other relevant factors. The Company does not expect to pay quarterly cash dividends for the foreseeable future as a result of the disruption to its operations from the COVID-19 pandemic.
16. RELATED PARTY TRANSACTIONS
Employee receivables totaled approximately $380,000 and $385,000 at October 2, 2021 and October 3, 2020, respectively. Such amounts consist of loans that are payable on demand, bear interest at the minimum statutory rate (0.17% at October 2, 2021 and 0.38% at October 3, 2020), and are net of reserves for collectability.
******
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
|
|
|
|
|
|
|
|
|
|
|
ARK RESTAURANTS CORP.
|
|
|
|
|
|
|
By:
|
/s/ Michael Weinstein
|
|
|
|
Michael Weinstein
|
|
|
|
Chairman of the Board and Chief Executive Officer
|
|
|
|
(Principal Executive Officer)
|
Date: December 21, 2021
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been duly signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
/s/ Michael Weinstein
|
|
Chairman of the Board and Chief Executive Officer
|
|
December 21, 2021
|
|
(Michael Weinstein)
|
|
|
|
|
|
|
|
|
|
|
/s/ Vincent Pascal
|
|
Senior Vice President and Director
|
|
December 21, 2021
|
|
(Vincent Pascal)
|
|
|
|
|
|
|
|
|
|
|
/s/ Anthony J. Sirica
|
|
Chief Financial Officer and Director (Principal Financial and Accounting Officer)
|
|
December 21, 2021
|
|
(Anthony J. Sirica)
|
|
|
|
|
|
|
|
|
|
|
/s/ Marcia Allen
|
|
Director
|
|
December 21, 2021
|
|
(Marcia Allen)
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Steven Shulman
|
|
Director
|
|
December 21, 2021
|
|
(Steven Shulman)
|
|
|
|
|
|
|
|
|
|
|
|
/s/Bruce R. Lewin
|
|
Director
|
|
December 21, 2021
|
|
(Bruce R. Lewin)
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Arthur Stainman
|
|
Director
|
|
December 21, 2021
|
|
(Arthur Stainman)
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Stephen Novick
|
|
Director
|
|
December 21, 2021
|
|
(Stephen Novick)
|
|
|
|
|
Exhibits Index
|
|
|
|
|
|
|
|
3.1
|
Certificate of Incorporation of the Registrant, filed with the Secretary of State of the State of New York on January 4, 1983.
|
|
|
|
|
3.2
|
Certificate of Amendment of the Certificate of Incorporation of the Registrant filed with the Secretary of State of the State of New York on October 11, 1985.
|
|
|
|
|
3.3
|
Certificate of Amendment of the Certificate of Incorporation of the Registrant filed with the Secretary of State of the State of New York on July 21, 1988.
|
|
|
|
|
3.4
|
Certificate of Amendment of the Certificate of Incorporation of the Registrant filed with the Secretary of State of the State of New York on May 13, 1997.
|
|
|
|
|
3.5
|
Certificate of Amendment of the Certificate of Incorporation of the Registrant filed on April 24, 2002 incorporated by reference to Exhibit 3.5 to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 30, 2002 (the “Second Quarter 2002 Form 10-Q”).
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3.6
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By-Laws of the Registrant, incorporated by reference to Exhibit 3.2 to the Registrant’s Registration Statement on Form S-18 filed with the Securities and Exchange Commission on October 17, 1985.
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10.1
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Amended and Restated Redemption Agreement dated June 29, 1993 between the Registrant and Michael Weinstein, incorporated by reference to Exhibit 10.1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended October 2, 1999 (“1994 10-K”).
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10.2
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Form of Indemnification Agreement entered into between the Registrant and each of Michael Weinstein, Ernest Bogen, Vincent Pascal, Robert Towers, Jay Galin, Robert Stewart, Bruce R. Lewin, Paul Gordon and Donald D. Shack, incorporated by reference to Exhibit 10.2 to the 1994 10-K.
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10.3
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Ark Restaurants Corp. 2004 Stock Option Plan, as amended, incorporated by reference to the Registrant’s Definitive Proxy Statement pursuant to Section 14(a) of the Securities Exchange Act of 1934 filed on January 26, 2004.
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10.4
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Ark Restaurants Corp. 2010 Stock Option Plan, incorporated by reference to the Registrant’s Definitive Proxy Statement pursuant to Section 14(a) of the Securities Exchange Act of 1934 filed on February 1, 2010.
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10.5
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Securities Purchase Agreement, by and between the Registrant and Estate of Irving Hershkowitz, incorporated by reference to Exhibit 10.01 to the Registrant’s Current Report on Form 8-K filed on December 15, 2011.
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10.6
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Promissory Note, in the principal amount of $2,125,000, issued by the Company to Estate of Irving Hershkowitz, incorporated by reference to Exhibit 10.02 to the Registrant’s Current Report on Form 8-K filed on December 15, 2011.
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10.7
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Promissory Note made by the Registrant to Bank Hapoalim B.M., issued as of February 25, 2013, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on March 1, 2013.
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10.8
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Asset Purchase Agreement dated as of November 22, 2013 by and between W and O, Inc. and Ark Rustic Inn LLC, incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on November 26, 2013.
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10.9
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Amended and Restated Promissory Note made by the Company to Bank Hapoalim B.M., issued as of February 24, 2014, incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on February 28, 2014.
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10.10
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Term or Installment Loan Rider to Promissory Note to Bank Hapoalim B.M, incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on February 28, 2014.
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10.11
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Commercial Contract Agreement and Rider to Commercial Contract Agreement both dated as of August 10, 2015 by and between Ark Shuckers Real Estate LLC and D.C. Holding Company, Inc., incorporated by reference to Exhibit 10.1 and 10.2 to the Registrant’s Current Report on Form 8-K filed on October 28, 2015.
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10.12
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Restaurant Asset Purchase Agreement dated as of August 10, 2015 by and between Ark Shuckers LLC and Ocean Enterprises, Inc. incorporated by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K filed on October 28, 2015.
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10.13
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Management Purchase Agreement dated as of August 10, 2015 by and between Ark Island Beach Resort LLC and Island Beach Resort, Inc. incorporated by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K filed on October 28, 2015.
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10.14
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Credit Agreement (Term Facility) between the Company and Bank Hapoalim B.M. issued as of October 21, 2015 incorporated by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K filed on October 28, 2015.
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10.15
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Term Promissory Note issued by the Company in favor of Bank Hapoalim B.M. on October 21, 2015 incorporated by reference to Exhibit 10.6 to the Registrant’s Current Report on Form 8-K filed on October 28, 2015.
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10.16
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Credit Agreement (Revolving Facility) and Form of Revolving Promissory Note between the Company and Bank Hapoalim B.M. issued as of October 21, 2015 incorporated by reference to Exhibit 10.7 and 10.8 to the Registrant’s Current Report on Form 8-K filed on October 28, 2015.
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10.17
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Asset Purchase Agreement dated as of October 21, 2016, by and between Ark Gulf Shores Real Estate, LLC, Ark Oyster House Gulf Shores I, LLC, Original Oyster House, Inc. and Premium Properties, Inc. including the Real Estate Purchase and Sale Agreement incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on November 16, 2016.
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10.18
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Asset Purchase Agreement dated as of October 21, 2016, by and between Ark Oyster House Causeway II, LLC, Ark Causeway Real Estate, LLC, Original Oyster House II, Inc. and Gumbo Properties, L.L.C. including the Real Estate Purchase and Sale Agreement incorporated by reference to Exhibit 2.2 to the Registrant’s Current Report on Form 8-K filed on November 16, 2016.
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10.19
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ROFR Purchase and Sale Agreement dated as of October 13, 2016 by and between SCFRC-HWG, LLC and Ark Jupiter RI, LLC incorporated by reference to Exhibit 2.3 to the Registrant’s Current Report on Form 8-K filed on November 16, 2016.
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10.20
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Purchase and Sale Agreement between Ark Jupiter RI, LLC and 1065 A1A, LLC, incorporated by reference to Exhibit 2.4 to the Registrant’s Current Report on Form 8-K filed on November 16, 2016.
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10.21
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Second Amendment to Credit Agreement (Revolving Facility) dated as of November 30, 2016, by and between Ark Restaurant Corp. and Bank Hapoalim B.M incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K/A filed on January 27, 2017.
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10.22
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Mortgage and Security Agreement (Alabama) dated as of November 30, 2016, by and between Ark Gulf Shores Real Estate LLC and Ark Causeway Real Estate LLC and Bank Hapoalim B.M incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K/A filed on January 27, 2017.
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10.23
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Amended and Restated Credit Agreement (Revolving Facility) dated as of June 1, 2018, by and between Ark Restaurants Corp. and Bank Hapoalim B.M.
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10.24
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Amended and Restated Promissory Note, dated as of June 1, 2018, by and between Ark Restaurants Corp. and Bank Hapoalim B.M. that restates and renews the Term Promissory Note, dated October 21, 2015 secured by the assets of Ark Shuckers Real Estate LLC.
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10.25
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Amended and Restated Promissory Note, dated as of June 1, 2018, by and between Ark Restaurants Corp. and Bank Hapoalim B.M. that restates and renews the Term Promissory Note, dated February 24, 2014 secured by the assets of Ark Rustic Inn Real Estate LLC.
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10.26
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Amended and Restated Promissory Note, dated as of June 1, 2018, by and between Ark Restaurants Corp. and Bank Hapoalim B.M. that restates and renews the Term Promissory Note, dated November 30, 2016 secured by the assets of Ark Gulf Shores Real Estate LLC.
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10.27
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Amended and Restated Promissory Note, dated as of June 1, 2018, by and between Ark Restaurants Corp. and Bank Hapoalim B.M. that restates and renews the Term Promissory Note, dated November 30, 2016 secured by the assets of Ark Causeway Real Estate LLC.
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10.28
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Amended and Restated Credit Agreement (Revolving Facility), dated as of May 15, 2019, by and between Ark Restaurants Corp. and Bank Hapoalim B.M.
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10.29
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Asset Purchase Agreement, dated as of February 21, 2019, by and between Ark Restaurants Corp., Beach House, LLC and Boyle Beach House, LLC.
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10.30
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Promissory Note in the amount of $7,000,000, dated as of May 15, 2019, by and between Ark Restaurants Corp. and Bank Hapoalim B.M.
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10.31
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Promissory Note in the amount of $3,200,000, dated as of May 15, 2019, by and between Ark Restaurants Corp. and Bank Hapoalim B.M.
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14
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Code of Ethics, incorporated by reference to Exhibit 14.1 to the Registrant’s Annual Report on Form 10-K for the fiscal year ended September 27, 2003.
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*21
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*23
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*31.1
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*31.2
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*32
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101.INS**
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XBRL Instance Document
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101.SCH**
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XBRL Taxonomy Extension Schema Document
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101.CAL**
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XBRL Taxonomy Extension Calculation Linkbase Document
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101.DEF**
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XBRL Taxonomy Extension Definition Linkbase Document
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101.LAB**
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XBRL Taxonomy Extension Label Linkbase Document
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101.PRE**
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XBRL Taxonomy Extension Presentation Linkbase Document
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*
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Filed herewith.
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**
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Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.
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