What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2023-12-21 compared with 2022-12-20 · 314 added, 319 removed, 693 unchanged (48% of the section changed)

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Evaluation of Disclosure Controls and Procedures

As of October 1, 2022 (the end of the period covered by this report), management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended).

Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, at the end of such period, our disclosure controls and procedures were effective and provided reasonable assurance that information required to be disclosed in our periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As of September 30, 2023 (the end of the period covered by this report), management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended).

periodic SEC filings is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

However, in evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of such possible controls and procedures.

Management’s Annual Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rule 13a-15(f), and for performing an assessment of the effectiveness of internal control over financial reporting as of October 1, 2022.

Internal control over financial reporting is a process designed by, or under the supervision of, our principal executive and principal financial officers, or persons performing similar functions, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S.

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Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of assets of the Company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S.

generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations;

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Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

Management performed an assessment of the effectiveness of our internal control over financial reporting as of October 1, 2022 based upon the criteria set forth in Internal Control — Integrated Framework issued by the 2013 Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

Based on our assessment, management determined that our internal control over financial reporting was effective as of October 1, 2022.

Management performed an assessment of the effectiveness of our internal control over financial reporting as of September 30, 2023 based upon the criteria set forth in Internal Control — Integrated Framework issued by the 2013 Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

Based on our assessment, management determined that our internal control over financial reporting was effective as of September 30, 2023.

This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting as management’s report was not subject to attestation by our independent registered public accounting firm pursuant to the permanent exemption of the SEC that permits us to provide only management’s report in this annual report.

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A copy is available free of charge through our Internet website, www.arkrestaurants.com, under the “Investors-Corporate Governance” caption.

We intend to satisfy the disclosure requirement under Item 5.05 of Current Report on Form 8-K regarding an amendment to, or waiver from, a provision of this code by posting such information on our website, at the address specified above.

Executive Compensation

The information required by this item is incorporated herein by reference to the Proxy Statement which will be filed no later than 120 days after October 1, 2022.

The information required by this item is incorporated herein by reference to the Proxy Statement which will be filed no later than 120 days after September 30, 2023.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item is incorporated herein by reference to the Proxy Statement which will be filed no later than 120 days after October 1, 2022.

Certain Relationships and Related Transactions

The information required by this item is incorporated herein by reference to the Proxy Statement which will be filed no later than 120 days after October 1, 2022.

The information required by this item is incorporated herein by reference to the Proxy Statement which will be filed no later than 120 days after September 30, 2023.

Certain Relationships and Related Transactions and Director Independence

The information required by this item is incorporated herein by reference to the Proxy Statement which will be filed no later than 120 days after September 30, 2023.

Principal Accountant Fees and Services

The information required by this item is incorporated herein by reference to the Proxy Statement which will be filed no later than 120 days after October 1, 2022.

The information required by this item is incorporated herein by reference to the Proxy Statement which will be filed no later than 120 days after September 30, 2023.

Exhibits and Financial Statement Schedule

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Report of Independent Registered Public Accounting Firm

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

Consolidated Balance Sheets - at September 30, 2023 and October 1, 2022

Consolidated Statements of Operations - years ended September 30, 2023 and October 1, 2022

Consolidated Statements of Changes in Equity - years ended September 30, 2023 and October 1, 2022

Consolidated Statements of Cash Flows - years ended September 30, 2023 and October 1, 2022

Notes to Consolidated Financial Statements

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(3) Exhibits:

The exhibits required by Item 601 of Regulation S-K and filed herewith are listed in the Exhibit List immediately preceding the exhibits.

The exhibits required by Item 601 of Regulation S-K and filed herewith are listed in the Exhibit List immediately following the Consolidated Financial Statements.

Report of Independent Registered Public Accounting Firm

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Opinion on the 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.

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

and Subsidiaries (the “Company”) as of September 30, 2023 and October 1, 2022, and the related consolidated statements of operations, changes in equity, and cash flows for each of the two years in the period ended September 30, 2023, 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 September 30, 2023 and October 1, 2022 and the results of its operations and its cash flows for each of the two years in the period ended September 30, 2023 in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

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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)

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

Critical Audit Matter

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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.

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 undiscounted 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.

If the Company concludes that the carrying value of certain long-lived assets 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.

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How our Audit Addressed the Critical Audit Matter

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

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

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

• We evaluated the reasonableness of undiscounted future cash flows utilized in the impairment analysis for the restaurants by comparing forecasted undiscounted 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.

Goodwill Valuation (Note 7 to the Consolidated Financial Statements)

Critical Audit Matter

The Company’s evaluation of goodwill for impairment involves the comparison of the fair value of the Company to its carrying value.

The Company determined the income approach provided the best approximation of fair value given the relatively low volume of shares of the Company’s stock traded and the lack of reliable market data.

In the income approach the Company utilized the discounted cash flow model to estimate fair value, which requires management to make significant estimates and assumptions related to forecasts of future revenue and operating margin.

Changes in these assumptions could have a significant impact on either the fair value, the amount of any goodwill impairment charge, or both.

The Company recorded an impairment charge of $10,000,000 for the year ended September 30, 2023.

Significant judgment is exercised by management in estimating its fair value and the difference between its fair value and carrying value.

Given these factors, the related audit effort in evaluating management’s judgments in determining the valuation of goodwill was challenging, subjective, and complex 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, among others:

• 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 goodwill impairment for reasonableness.

• We evaluated management’s ability to accurately forecast future revenues and profit margins by comparing actual results to management’s historical forecasts.

• We evaluated the reasonableness of management’s assumptions by:

◦ Comparing forecasts of revenue and profit margins to historical revenues and profit margins.

◦ Reading select internal communications to management and the Board of Directors.

◦ Considering the remaining lease terms of the company’s locations as the lease terms could have an impact on future cashflows.

Our consideration included challenging management’s assumptions in its valuation regarding the risk of non-renewal of significant leases in its various locations.

◦ Involving a valuation professional with specialized skills and knowledge, who assisted in considering the reasonableness of the weighted average cost of capital used in the discounted cash flow forecast

/s/ CohnReznick LLP PCAOB ID:

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(In Thousands, Except Per Share Amounts)

September 30,

2023 October 1,

CURRENT ASSETS:

Cash and cash equivalents (includes $ 834 at October 1, 2022 and $ 785 at October 2, 2021

related to VIEs)

Cash and cash equivalents (includes $ 564 at September 30, 2023 and $ 834 at

October 1, 2022 related to VIEs)

$ 13,415 $ 23,439

Certificate of deposit, plus accrued interest — 5,021

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

Accounts receivable (includes $ 169 at September 30, 2023 and $ 140 at October 1, 2022

related to VIEs)

Employee receivables 328 440

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 1, 2022 and

Inventories (includes $ 47 at September 30, 2023 and $ 38 at October 1, 2022 related to

Prepaid and refundable income taxes (includes $ 204 at September 30, 2023 and $ 278

October 1, 2022 related to VIEs)

Prepaid expenses and other current assets (includes $ 17 at October 1, 2022 and $ 277 at

Prepaid expenses and other current assets (includes $ 31 at September 30, 2023 and $ 17 at

October 1, 2022 related to VIEs)

Total current assets 21,930 39,093

FIXED ASSETS - Net (includes $ 212 at October 1, 2022 and $ 218 at October 2, 2021

FIXED ASSETS - Net (includes $ 216 at September 30, 2023 and $ 212 at October 1, 2022

related to VIEs)

34,314 34,682

OPERATING LEASE RIGHT-OF-USE ASSETS - Net (includes $ 2,076 at October 1, 2022

and $ 2,342 at October 2, 2021 related to VIEs)

OPERATING LEASE RIGHT-OF-USE ASSETS - Net (includes $ 1,796 at

September 30, 2023 and $ 2,076 at October 1, 2022 related to VIEs)

96,459 101,720

INTANGIBLE ASSETS - Net 272 376

GOODWILL 7,440 17,440

TRADEMARKS 4,220 4,220

INTANGIBLE ASSETS - Net 187 272

DEFERRED INCOME TAXES 3,738 3,118

INVESTMENT IN AND RECEIVABLE FROM NEW MEADOWLANDS RACETRACK 6,507 6,465

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

OTHER ASSETS (includes $ 11 at September 30, 2023 and October 1, 2022 related to VIEs)

TOTAL ASSETS $ 176,956 $ 209,534

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CURRENT LIABILITIES:

Accounts payable - trade (includes $ 135 at October 1, 2022 and $ 213 at October 2, 2021

Accounts payable - trade (includes $ 93 at September 30, 2023 and $ 135 at October 1, 2022

related to VIEs)

$ 4,058 $ 4,466

Accrued expenses and other current liabilities (includes $ 417 at October 1, 2022 and

Accrued expenses and other current liabilities (includes $ 331 at September 30, 2023 and

$ 417 at October 1, 2022 related to VIEs)

13,829 16,312

Current portion of operating lease liabilities (includes $ 272 at October 1, 2022 and $ 249 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)

Current portion of operating lease liabilities (includes $ 298 at September 30, 2023 and $ 272

at October 1, 2022 related to VIEs)

Current portion of notes payable 1,987 6,575

Total current liabilities 27,862 34,883

OPERATING LEASE LIABILITIES, LESS CURRENT PORTION (includes $ 1,623 at

October 1, 2022 and $ 2,193 at October 2, 2021 related to VIEs)

97,444 52,552

NOTES PAYABLE, LESS CURRENT PORTION, net of deferred financing costs (includes

$ 0 at October 1, 2022 and $ 101 at October 2, 2021 related to VIEs)

September 30, 2023 and $ 1,921 at October 1, 2022 related to VIEs)

92,232 97,444

NOTES PAYABLE, LESS CURRENT PORTION, net of deferred financing costs 5,140 17,089

TOTAL LIABILITIES 125,234 149,416

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Common stock, par value $ 0.01 per share - authorized, 10,000 shares;

outstanding, 3,600 shares at October 1, 2022 and 3,551 shares at October 2, 2021

outstanding, 3,604 shares at September 30, 2023 and 3,600 shares at October 1, 2022

Additional paid-in capital 14,161 15,493

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, Except Per Share Amounts)

September 30,

2023 October 1,

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General and administrative expenses 12,407 12,936

Gain on lease termination — ( 810 )

Goodwill impairment 10,000 —

Depreciation and amortization 4,310 4,297

Total costs and expenses 189,633 173,810

OPERATING INCOME 9,864 6,207

OPERATING INCOME (LOSS) ( 4,840 ) 9,864

OTHER (INCOME) EXPENSE:

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Total other (income) expense, net 582 ( 1,758 )

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

INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME TAXES ( 5,422 ) 11,622

Provision (benefit) for income taxes ( 64 ) 1,448

CONSOLIDATED NET INCOME (LOSS) ( 5,358 ) 10,174

Net income attributable to non-controlling interests ( 570 ) ( 893 )

NET INCOME ATTRIBUTABLE TO ARK RESTAURANTS CORP.

NET INCOME (LOSS) ATTRIBUTABLE TO ARK RESTAURANTS CORP.

$ ( 5,928 ) $ 9,281

NET INCOME PER ARK RESTAURANTS CORP.

NET INCOME (LOSS) PER ARK RESTAURANTS CORP.

COMMON SHARE:

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CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

FOR THE YEARS ENDED OCTOBER 1, 2022 AND OCTOBER 2, 2021

FOR THE YEARS ENDED SEPTEMBER 30, 2023 AND OCTOBER 1, 2022

(In Thousands, Except Per Share Amounts)

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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

Net income — — — 9,281 9,281 893 10,174

Net income (loss) — — — ( 5,928 ) ( 5,928 ) 570 ( 5,358 )

Elimination of non-controlling

interest upon dissolution of

subsidiary — — ( 1,685 ) — ( 1,685 ) 1,685 —

Exercise of stock options 4 — 39 — 39 — 39

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— — — ( 2,252 ) ( 2,252 ) — ( 2,252 )

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

BALANCE - September 30, 2023 3,604 $ 36 $ 14,161 $ 36,091 $ 50,288 $ 1,434 $ 51,722

See notes to consolidated financial statements.

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(In Thousands)

September 30,

2023 October 1,

CASH FLOWS FROM OPERATING ACTIVITIES:

Consolidated net income $ 10,174 $ 14,247

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

Consolidated net income (loss) $ ( 5,358 ) $ 10,174

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

Stock-based compensation 314 298

Gain on lease termination — ( 810 )

Gain on forgiveness of PPP Loans ( 272 ) ( 2,420 )

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Accrued interest on note receivable from NMR ( 42 ) ( 40 )

Goodwill impairment 10,000 —

Depreciation and amortization 4,310 4,297

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Purchase of certificate of deposit — ( 5,000 )

Principal and interest payments received from NMR — 500

Purchase of The Blue Moon Fish Company, net of cash acquired — ( 1,817 )

Net cash used in investing activities ( 7,761 ) ( 3,450 )

Proceeds from maturity of Certificate of Deposit 5,021 —

Net cash provided by (used in) investing activities 1,276 ( 7,761 )

CASH FLOWS FROM FINANCING ACTIVITIES:

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Principal payments on PPP Loans ( 531 ) ( 1,571 )

Proceeds from PPP Loans — 111

Dividends paid ( 2,252 ) ( 894 )

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Net cash used in financing activities ( 19,686 ) ( 8,318 )

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

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ( 10,024 ) 4,268

CASH AND CASH EQUIVALENTS, Beginning of year 23,439 19,171

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Non-cash financing activities:

Note payable in connection with the purchase of The Blue Moon Fish Company $ — $ 1,000

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

Elimination of non-controlling interest upon dissolution of subsidiary $ 1,685 $ —

See notes to consolidated financial statements.

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BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

As of October 1, 2022, Ark Restaurants Corp.

As of September 30, 2023, Ark Restaurants Corp.

and Subsidiaries (the “Company”) owned and operated 17 restaurants and bars, 16 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.

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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.

As a result, 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.

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, other than in New York City where customers were required to show proof of vaccination through November 1, 2022.

In addition to the associated impacts 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.

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Accounting Period — The Company's fiscal year ends on the Saturday nearest September 30.

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

The fiscal years ended September 30, 2023 and October 1, 2022 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.

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.

Significant estimates are used for, but are not limited to:

(i) projected cash flows related to asset impairments, including goodwill and intangibles, (ii) income tax valuation allowances for deferred tax assets, (iii) allowances for potential bad debts on receivables, (iv) assumptions regarding discount rates related to lease accounting, (v) the useful lives and recoverability of our long-lived assets, such as fixed assets and intangibles, (vi) fair values of financial instruments, (vii) share-based compensation, (viii) estimates made in connection with acquisition purchase price allocations, (ix) uncertain tax positions, and (x) determining when investment impairments are other-than-temporary.

The Company’s accounting estimates require the use of judgment as future events and the effect of these events cannot be predicted with certainty.

The accounting estimates may change as new events occur, as more experience is acquired and as more information is obtained.

The Company evaluates and updates assumptions and estimates on an ongoing basis and may use outside experts to assist in the Company’s evaluation, as considered necessary.

Actual results could differ from those 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.

and all of its wholly-owned subsidiaries, partnerships and other entities in which it has a controlling financial interest.

Also included in the consolidated financial statements are certain variable interest entities (“VIEs”).

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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 Company reviews the collectability of its receivables on an ongoing basis, and has not provided for an allowance as it considers all of the counterparties will be able to meet their obligations.

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 September 30, 2023, the Company had accounts receivable balances due from one hotel operator totaling 52 % 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.

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).

For the years ended September 30, 2023 and October 1, 2022, the Company made purchases from two vendors that accounted for 22 % and 20 % of total purchases, respectively.

As of September 30, 2023, all debt outstanding, other than 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.

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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 income.

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.

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.

Based on the results of this analysis, no impairment charges were recognized related to long-lived assets and ROU assets during the year ended September 30, 2023 and October 1, 2022.

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.

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

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.

With respect to goodwill, the Company assesses qualitative factors to determine whether it is necessary to perform a more detailed quantitative impairment test.

The Company may elect to bypass the qualitative assessment and proceed directly to the quantitative test.

When performing the quantitative test, an impairment loss is recognized if the carrying value of our equity, including goodwill, exceeds its fair value.

Due to the volatility of the Company's stock price in the fourth quarter of fiscal 2023, the upcoming expiration of the Bryant Park Grill & Cafe and The Porch at Bryant Park leases on April 30, 2025 and the related requests for proposals from the landlord received in July 2023 and September 2023, respectively (see Note 11 - Commitments and Contingencies), the Company determined that there were indicators of potential impairment of its goodwill during the years ended September 30, 2023.

As such, the Company performed a qualitative and quantitative assessment for its goodwill.

The Company determined the income approach using a discounted cash flow model was appropriate and recorded a pre-tax noncash goodwill impairment charge of $ 10,000,000 in the fourth quarter of 2023.

(see Note 7 – Goodwill, Trademarks and Intangible Assets).

Given the relatively low volume of shares traded and the lack of reliable market data as of September 30, 2023, the Company determined the income approach provided the best approximation of fair value.

The Company did no t record any impairment to its goodwill during the year ended October 1, 2022.

Our impairment analysis for trademarks consists of a comparison of the fair value to the carrying value of the assets.

This comparison is made based on a review of historical, current and forecasted sales and profit levels, as well as a review of any factors that may indicate potential impairment.

For the years ended September 30, 2023 and October 1, 2022, our impairment analysis did not result in any other charges related to trademarks.

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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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 $ 11,812,000 and $ 3,240,000 in catering services revenue for the years ended October 1, 2022 and October 2, 2021, respectively.

Unearned revenue which is included in accrued expenses and other current liabilities on the consolidated balance sheets as of October 1, 2022 and October 2, 2021 was $ 5,534,000 and $ 4,988,000 , respectively.

All customer payments, including

nonrefundable upfront deposits, are deferred as a liability until such time.

The Company recognized $ 14,775,000 and $ 11,812,000 in catering services revenue for the years ended September 30, 2023 and October 1, 2022, respectively.

Unearned revenue which is included in accrued expenses and other current liabilities on the consolidated balance sheets as of September 30, 2023 and October 1, 2022 was $ 5,962,000 and $ 5,534,000 , 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 1, 2022 and October 2, 2021, the total liability for gift cards in the amounts of approximately $ 309,000 and $ 252,000 , respectively, are included in accrued expenses and other current liabilities in the consolidated balance sheets.

As of September 30, 2023 and October 1, 2022, the total liability for gift cards in the amounts of approximately $ 340,000 and $ 309,000 , 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.

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Company contributions to the Plan are at the discretion of the Board of Directors.

During the years ended October 1, 2022 and October 2, 2021, the Company did not make any contributions to the Plan.

During the years ended September 30, 2023 and October 1, 2022, 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.

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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 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”).

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.

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

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 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.

Effect of Accounting Pronouncements Adopted in 2023 and Those to be Adopted in Future Periods — We reviewed the accounting pronouncements adopted in 2023, as well as all other recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact on our consolidated financial statements.

CONSOLIDATION OF VARIABLE INTEREST ENTITIES

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Following are the required disclosures associated with the Company’s consolidated VIEs:

September 30,

2023 October 1,

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Current portion of operating lease liabilities 298 272

Current portion of notes payable — 95

Operating lease liabilities, less current portion 1,623 1,921

Notes payable, less current portion — 101

Total liabilities 2,345 2,745

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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;

The liabilities of $ 2,345,000 and $ 2,745,000 at September 30, 2023 and October 1, 2022, respectively, recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets and creditors of the VIEs do not have recourse to the general credit of the Company;

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.

Conversely, the assets of $ 3,096,000 and $ 4,006,000 at September 30, 2023 and October 1, 2022, respectively, 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;

rather, these assets can be used only to settle obligations of the three VIEs.

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.

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):

Security deposit 30

Trademarks 500

Non-compete agreement 380

Goodwill 1,870

Liabilities assumed ( 2 )

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 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.

Total revenues $ 132,547

Net income (loss) $ 12,926

Net income (loss) per share - basic $ 3.68

Net income (loss) per share - diluted $ 3.59

Shares - Basic 3,516

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 ("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.

In connection with the extension, the Company 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).

Accordingly, the property was substantially closed for renovation on February 5, 2023 and reopened on April 28, 2023.

The total cost of the refresh was approximately $ 1,900,000 .

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.

No amounts have been expended to date related to this refresh.

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.

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 March 31, 2024 (as extended from June 30, 2023), subject to various extensions as set out in the agreement.

To date approximately $ 300,000 has been spent on this refresh.

Each of the above refresh obligations are to be consistent with designs approved by the landlord which shall not be unreasonably withheld.

We have and 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.

On September 19, 2023, the Company extended the lease for its corporate office through December 31, 2038.

The amended lease provides for rents, beginning on January 1, 2024, approximately 19 % lower than the Company is currently paying.

The lease also provides for, among other things, the ability for the Company to vacate the premises upon 12 months' notice.

RECENT RESTAURANT DISPOSITIONS

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 .

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.

During the 26 weeks ended April 1, 2023, the Company dissolved the entity which owned Clyde Frazier's Wine and Dine , which was closed in September of 2021.

In connection with the dissolution, the Company reclassified the remaining non-controlling interest balance to additional paid-in capital.

INVESTMENT IN AND RECEIVABLE FROM NEW MEADOWLANDS RACETRACK

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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.

The Company accounts for this investment at cost, less impairment, adjusted for subsequent observable price changes in accordance with Accounting Standards Update ("ASU") No.

There are no observable prices for this investment.

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.

During the years ended September 30, 2023 and October 1, 2022, the Company received distributions from NMR in the amounts of $ 52,000 and $ 421,000 , respectively, which are included in other income in the consolidated statements of operations for the years 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.

Accordingly, the Company did not record any impairment during the year ended September 30, 2023 and October 1, 2022.

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.

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

As of September 30, 2023 and October 1, 2022, $ 11,000 and $ 22,000 were due AM VIE by NMR.

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

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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 $ 1,357,000 and $ 1,317,000 , are included in Investment In and Receivable From New Meadowlands Racetrack in the consolidated balance sheets at October 1, 2022 and October 2, 2021, respectively.

The principal and accrued interest related to this note in the amounts of $ 1,399,000 and $ 1,357,000 , are included in Investment In and Receivable From New Meadowlands Racetrack in the consolidated balance sheets at September 30, 2023 and October 1, 2022, respectively.

On April 30, 2023, the due date of the note was extended to June 30, 2029.

Fixed assets consist of the following:

September 30,

2023 October 1,

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Land and building $ 18,393 $ 18,033

Leasehold improvements 43,054 42,200

Building and leasehold improvements 44,308 43,054

Furniture, fixtures and equipment 39,025 36,554

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Fixed Assets - Net $ 34,314 $ 34,682

Depreciation and amortization expense related to fixed assets for the years ended October 1, 2022 and October 2, 2021 was $ 4,193,000 and $ 3,577,000 , respectively.

Depreciation and amortization expense related to fixed assets for the years ended September 30, 2023 and October 1, 2022 was $ 4,225,000 and $ 4,193,000 , respectively.

Management continually evaluates unfavorable cash flows, if any, related to underperforming restaurants.

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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).

INTANGIBLE ASSETS, GOODWILL AND TRADEMARKS

GOODWILL, TRADEMARKS AND INTANGIBLE ASSETS

Goodwill and Trademarks

Goodwill and trademarks are not amortized, but are subject to impairment analysis.

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.

In performing its goodwill impairment test as of September 30, 2023, the Company determined that a triggering event had occurred.

Due to the volatility of the Company's stock price in the fourth quarter of fiscal 2023, the upcoming expiration of the current Bryant Park Grill & Cafe and The Porch at Bryant Park leases on April 30, 2025 and the related requests for proposals from the landlord for both locations received in July 2023 and September 2023, respectively (see Note 11 - Commitments and Contingencies to the Consolidated Financial Statements), the Company determined that there were indicators of potential impairment of its goodwill as of September 30, 2023.

As such, the Company performed a qualitative and quantitative assessment for its goodwill.

The fair value of the equity was determined using the income approach.

In the income approach, we utilized a discounted cash flow analysis, which involved estimating the expected future after-tax cash flows generated and then discounting those cash flows to present value, reflecting the relevant risks associated with the achievement of projected cash flows, the possibility that the Bryant Park Grill & Cafe and The Porch at Bryant Park leases may not be renewed beyond their expirations on April 30, 2025 (see Note 11 - Commitments and Contingencies), and the time value of money.

This approach requires the use of significant estimates and assumptions, including forecasted revenue growth rates, forecasted cash flows from operations, and discount rates that reflect the risk inherent in the future cash flows.

Based on the impairment analysis, the carrying amount of our equity exceeded its estimated fair value, which indicated an impairment of the carrying value of our goodwill.

Accordingly, during the fourth quarter of fiscal 2023, the Company recorded a goodwill impairment charge of $ 10,000,000 , of which $ 8,000,000 was deductible for tax purposes and resulted in a deferred income tax benefit of $ 2,300,000 .

Such impairment has been attributed to factors such as, but not limited to, a decrease in the market price of the Company's common stock and lower than expected profitability in the fourth quarter of fiscal 2023.

The changes in the carrying amount of goodwill and trademarks for the years ended September 30, 2023 and October 1, 2022 are as follows:

Goodwill Trademarks

(in thousands)

Balance as of October 2, 2021 $ 17,440 $ 4,220

Acquired during the year — —

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

Acquired during the year — —

Impairment charge (1) ( 10,000 ) —

Balance as of September 30, 2023 $ 7,440 $ 4,220

(1) Accumulated impairment losses as of September 30, 2023 and October 1, 2022 were $ 10,000,000 and $ 0 , respectively.

Intangible assets consist of the following:

September 30,

2023 October 1,

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(a) Purchased leasehold rights arose from acquiring leases and subleases of various restaurants.

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 related to intangible assets for the years ended September 30, 2023 and October 1, 2022 was $ 85,000 and $ 104,000 , respectively.

Amortization expense is expected to be $ 85,000 for fiscal 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.

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 1, 2022 and October 2, 2021 are as follows:

Goodwill Trademarks

(in thousands)

Balance as of October 3, 2020 $ 15,570 $ 3,720

Acquired during the year 1,870 500

Balance as of October 2, 2021 17,440 4,220

Acquired during the year — —

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

ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following:

September 30,

2023 October 1,

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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.

If these criteria are met and we have identified a lease, we account for the contract under the requirements of Accounting Standards Codification 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 1, 2022 or October 2, 2021.

We do not have any finance leases as of September 30, 2023 or October 1, 2022.

Generally, our real estate leases have initial terms ranging from 10 to 25 years and typically include renewal options.

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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 income.

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 income.

We record the straight-line lease expense and any contingent rent, if applicable, in occupancy 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 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

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

September 30, 2023 October 1, 2022

(in thousands)

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(1) Includes short-term leases, which are immaterial.

Supplemental cash flow information related leases:

October 1, 2022 October 2, 2021

Supplemental cash flow information related to leases is as follows:

September 30, 2023 October 1, 2022

(in thousands)

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ROU assets obtained in exchange for new operating lease liabilities $ 3,860 $ 53,530

The weighted average remaining lease terms and discount rate as of October 1, 2022 are as follows:

The weighted average remaining lease terms and discount rate as of September 30, 2023 are as follows:

Weighted Average Remaining Lease Term Weighted Average Discount Rate

Operating leases 11.9 years 6.25 %

The annual maturities of our lease liabilities as of October 1, 2022 are as follows:

The annual maturities of our lease liabilities as of September 30, 2023 are as follows:

Fiscal Year Ending Operating Leases

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September 27, 2025 12,881

September 27, 2025 12,995

October 3, 2026 12,143

October 2, 2027 11,960

September 30, 2028 12,057

Thereafter 79,284

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Long-term debt consists of the following:

September 30,

2023 October 1,

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Promissory Note - Revolving Facility — 7,166

Promissory Note - Blue Moon Fish Company (see Note 3) 587 827

Promissory Note - Blue Moon Fish Company 313 587

Paycheck Protection Program Loans — 797

23,729 32,596

Current maturities ( 1,987 ) ( 6,575 )

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Long-term debt $ 5,140 $ 17,089

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 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.

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 1, 2022.

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.

Credit Facility

On March 30, 2023, the Company entered into a Second Amended and Restated Credit Agreement (the “Credit Agreement”), with its lender, Bank Hapoalim B.M.

This facility, which matures on June 1, 2025, replaced our revolving credit facility which was entered into in June 1, 2018 (the "Prior Credit Agreement").

Under the terms of the Credit Agreement:

(i) a promissory note under the Prior Credit Agreement in the amount of $ 6,666,000 was repaid, (ii) BHBM established a new revolving credit facility in the amount of $ 10,000,000 with a commitment termination date of May 31, 2025, (iii) the Company may use the revolving commitments of BHBM to obtain letters of credit up to a sublimit thereunder of $ 1,000,000 , and (iv) the LIBOR rate option for all borrowings was replaced with the secured overnight financing rate for U.S.

Government Securities (“SOFR”).

Advances under the Credit Agreement bear interest, at the Company's election at the time of the advance, at either BHBM's prime rate of interest plus a 0.45 % spread or SOFR plus a 3.65 % spread.

In addition, there is a 0.30 % per annum fee for any unused portion of the $ 10,000,000 revolving facility.

As of September 30, 2023, no advances were outstanding under the Credit Agreement.

As of September 30, 2023, the weighted average interest on the outstanding BHBM indebtedness was approximately 8.8 %.

The replacement of LIBOR with SOFR as a reference rate in our debt agreements did not have a material adverse effect on our financial position or materially affect our interest expense.

The Credit Agreement 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.

Agreement 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.

The Company was in compliance with all of its financial covenants under the Credit Agreement as of September 30, 2023 except for the minimum annual net income requirement (as a result of the non-cash goodwill impairment).

On December 13, 2023, BHBM agreed to waive applicability of this covenant (and any breach arising therefrom) as of September 30, 2023.

Borrowings and all other obligations under the Credit Agreement (including amounts outstanding under the Existing Term Notes (discussed below)) 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 March 30, 2023, in connection with entering into the Credit Agreement, the Company amended each of the following promissory notes to replace the interest rate benchmark based on LIBOR and related LIBOR-based mechanics with an interest rate benchmark based on SOFR, with such amendments becoming effective upon the expiration of the then applicable interest period (the “Notes Amendment Effective Date”) and with the following terms:

• Promissory Note – Rustic Inn purchase – The 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 , commencing on September 1, 2018, with a balloon payment of $ 2,474,000 on June 1, 2025, and commencing on the Notes Amendment Effective Date, bears interest at SOFR plus 3.65 % per annum.

• Promissory Note – Shuckers purchase – The 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 , commencing on September 1, 2018, with a balloon payment of $ 2,805,000 on June 1, 2025, and commencing on the Notes Amendment Effective Date, bears interest at SOFR plus 3.65 % per annum.

This note was paid in full on April 4, 2023.

• Promissory Note – Oyster House purchase – In connection with the a prior 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 , commencing on September 1, 2018, with a balloon payment of $ 1,060,716 on June 1, 2023, and commencing on the Notes Amendment Effective Date, bears interest at SOFR plus 3.65 % 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 , commencing on September 1, 2018, with a balloon payment of $ 1,210,000 on June 1, 2025, and commencing on the Notes Amendment Effective Date, bears interest at SOFR plus 3.65 % per annum.

These notes were paid in full on April 4, 2023.

• Promissory Note - JB's on the Beach purchase – On May 15, 2019, the Company issued a promissory note under a prior 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, commencing on the Notes Amendment Effective Date, bears interest at SOFR plus 3.65 % per annum.

• Promissory Note - Sequoia renovation – Also on May 15, 2019, the Company converted $ 3,200,000 of prior 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, commencing on the Notes Amendment Effective Date, bears interest at SOFR plus 3.65 % per annum.

Promissory Note - Blue Moon Fish Company

On December 1, 2020, the Company acquired a restaurant and bar named Blue Moon Fish Company located in Lauderdale-by-the-Sea, FL.

In connection with the purchase the Company entered into a four -year note held by the sellers in the amount of $ 1,000,000 payable in monthly installments of $ 23,029 including interest at 5 %.

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.

During the year ended October 3, 2020, subsidiaries and consolidated VIEs (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.

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.

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.

The PPP Loans were evidenced by individual promissory notes of each of the Borrowers (together, the “Notes”) in favor of the

Lender, which Notes bore interest at the rate of 1.00% per annum.

Funds from the PPP Loans were to 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, were to be forgiven if they were used for Qualifying Expenses as described in and in compliance with the CARES Act.

During the years ended September 30, 2023 and October 1, 2022, $ 272,000 and $ 2,420,000 of PPP Loans, respectively (including $ 6,000 and $ 65,000 of accrued interest, respectively), were forgiven.

During the years ended September 30, 2023 and October 1, 2022, the Company made payments related to the unforgiven portion of PPP Loans in the aggregate amount of $ 531,000 and $ 1,571,000 , respectively.

As of September 30, 2023, no PPP Loans were outstanding;

however, the Company was denied forgiveness of one PPP Loan in fiscal 2023 in the amount of $ 280,000 and accordingly such amount was repaid.

The Company filed an appeal concurrent with the repayment, which was granted and the amount was forgiven and refunded to the Company in November 2023.

Deferred Financing Costs

Deferred financing costs incurred in the amount of $ 304,000 are being amortized over the life of the agreements using the effective interest rate method and included in interest expense.

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 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

2023 $ 5,525 $ 797 $ 253 $ 6,575

Amortization expense of $ 63,000 and $ 48,000 is included in interest expense for the years ended September 30, 2023 and October 1, 2022, respectively.

As of September 30, 2023, the aggregate amounts of notes payable maturities are as follows (in thousands):

BHBM Blue Moon Note Total

2024 $ 1,742 $ 244 $ 1,986

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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.

The Company's leases for the Bryant Park Grill & Cafe and The Porch at Bryant Park expire on April 30, 2025.

During July 2023 (for Bryant Park Grill & Cafe) and September 2023 (for The Porch at Bryant Park) , the Company received requests for proposals (the "RFPs") from the landlord which we responded to on October 25, 2023.

The RFPs for both locations are for new 10-year agreements with one five-year renewal option.

The landlord has not indicated when they will be making decisions as to the successful bidder(s).

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.

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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 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.

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.

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

STOCK OPTIONS

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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.

Under the 2022 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 September 30, 2023, no options to purchase shares of common stock were issued by the Company.

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").

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

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 .

The Company generally issues new shares upon the exercise of employee stock options.

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The assumptions used for the 2022 Grant include a risk-free interest rate of 3.2 %, volatility of 49.7 %, a dividend yield of 4.2 % and an expected life of 10 years.

The assumptions used for the 2021 grants 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 following table summarizes stock option activity under all plans:

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grant 477,500 477,500

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 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:

Compensation cost charged to operations for the years ended September 30, 2023 and October 1, 2022 for share-based compensation programs was approximately $ 314,000 and $ 298,000 , respectively.

The compensation cost recognized is classified as a general and administrative expense in the consolidated statements of operations.

As of September 30, 2023, there was approximately $ 228,000 of unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a period of 3.5 years.

The following table summarizes information about stock options outstanding as of September 30, 2023:

Options Outstanding Options Exercisable

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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).

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 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.

During the years ended September 30, 2023 and October 1, 2022, the Company recorded income of $ 272,000 and $ 2,420,000 , respectively (including $ 6,000 and $ 65,000 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 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 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:

September 30,

2023 October 1,

3 unchanged sentences

State and local 237 49

866 ( 1,016 )

Deferred provision (benefit):

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income tax rate as follows:

September 30,

2023 October 1,

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State and local income taxes, net of tax benefits ( 241 ) 275

Goodwill impairment 419 —

Gain on forgiveness of PPP Loans ( 57 ) ( 432 )

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Changes in tax rates 49 22

Net operating loss carryback Federal rate benefit — ( 159 )

Change in valuation allowance 1,866 149

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Significant components of the Company’s deferred tax assets and liabilities are as follows:

September 30,

2023 October 1,

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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 $ 1,407,000 and $ 1,258,000 as of October 1, 2022 and October 2, 2021, 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 1, 2022 and October 2, 2021, the Company’s valuation allowance increased by approximately $ 149,000 and $ 845,000 , 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 1, 2022, the Company had General Business Credit carryforwards of approximately $ 2,269,000 which expire through fiscal 2042.

In addition, as of October 1, 2022, the Company has New York State net operating loss carryforwards of approximately $ 26,966,000 and New York City net operating loss carryforwards of approximately $ 25,291,000 that expire through fiscal 2041.

A reconciliation of the beginning and ending amount of unrecognized tax benefits excluding interest and penalties is as follows:

In the assessment of the valuation allowance, appropriate consideration was given to all positive and negative evidence including reversal of existing taxable temporary differences, forecasts of future earnings and the duration of statutory carryforward periods.

The Company recorded a valuation allowance of $ 3,273,000 and $ 1,407,000 as of September 30, 2023 and October 1, 2022, respectively, attributable to certain federal tax credits and state and local net operating loss carryforwards which are not realizable on a more-likely-than-not basis.

During the year ended September 30, 2023, the Company’s valuation allowance increased by approximately $ 1,803,000 related to certain general business credit carryforwards that are not expected to be realized on a more-likely-than-not basis.

During the year ended October 1, 2022, the Company’s valuation allowance increased by approximately $ 149,000 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 September 30, 2023, the Company had General Business Credit carryforwards of approximately $ 2,557,000 which expire through fiscal 2041.

In addition, as of September 30, 2023, the Company has New York State net operating loss carryforwards of approximately $ 27,453,000 and New York City net operating loss carryforwards of approximately $ 24,933,000 that expire through fiscal 2041.

A reconciliation of the beginning and ending amounts of unrecognized tax benefits excluding interest and penalties is as follows:

September 30,

2023 October 1,

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The entire amount of unrecognized tax benefits if recognized would reduce our annual effective tax rate.

For the years ended October 1, 2022 and October 2, 2021, there are no amounts accrued for the payment of interest and penalties.

For the years ended September 30, 2023 and October 1, 2022, 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.

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A reconciliation of shares used in calculating earnings per basic and diluted share follows:

September 30,

2023 October 1,

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Diluted 3,601 3,603

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.

For the year ended September 30, 2023, the dilutive effect of options to purchase 471,250 shares of common stock at exercise prices ranging from $ 10.65 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.

On November 9, 2022, February 9, 2023, May 9, 2023 and August 8, 2023, the Board of Directors of the Company (the "Board") declared quarterly cash dividends of $ 0.125 , $ 0.125 , $ 0.1875 and $ 0.1875 , respectively, per share, which were paid on December 13, 2022, March 14, 2023, June 13, 2023 and September 13, 2023 to the stockholders of record of the Company's common stock at the close of business on November 30, 2022, February 28, 2023, May 31, 2023 and August 31, 2023.

Future decisions to pay or to increase or decrease dividends are at the discretion of the Board and will depend upon operating performance and other factors.

RELATED PARTY TRANSACTIONS

Employee receivables totaled approximately $ 440,000 and $ 380,000 at October 1, 2022 and October 2, 2021, respectively.

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.

Employee receivables totaled approximately $ 328,000 and $ 440,000 at September 30, 2023 and October 1, 2022, respectively.

Such amounts consist of loans that are payable on demand, bear interest at the minimum statutory rate ( 5.12 % at September 30, 2023 and 3.05 % at October 1, 2022), 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.

ARK RESTAURANTS CORP.

/s/ Michael Weinstein

Michael Weinstein

Chairman of the Board and Chief Executive Officer

(Principal Executive Officer)

December 20, 2022

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

(Principal Executive Officer) December 20, 2022

(Michael Weinstein)

/s/ Vincent Pascal Senior Vice President and Director December 20, 2022

(Vincent Pascal)

/s/ Anthony J.

Sirica President, Chief Financial Officer and Director

(Principal Financial and Accounting Officer) December 20, 2022

/s/ Marcia Allen Director December 20, 2022

(Marcia Allen)

/s/ Steven Shulman Director December 20, 2022

(Steven Shulman)

Lewin Director December 20, 2022

/s/ Jessica Kates Director December 20, 2022

(Jessica Kates)

/s/ Stephen Novick Director December 20, 2022

(Stephen Novick)

On November 8, 2023, the Board of Directors declared a quarterly cash dividend of $ 0.1875 per share to be paid on December 13, 2023 to shareholders of record of the Company's common stock at the close of business on November 30, 2023.

Exhibits Index

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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.

4.1 Description of Securities, incorporated by reference to Exhibit 4.1 to the Registrant's Annual Report on Form 10-K for the fiscal year ended October 1, 2022.

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”).

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and Bank Hapoalim B.M.

10.34 Second Amended and Restated Credit Agreement, dated as of March 30, 2023, by and between Ark Restaurants Corp.

and Bank Hapoalim B.M., as lender, incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on April 5, 2023.

10.35 Second Amended and Restated Security Agreement, dated as of March 30, 2023, by and between Ark Restaurants Corp., and Bank Hapoalim B.M., incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed with the SEC on April 5, 2023.

14 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.

1 unchanged sentence

*23 Consent of CohnReznick LLP.

*31.1 Certification of Chief Executive Officer.

*31.2 Certification of Chief Financial Officer.

**32 Section 1350 Certification.

*31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 .

*31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 .

**32 Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.

Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*97.1 Incentive-Based Compensation Clawback Policy.

*101.INS XBRL Instance Document

7 unchanged sentences

** Furnished herewith.

# Indicates management contract or compensatory plan or arrangement.

Form 10-K Summary

ARK RESTAURANTS CORP.

/s/ Michael Weinstein

Michael Weinstein

Chairman of the Board and Chief Executive Officer

(Principal Executive Officer)

December 21, 2023

Signature Title Date

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

(Principal Executive Officer) December 21, 2023

(Michael Weinstein)

/s/ Vincent Pascal Senior Vice President and Director December 21, 2023

(Vincent Pascal)

/s/ Anthony J.

Sirica President, Chief Financial Officer and Director

(Principal Financial and Accounting Officer) December 21, 2023

/s/ Marcia Allen Director December 21, 2023

(Marcia Allen)

/s/ Steven Shulman Director December 21, 2023

(Steven Shulman)

Lewin Director December 21, 2023

/s/ Jessica Kates Director December 21, 2023

(Jessica Kates)

/s/ Stephen Novick Director December 21, 2023

(Stephen Novick)

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