What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2022-12-20 compared with 2021-12-21 · 202 added, 176 removed, 810 unchanged (32% of the section changed)

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Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets --

at October 2, 2021 and October 3, 2020

Consolidated Statements of Operations –

years ended October 2, 2021 and October 3, 2020

Consolidated Statements of Changes in Equity --

years ended October 2, 2021 and October 3, 2020

Consolidated Statements of Cash Flows --

years ended October 2, 2021 and October 3, 2020

Consolidated Balance Sheets - at October 1, 2022 and October 2, 2021

Consolidated Statements of Income - years ended October 1, 2022 and October 2, 2021

Consolidated Statements of Changes in Equity - years ended October 1, 2022 and October 2, 2021

Consolidated Statements of Cash Flows - years ended October 1, 2022 and October 2, 2021

Notes to Consolidated Financial Statements

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders

The Board of Directors and Shareholders

Ark Restaurants Corp.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Ark Restaurants Corp.

and subsidiaries (the “Company”) as of October 2, 2021 and October 3, 2020 and the related consolidated statements of operations, changes in equity, and cash flows for each of the years in the two-year period ended October 2, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

We have audited the accompanying balance sheets of Ark Restaurants Corp.

and Subsidiaries (the “Company”) as of October 1, 2022 and October 2, 2021, and the related consolidated statements of income, changes in shareholders’ equity, and cash flows for each of the years in the two-year period ended October 1, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of October 1, 2022 and October 2, 2021 and the results of its operations and its cash flows for each of the two years in the two-year period ended October 1, 2022 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Company in accordance with the U.S.

These consolidated financial statements are the responsibility of the entity’s management.

Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to Ark Restaurants Corp.

in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a reasonable basis for our opinion.

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The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) related to accounts or disclosures that are material to the consolidated financial statements and (2) involved especially challenging, subjective, or complex judgements.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which they relate.

Long-lived Asset Valuation

As discussed in Note 6 to the consolidated financial statements, the Company utilizes projections of future cash flows to determine if there are indications of impairment of long-lived assets, specifically, land, buildings, equipment and right-of-use assets which totaled $92,510,000 as of October 2, 2021.

The Company tests for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable.

Such indicators may include, among others:

a significant decline in future cash flows and changes in expected useful life which relates to the Company’s ability and intent to hold its asset groups for a period of time that recovers their carrying value.

We identified the valuation of certain long-lived assets to be a critical audit matter.

The valuation is based upon undiscounted future cash flows related to certain long-lived assets, specifically, land, buildings, equipment and right-of-use assets.

judgments were required to evaluate subjective assumptions in the Company’s analysis of undiscounted cash flows.

These included estimated future revenue and operating expenses from restaurant locations.

Adverse changes in the assumptions could have a significant impact on whether an indicator of impairment has been identified and could have a material impact on the Company’s consolidated financial statements.

The following are the primary procedures we performed to address this critical audit matter.

We obtained an understanding for the Company’s process for determining indicators of impairment of long-lived assets and the Company’s evaluation of impairment when indicators arose.

We reviewed the minutes of board of director meetings to determine any potential closures of locations that would affect future cash flows and corroborated management’s plans with others in the organization who are responsible for, and have authority over, disposition and closure activities.

We visited the site of any locations that were considered high risk for potential impairment.

We evaluated the reasonableness of the Company’s forecasted revenues, operating results and cash flows by performing an independent sensitivity analysis related to the key inputs to forecasted cash flows, including estimated revenue growth rates, margins and operating expenses, to evaluate whether the changes in the assumptions would result in a material change in fair value of related long-lived assets.

/s/ CohnReznick LLP

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Long-lived Asset and Right-of-Use Asset Valuation (Note 1 to the Financial Statements)

Critical Audit Matter

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

projected 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.

Significant judgment is exercised by the Company in performing their long-lived asset and right-of-use asset impairment analysis specifically surrounding the development of undiscounted cash flow forecasts.

The related audit effort in evaluating management's judgments in determining the cash flow forecasts to be utilized was complex, subjective, and challenging, and required a high degree of auditor judgment.

How our Audit Addressed the Critical Audit Matter

Our principal audit procedures related to this critical audit matter included the following:

• We gained an understanding of and evaluated the design and implementation of the Company’s controls that address the risk of material misstatement related to potential impairment.

• We evaluated management's significant accounting policies related to the consideration of impairment for long-lived assets for reasonableness.

• We tested the reasonableness of the underlying data used to determine the forecasted future cash flows.

• We evaluated the reasonableness of future cash flows utilized in the impairment analysis for the restaurants by comparing forecasted cash flows to historical cash flows from each restaurant location, and evaluating management's future operating forecasts.

• We evaluated the reasonableness of management's estimate that no impairment charges were appropriate during the year.

/s/ CohnReznick LLP PCAOB ID:

We have served as the Company’s auditors since 2004.

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$ 23,439 $ 19,171

Certificate of deposit, plus accrued interest 5,021 —

Accounts receivable (includes $ 140 at October 1, 2022 and $ 358 at October 2, 2021

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Inventories (includes $ 38 at October 1, 2022 and $ 35 at October 2, 2021 related to VIEs)

Prepaid and refundable income taxes (includes $ 278 at October 2, 2021 and $ 274 at

Prepaid and refundable income taxes (includes $ 278 at October 1, 2022 and

October 2, 2021 related to VIEs)

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INVESTMENT IN AND RECEIVABLE FROM NEW MEADOWLANDS RACETRACK 6,465 6,425

OTHER ASSETS (includes $ 82 at October 2, 2021 and October 3, 2020 related to VIEs)

OTHER ASSETS (includes $ 11 at October 1, 2022 and $ 82 at October 2, 2021 related to VIEs)

TOTAL ASSETS $ 209,534 $ 161,216

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October 2, 2021 related to VIEs)

Current portion of notes payable (includes $ 95 at October 2, 2021 related to VIEs)

Current portion of notes payable (includes $ 0 at October 1, 2022 and $ 95 at

October 2, 2021 related to VIEs)

Total current liabilities 34,883 31,703

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENTS OF INCOME

(In Thousands, Except Per Share Amounts)

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General and administrative expenses 12,936 10,523

(Gain) loss on lease termination ( 810 ) 364

Gain on lease termination — ( 810 )

Depreciation and amortization 4,297 3,630

Total costs and expenses 173,810 125,663

OPERATING INCOME (LOSS) 6,207 ( 7,796 )

OPERATING INCOME 9,864 6,207

OTHER (INCOME) EXPENSE:

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Total other (income) expense, net ( 1,758 ) ( 9,221 )

INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME TAXES 15,428 ( 9,003 )

Provision (benefit) for income taxes 1,181 ( 4,385 )

CONSOLIDATED NET INCOME (LOSS) 14,247 ( 4,618 )

INCOME BEFORE PROVISION FOR INCOME TAXES 11,622 15,428

Provision for income taxes 1,448 1,181

CONSOLIDATED NET INCOME 10,174 14,247

Net income attributable to non-controlling interests ( 893 ) ( 1,352 )

NET INCOME (LOSS) ATTRIBUTABLE TO ARK RESTAURANTS CORP.

NET INCOME ATTRIBUTABLE TO ARK RESTAURANTS CORP.

$ 9,281 $ 12,895

NET INCOME (LOSS) PER ARK RESTAURANTS CORP.

NET INCOME PER ARK RESTAURANTS CORP.

COMMON SHARE:

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Shares Amount

BALANCE - September 28, 2019 3,499 $ 35 $ 13,277 $ 28,552 $ 41,864 $ 843 $ 42,707

Net income (loss) — — — ( 4,688 ) ( 4,688 ) 70 ( 4,618 )

BALANCE - October 3, 2020 3,502 $ 35 $ 13,503 $ 22,989 $ 36,527 $ 626 $ 37,153

Net income — — — 12,895 12,895 1,352 14,247

Exercise of stock options 49 1 709 — 710 — 710

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interests — — — — — ( 938 ) ( 938 )

Dividends paid - $ 0.25 per share

— — — ( 875 ) ( 875 ) — ( 875 )

BALANCE - October 2, 2021 3,551 36 14,492 35,884 50,412 1,040 51,452

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interests — — — — — ( 1,615 ) ( 1,615 )

Dividends paid - $ 0.25 per share

— — — ( 894 ) ( 894 ) — ( 894 )

BALANCE - October 1, 2022 3,600 $ 36 $ 15,493 $ 44,271 $ 59,800 $ 318 $ 60,118

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CASH FLOWS FROM OPERATING ACTIVITIES:

Consolidated net income (loss) $ 14,247 $ ( 4,618 )

Adjustments to reconcile consolidated net income (loss) to net cash provided by (used in)

operating activities:

Consolidated net income $ 10,174 $ 14,247

Adjustments to reconcile consolidated net income to net cash provided by operating activities:

Stock-based compensation 298 280

(Gain) loss on lease termination ( 810 ) 364

Gain on lease termination — ( 810 )

Gain on forgiveness of PPP Loans ( 2,420 ) ( 10,400 )

Deferred income taxes 582 2,197

Accrued interest on Certificate of Deposit ( 21 ) —

Accrued interest on note receivable from NMR ( 40 ) ( 51 )

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Amortization of deferred financing costs 48 60

Operating lease deferred credit — ( 197 )

Changes in operating assets and liabilities:

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Accrued expenses and other current liabilities 2,699 900

Net cash provided by (used in) operating activities 9,294 ( 4,528 )

Net cash provided by operating activities 20,347 9,294

CASH FLOWS FROM INVESTING ACTIVITIES:

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Payments received on employee receivables 169 97

Purchase of certificate of deposit ( 5,000 ) —

Principal and interest payments received from NMR — 500

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Principal payments on notes payable ( 4,941 ) ( 3,374 )

Borrowings under credit facility — 6,300

Principal payments on PPP Loans ( 1,571 ) ( 68 )

Proceeds from PPP Loans — 111

Payment of debt financing costs — ( 63 )

Dividends paid ( 894 ) —

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Distributions to non-controlling interests ( 1,615 ) ( 938 )

Net cash provided by (used in) financing activities ( 3,559 ) 16,694

Net cash used in financing activities ( 8,318 ) ( 3,559 )

NET INCREASE IN CASH AND CASH EQUIVALENTS 4,268 2,285

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Refinancing of credit facility borrowings to term notes $ — $ 9,666

Accrued distributions to non-controlling interests $ — $ 150

See notes to consolidated financial statements.

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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.

The Las Vegas operations include four restaurants within the New York-New York Hotel and 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.

COVID-19 PANDEMIC AND INFLATION — Recent global events, including the COVID-19 pandemic ("COVID-19"), have adversely affected global economies, disrupted global supply chains and labor force participation and created significant volatility and disruption of financial markets.

We experienced significant and variable disruptions to our business as federal, state and local restrictions were mandated, among other remedial measures, to mitigate the spread of the COVID-19 virus.

During fiscal 2021, most of our restaurants operated with no restrictions on indoor dining, although there was a significant reduction in guest traffic at our restaurants due to changes in consumer behavior as public health officials encouraged social distancing.

While restrictions on the type of permitted operating model and occupancy capacity may continue to change, during fiscal 2022 all of our restaurants operated with no restrictions.

During fiscal 2022, in addition to the associated impact of COVID-19, our operating results have been impacted by geopolitical and other macroeconomic factors, leading to increased commodity and wage inflation and other increased costs.

The ongoing effects of COVID-19 and its variants, along with other geopolitical and macroeconomic events, could lead to further government mandates, including but not limited to capacity restrictions, shifts in consumer behavior, wage inflation, staffing challenges, product and services cost inflation and disruptions in our supply chain.

If these factors significantly impact our cash flow in the future, we may again implement mitigation actions such as suspending dividends, increasing borrowings or modifying our operating strategies.

Some of these measures may have an adverse impact on our business, including possible impairments of assets.

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”).

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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.

The fiscal years ended October 1, 2022 and October 2, 2021 both included 52 weeks.

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.

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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.

Although our business is highly seasonal, our broader geographical reach as a result of recent acquisitions mitigates some of this 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;

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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.

Fair Value of Financial Instruments — Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

Fair value is estimated by applying a fair value hierarchy, which requires maximizing the use of observable inputs when measuring fair value.

The three levels of inputs are:

Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.

Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities;

quoted prices in markets that are not active;

or other inputs that are observable or can be corroborated by observable market data.

Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

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.

Certificates of deposit, which are considered Level 2 assets, are valued at original cost plus accrued interest, which approximates fair value.

Cash and Cash Equivalents — Cash and cash equivalents include cash on hand, deposits with banks, highly liquid investments and certificates of deposit 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.

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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 1, 2022, the Company had accounts receivable balances due from two hotel operators totaling 54 % 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, the Company had accounts receivable balances due from one hotel operator totaling 37 % of total accounts receivable.

For the years ended October 1, 2022 and October 2, 2021, the Company made purchases from two vendors that accounted for 20 % and 21 % of total purchases, respectively.

As of October 1, 2022, 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).

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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.

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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.

No impairment charges related to long-lived and ROU assets were recognized during the year ended October 1, 2022.

The Company recognized impairment charges related to long-lived and ROU assets during the year ended October 2, 2021 as described in Note 4 – Recent Restaurant Dispositions.

Given the inherent uncertainty in projecting results of restaurants under the current circumstances, 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.

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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.

If we determine through the impairment review process that goodwill or trademarks are impaired, we record an impairment charge in our consolidated statements of income.

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 1, 2022 and October 2, 2021.

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.

Accordingly, the Company did no t record any impairment to its goodwill or trademarks during the years ended October 1, 2022 and October 2, 2021.

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.

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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;

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;

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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.

Recently Adopted Accounting Standards — In January 2017, the Financial Accounting Standards Board (the "FASB") issued Accounting Standards Update ("ASU") No.

2017-04, Intangibles - Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment (“ASU 2017-04”).

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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.

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.

Simplifying the Accounting for Income Taxes ("ASU 2019-12"), 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.

The Company adopted this guidance in the first quarter of fiscal 2022.

Such adoption did not have a material impact on our consolidated condensed financial statements.

New Accounting Standards Not Yet Adopted — In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S.

GAAP to contracts, hedging relationships and other transactions affected by the discontinuation of the London Interbank Offered Rate (“LIBOR”) or by another reference rate expected to be discontinued because of reference rate reform.

The guidance was effective beginning March 12, 2020 and can be applied prospectively

through December 31, 2022.

In January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848):

Scope (“ASU 2021-01”).

ASU 2021-01 provides temporary optional expedients and exceptions to certain guidance in U.S.

GAAP to ease the financial reporting burdens related to the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”).

The guidance is effective upon issuance, on January 7, 2021, and can be applied through December 31, 2022.

We do not expect that the requirements of this guidance will have a material impact on our consolidated financial statements.

CONSOLIDATION OF VARIABLE INTEREST ENTITIES

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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.

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.

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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 consolidated statement of income 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 year ended October 2, 2021 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.

2021 October 3,

Total revenues $ 132,547

4 unchanged sentences

Shares - Diluted 3,604

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.

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 ("Sandcastle 1, LLC") that purchased the properties on March 22, 2021.

In exchange, the Company received a 5 % interest in Sandcastle 1, LLC, which plans future development of the sites.

In addition, all rights and privileges under the current lease were assigned to Sandcastle 1, LLC, as landlord and the lease terms remain unchanged.

On April 8, 2022, the Company extended its lease for Gallagher's Steakhouse at the New York-New York Hotel and Casino in Las Vegas, NV through December 31, 2032.

In connection with the extension, the Company has agreed to spend a minimum of $ 1,500,000 to materially refresh the premises by April 30, 2023 (as extended from September 30, 2022 due to supply chain issues), subject to additional extensions as set out in the agreement.

On June 24, 2022, the Company extended its lease for America at the New York-New York Hotel and Casino in Las Vegas, NV through December 31, 2033.

In connection with the extension, the Company has agreed to spend a minimum of $ 4,000,000 to materially refresh the premises by December 31, 2024, subject to various extensions as set out in the agreement.

On July 21, 2022, the Company extended its lease for the Village Eateries at the New York-New York Hotel and Casino in Las Vegas, NV through December 31, 2034.

As part of this extension, the Broadway Burger Bar and Grill and Gonzalez y Gonzalez , were carved out of the Village Eateries footprint and the extended date for those two locations is December 31, 2033.

In connection with the extension, the Company has agreed to spend a minimum of $ 3,500,000 to materially refresh all three of these premises by June 30, 2023, subject to various extensions as set out in the agreement.

The above refresh obligations related to the New York-New York Hotel and Casino lease extensions are to be consistent with designs approved by the Landlord which shall not be unreasonably withheld.

We will continue to pay all rent as required by the leases without abatement during construction.

Note that our substantial completion of work set forth in plans approved by the Landlord shall constitute our compliance with the requirements of the completion deadlines, regardless of whether or not the amount actually expended in connection therewith is less than the minimum.

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.

6 unchanged sentences

(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 .

On July 5, 2022, the Company terminated its lease for Lucky 7 at the Foxwoods Resort Casino.

The closure did not result in a material change to the Company's operations.

INVESTMENT IN AND RECEIVABLE FROM NEW MEADOWLANDS RACETRACK

4 unchanged sentences

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.

During the year ended October 1, 2022, the Company received distributions from NMR in the amount of $ 421,000 which are included in other income in the consolidated statement of income for the year then ended.

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 during the year ended October 1, 2022 and October 2, 2021.

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.

1 unchanged sentence

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.

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.

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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.

As of October 1, 2022 and October 2, 2021, $ 22,000 and $ 0 were due AM VIE by NMR.

On April 25, 2014, the Company loaned $ 1,500,000 to Meadowlands Newmark, LLC.

24 unchanged sentences

(in thousands)

Purchased leasehold rights (a) $ 1,995 $ 1,995

Noncompete agreements and other 633 253

Purchased leasehold rights (a) - fully amortized $ 1,995 $ 1,995

Noncompete agreements and other - 5 - 10 years

Less accumulated amortization 2,356 2,252

1 unchanged sentence

(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 .

Amortization expense related to intangible assets for the years ended October 1, 2022 and October 2, 2021 was $ 104,000 and $ 53,000 , respectively.

Amortization expense is expected to be $ 85,000 for fiscal 2023, 2024 and 2025 and $ 17,000 for fiscal 2026.

Goodwill is the excess of cost over fair market value of tangible and intangible net assets acquired.

4 unchanged sentences

(in thousands)

Balance as of September 28, 2019 $ 15,570 $ 3,720

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

Acquired during the year — —

Impairment losses — —

Balance as of October 1, 2022 $ 17,440 $ 4,220

19 unchanged sentences

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.

We record the straight-line lease expense and any contingent rent, if applicable, in occupancy expenses in the consolidated statements of income.

Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.

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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:

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 year ended October 2, 2021.

The components of lease expense in the consolidated statements of income are as follows:

October 1, 2022 October 2, 2021

20 unchanged sentences

(in thousands)

October 1, 2022 $ 9,026

September 30, 2023 $ 13,695

2 unchanged sentences

October 3, 2026 11,867

October 2, 2027 11,547

Thereafter 85,915

24 unchanged sentences

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 expect that the LIBOR rate will be discontinued by June 30, 2023 and will continue 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.

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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.

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.

13 unchanged sentences

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”).

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.

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.

While the Company and each Borrower believe that PPP Loan proceeds were used exclusively for Qualifying Expenses, it is unclear and uncertain whether the conditions for forgiveness of the remaining PPP Loans outstanding at October 1, 2022 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 the amount of $ 797,000 , in whole or in part.

During the years ended October 1, 2022 and October 2, 2021, $ 2,420,000 and $ 10,400,000 , respectively (including $ 65,000 and $ 84,000 of accrued interest, respectively), 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.

Accordingly, based on the above, we have classified the PPP Loan amounts expected to be forgiven as long-term in accordance with SEC interpretative guidance and the remaining amounts expected to be repaid in the next 12 months of $ 797,000 and $ 2,032,000 as short-term in the consolidated condensed balance sheets as of October 1, 2022 and October 2, 2021, respectively.

During the year ended October 1, 2022 and October 2, 2021, the Company made payments related to the unforgiven portion of PPP Loans in the aggregate amount of $ 1,571,000 and $ 68,000 , respectively.

Deferred Financing Costs

1 unchanged sentence

Amortization expense of $ 48,000 and $ 60,000 is included in interest expense for the years ended October 1, 2022 and October 2, 2021, respectively.

As of October 2, 2021, the aggregate amounts of notes payable maturities (excluding borrowings under the Revolving Facility) are as follows:

As of October 1, 2022, the aggregate amounts of notes payable maturities (excluding borrowings under the Revolving Facility) are as follows (in thousands):

BHBM PPP Loans Blue Moon Note Total

3 unchanged sentences

$ 22,345 $ 797 $ 587 $ 23,729

$ 27,047 $ 4,722 $ 827 $ 32,596

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.

Leases — The Company leases several restaurants, bar facilities, and administrative headquarters through its subsidiaries under terms expiring at various dates through 2046.

Most of the leases provide for the payment of base rents plus real estate taxes, insurance and other expenses and, in certain instances, for the payment of a percentage of the restaurant’s sales in excess of stipulated amounts at such facility and in one instance based on profits.

In connection with one of our leases, the Company obtained and delivered an irrevocable letter of credit in the amount of approximately $ 542,000 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.

1 unchanged sentence

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.

well as certain officers of the Company (the “Defendants”).

Plaintiffs alleged, on behalf of themselves and the putative class, that the Defendants violated certain of the New York State Labor Laws and related regulations.

The Complaint sought unspecified monetary 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 final approval by the New York State Supreme Court in October 2022, for approximately the amount which was previously accrued.

Under the terms of the court approved settlement agreement, settlement proceeds will be distributed to the Plaintiffs in the first quarter of fiscal year 2023.

STOCK OPTIONS

The Company has options outstanding under two stock option plans:

Prior to fiscal 2022, the Company had 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.

On March 15, 2022, the shareholders of the Company approved the Ark Restaurants Corp.

2022 Stock Option Plan (the "2022 Plan").

Effective with this approval, the Company terminated the 2016 Plan along with the 63,750 authorized but unissued options under the 2016 Plan.

Such termination did not affect any of the options previously issued and outstanding under the 2016 Plan, which remain outstanding in accordance with their terms.

Under the 2022 Stock Option Plan, 500,000 options were authorized for future grant and are exercisable at prices at least equal to the fair market value of such stock on the dates the options were granted.

The options expire ten years after the date of grant.

During the year ended October 1, 2022, options to purchase 22,500 shares of common stock at an exercise price of $ 17.80 per share were granted to employees and directors of the Company (the "2022 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.

Such options are exercisable as to 25 % of the shares commencing on the first anniversary of the date of grant and 25 % each year thereafter.

The grant date fair value of these stock options was $ 4.53 per share and totaled approximately $ 102,000 .

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.

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 .

20 unchanged sentences

Compensation cost charged to operations for the years ended October 1, 2022 and October 2, 2021 for share-based compensation programs was approximately $ 298,000 and $ 280,000 , 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 compensation cost recognized is classified as a general and administrative expense in the consolidated statements of income.

As of October 1, 2022, there was approximately $ 543,000 of unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a period of four years.

The following table summarizes information about stock options outstanding as of October 1, 2022:

15 unchanged sentences

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.

The Inflation Reduction Act of 2022 (the “Act”) was signed into U.S.

law on August 16, 2022.

The Act includes various tax provisions, including an excise tax on stock repurchases, expanded tax credits for clean energy incentives, and a corporate alternative minimum tax that generally applies to U.S.

corporations with average adjusted financial statement income over a three-year period in excess of $1 billion.

The Company does not expect the Act to materially impact its financial statements.

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).

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.

During the years ended October 1, 2022 and October 2, 2021, the Company recorded income of $ 2,420,000 and $ 10,400,000 , respectively (including $ 65,000 and $ 84,000 of accrued interest, respectively), 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 the CARES Act and the CAA, the Company carried back taxable losses from fiscal years 2020 and 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.

Included in Prepaid and Refundable Income Taxes at October 1, 2022 and October 2, 2021 is $ 1,360,000 and $ 3,766,000 , respectively, related to these carryback claims.

The provision for income taxes consists of the following:

9 unchanged sentences

$ 1,448 $ 1,181

$ 1,181 $ ( 4,385 )

The effective tax rate differs from the U.S.

21 unchanged sentences

Tax credits 2,269 2,777

Partnership investments — 346

Other 604 492

20 unchanged sentences

Additions based on tax positions taken in current and prior years 39 18

Settlements — —

Lapse in statute of limitations — —

Decreases based on tax positions taken in prior years — —

17 unchanged sentences

Diluted 3,603 3,604

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 1, 2022, the dilutive effect of options to purchase 329,125 shares of common stock at exercise prices ranging from $ 20.18 per share to $ 22.50 per share were not included in diluted earnings per share as their impact would have been anti-dilutive.

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.

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.

On May 11, 2022 and August 10, 2022, the Board of Directors (the "Board") of the Company declared quarterly cash dividends of $ 0.125 per share which were paid on June 13, 2022 and September 13, 2022 to the stockholders of record of each share of the Company's common stock at the close of business on May 31, 2022 and August 31, 2022.

Future decisions to pay dividends, and the amount of any dividend, are at the discretion of the Board and will depend upon operating performance and other factors.

RELATED PARTY TRANSACTIONS

1 unchanged sentence

Such amounts consist of loans that are payable on demand, bear interest at the minimum statutory rate ( 3.05 % at October 1, 2022 and 0.17 % at October 2, 2021), and are net of reserves for collectability.

SUBSEQUENT EVENTS

On November 9, 2022, the Board of Directors declared a quarterly cash dividend of $ 0.125 per share to be paid on December 13, 2022 to shareholders of record of each share of the Company's common stock at the close of business on November 30, 2022.

In November 2022, the Company entered into a separation agreement with the Senior Vice President of its Las Vegas operations which requires the Company to pay $ 500,000 on January 1, 2023, this individual's last day of employment.

In addition, the Company entered into a consulting agreement with this same individual effective January 1, 2023 for $ 200,000 per year expiring on December 31, 2025.

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.

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Signature Title Date

/s/ Michael Weinstein Chairman of the Board and Chief Executive Officer December 21, 2021

/s/ Michael Weinstein Chairman of the Board and Chief Executive Officer

(Principal Executive Officer) December 20, 2022

(Michael Weinstein)

2 unchanged sentences

/s/ Anthony J.

Sirica Chief Financial Officer and Director (Principal Financial and Accounting Officer) December 21, 2021

Sirica President, Chief Financial Officer and Director

(Principal Financial and Accounting Officer) December 20, 2022

/s/ Marcia Allen Director December 20, 2022

3 unchanged sentences

Lewin Director December 20, 2022

/s/ Arthur Stainman Director December 21, 2021

(Arthur Stainman)

/s/ Jessica Kates Director December 20, 2022

(Jessica Kates)

/s/ Stephen Novick Director December 20, 2022

7 unchanged sentences

3.6 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.

Description of Securities.

10.1 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”).

2 unchanged sentences

Shack, incorporated by reference to Exhibit 10.2 to the 1994 10-K.

10.3 Form of Director and Officer Indemnification Agreement, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the Securities and Exchange Commission on July 5, 2022.

10.4 Ark Restaurants Corp.

2 unchanged sentences

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.

10.6 Ark Restaurants Corp.

2022 Stock Option Plan, incorporated by reference to Appendix A to the Company's Definitive Proxy Statement filed with the Securities and Exchange Commission on January 28, 2022.

10.7 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.

61 unchanged sentences

101.PRE** XBRL Taxonomy Extension Presentation Linkbase Document

104 Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101)

* Filed herewith.

** 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.

** Furnished herewith.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures