ARK RESTAURANTS CORP 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations This section and other parts of this Quarterly Report on Form 10-Q ("Form 10-Q") contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 ("PSLRA"), which are subject to known and unknown risks, uncertainties and other important factors that may cause actual results to be materially different from the statements made herein. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements discuss our current expectations and projections relating to our financial position, results of operations, plans, objectives, future performance and business. You can identify forward-looking statements by the fact that they do not relate strictly to any historical or current facts. These statements may include words such as "aim," "anticipate," "believe," "estimate," "expect," "forecast," "future," "intend," "outlook," "potential," "project," "projection," "plan," "seek," "may," "could," "would," "will," "should," "can," "can have," "likely," the negatives thereof and other similar expressions. All forward-looking statements are expressly qualified in their entirety by these cautionary statements. The following discussion and analysis should be read in conjunction with our Annual Report on Form 10-K for the year ended September 27, 2025 and the consolidated condensed financial statements and notes thereto included in Part I, Item 1 of this Form 10-Q. All information presented herein is based on our fiscal calendar. Unless otherwise stated, references to particular years, quarters, months or periods refer to our fiscal years and the associated quarters, months and periods of those fiscal years. Overview As of December 27, 2025, the Company owned and operated 16 restaurants and bars, 12 fast food concepts and catering operations, exclusively in the United States, that have similar economic characteristics, nature of products and service, class of customer and distribution methods. The Company believes it meets the criteria for aggregating its operating components into a single operating segment in accordance with applicable accounting guidance. Accounting Period Our fiscal year ends on the Saturday nearest September 30. We report fiscal years under a 52/53-week format. This reporting method is used by many companies in the hospitality industry and is meant to improve year-to-year comparisons of operating results. Under this method certain years will contain 53 weeks. The periods ended December 27, 2025 and December 28, 2024 each included 13 weeks. Seasonality The Company has substantial fixed costs that do not decline proportionally with sales. Although our business is highly seasonal, our broader geographical reach mitigates some of this risk. For instance, the second quarter of our fiscal year, consisting of the non-holiday portion of the cold weather season in New York and Washington D.C. (January, February and March), is the poorest performing quarter; however, this is partially offset by our locations in Florida as they experience increased results in the winter months. We generally achieve our best results during the warmer weather, attributable to our extensive outdoor dining availability, particularly at Bryant Park in New York and Sequoia in Washington, D.C. (our largest restaurants) and our outdoor cafes. However, even during summer months these facilities can be adversely affected by unusually cool or rainy weather conditions. Our facilities in Las Vegas are indoors and generally operate on a more consistent basis throughout the year, although in recent years the summer months have seen lower traffic. Recent Developments Bryant Park Grill & Cafe and The Porch at Bryant Park The Company’s lease agreements for the Bryant Park Grill & Café and The Porch at Bryant Park expired in April 2025 and March 2025, respectively. In response to requests for proposals issued by the landlord in 2023, the Company submitted bids for new long-term agreements. In the second quarter of 2025, the landlord publicly announced the selection of a new operator for both locations; however, as of the date of this filing, the required approvals from the City of New York Department of Parks & Recreation and the New York Public Library have not been obtained, and no new lease has become effective. The Company has initiated legal proceedings in New York State Supreme Court challenging the lease award process and asserting its contractual rights, including its right of first lease for the Bryant Park Café . The litigation remains ongoing, with discovery continuing and motions pending, including a motion for summary judgment filed by the landlord. While the court has required the Company to make use and occupancy payments during the pendency of the case, the Company continues to operate both restaurants and intends to do so unless it is ordered to vacate or is awarded lease extensions. - 20 - Management is unable to predict the outcome of the litigation at this time. The Bryant Park Grill & Café and The Porch at Bryant Park represented a significant portion of the Company’s revenues, accounting for approximately 19.5% and 22.3% of total revenue for the 13 weeks ended December 27, 2025 and December 28, 2024, respectively. The ongoing uncertainty related to this dispute has had, and is expected to continue to have, a material adverse effect on the Company’s business, financial condition, and results of operations while the matter remains unresolved and if the Company is ultimately unable to retain these locations on favorable terms, or at all. Further discussion related to these matters is included in Note 8 of the consolidated condensed financial statements. Investment in and Receivable From New Meadowlands Racetrack LLC ("NMR") NMR has been actively pursuing a full casino license (including slots and table games like blackjack and roulette) to supplement its existing horse racing and sports betting operations. In January 2026, the New Jersey Senate Government, Wagering, Tourism & Historic Preservation Committee proposed a constitutional amendment to allow the legislature to authorize casino gambling at both the Monmouth Park and Meadowlands Racetracks. Such amendment will require a three-fifths vote in both legislative chambers followed by a voter referendum in a general election before becoming law. It is possible that a referendum could be on the ballot in November 2026 and if it were to pass, NMR could open a temporary facility in 2027 and a permanent one by 2028. In conjunction with such referendum, NMR will need to raise substantial capital to fund a marketing campaign to support the passage of the referendum. To the extent the Company does not contribute to this effort, or if NMR raises outside capital, our interests will be diluted. There can be no assurances that the above referendum will be included in the November 2026 election ballot or that it will pass if it is included. If either of these do not occur, the Company’s investment in NMR will be evaluated based on the existing horse racing and sports betting operations and may be subject to substantial impairment. Further discussion related to these matters is included in Note 4 of the consolidated condensed financial statements. Results of Operations The Company's operating income for the 13 weeks ended December 27, 2025 decreased 80.8% as compared to operating income in the same period of the prior year (which includes a loss on the closure of El Rio Grande in the amount of $146,000 and a gain on the termination of our Tampa Food Court lease in the amount of $5,235,000). Excluding these items in the prior period, operating income of $1,093,000 for the 13 weeks ended December 27, 2025 increased 82.2% as compared to adjusted operating income of $600,000 for the 13 weeks ended December 28, 2024. The following table summarizes the significant components of the Company’s operating results for the 13 weeks ended December 27, 2025 and December 28, 2024: - 21 - 13 Weeks Ended Variance December 27, 2025 December 28, 2024 $ % (in thousands) REVENUES: Food and beverage sales $ 40,246 $ 44,442 $ (4,196) -9.4 % Other revenue 503 546 (43) -7.9 % Total revenues 40,749 44,988 (4,239) -9.4 % COSTS AND EXPENSES: Food and beverage cost of sales 10,662 12,107 (1,445) -11.9 % Payroll expenses 14,209 16,408 (2,199) -13.4 % Occupancy expenses 5,679 6,148 (469) -7.6 % Other operating costs and expenses 5,317 5,800 (483) -8.3 % General and administrative expenses 3,179 3,148 31 1.0 % Depreciation and amortization 610 777 (167) -21.5 % Loss on closure of El Rio Grande — 146 (146) N/A Gain on termination of Tampa Food Court lease — (5,235) 5,235 N/A Total costs and expenses 39,656 39,299 357 0.9 % OPERATING INCOME $ 1,093 $ 5,689 $ (4,596) -80.8 % Revenues During the 13 weeks ended December 27, 2025, revenues decreased 9.4% as compared to revenues for the 13 weeks ended December 28, 2024. We attribute this decrease primarily to the decreases in same-store sales discussed below and the closure of the Tampa Food Court . Food and Beverage Same-Store Sales On a Company-wide basis, same-store sales decreased 7.3% during the 13 weeks ended December 27, 2025 as compared to the same period of last year as follows: 13 Weeks Ended Variance December 27, 2025 December 28, 2024 $ % (in thousands) Las Vegas $ 13,360 $ 14,279 $ (919) -6.4 % New York 9,519 11,161 (1,642) -14.7 % Washington, D.C. 2,115 2,015 100 5.0 % Atlantic City, NJ 470 553 (83) -15.0 % Alabama 3,146 3,290 (144) -4.4 % Florida 10,432 10,828 (396) -3.7 % Same-store sales 39,042 42,126 $ (3,084) -7.3 % Other 1,204 2,316 Food and beverage sales $ 40,246 $ 44,442 Same-store sales in Las Vegas decreased, 6.4% which we attribute primarily to lower revenues at our America property as a result of partial closure for renovations and lower visitor counts in Las Vegas. Same-store sales in New York decreased 14.7%, which we attribute primarily to decreases in both catering and a la carte revenue at the Bryant Park Grill & Cafe as a result of the negative publicity related to our dispute with the landlord. Same-store sales in Washington, D.C. increased 5.0%, which we attribute primarily to an increased number of catered events. Same-store sales in Atlantic City, NJ decreased 15.0%, which we attribute primarily to lower than expected customer traffic at the property where we are located. Same-store sales in Alabama decreased 4.4%, which we attribute primarily to lower customer traffic as a result of economic pressures on the customers who - 22 - frequent our properties. Same-store sales in Florida decreased 3.7%, which we attribute primarily to increased competition. Other food and beverage sales consist of sales related to properties that were closed (the Tampa Food Court in December 2024 ) and other fees. Costs and Expenses Costs and expenses for the 13 weeks ended December 27, 2025 and December 28, 2024 were as follows (in thousands): 13 Weeks Ended December 27, 2025 % to Total Revenues 13 Weeks Ended December 28, 2024 % to Total Revenues Increase (Decrease) $ % Food and beverage cost of sales $ 10,662 26.2 % $ 12,107 26.9 % $ (1,445) -11.9 % Payroll expenses 14,209 34.9 % 16,408 36.5 % (2,199) -13.4 % Occupancy expenses 5,679 13.9 % 6,148 13.7 % (469) -7.6 % Other operating costs and expenses 5,317 13.0 % 5,800 12.9 % (483) -8.3 % General and administrative expenses 3,179 7.8 % 3,148 7.0 % 31 1.0 % Depreciation and amortization 610 1.5 % 777 1.7 % (167) -21.5 % Loss on closure of El Rio Grande — — % 146 0.3 % (146) N/A Gain on termination of Tampa Food Court lease — — % (5,235) -11.6 % 5,235 N/A Total costs and expenses $ 39,656 $ 39,299 $ 357 Food and beverage costs as a percentage of total revenues for the 13 weeks ended December 27, 2025 decreased as compared with the same period of last year as a result of targeted menu engineering. Payroll expenses as a percentage of total revenues for the 13 weeks ended December 27, 2025 decreased as compared with the same period of last year as a result of better shift management of related overtime hours and lower performance bonuses in the current year. Occupancy expenses as a percentage of total revenues for the 13 weeks ended December 27, 2025 increased marginally as compared with the same period of last year primarily as a result of increases in property and liability insurance premiums partially offset by lower percentage rents as a result of the sales decreases discussed above. Other operating costs and expenses as a percentage of total revenues for the 13 weeks ended December 27, 2025 increased marginally as compared to the same period of last year primarily as a result of restaurant-level legal fees incurred in connection with the Bryant Park Grill & Café and The Porch at Bryant Park dispute with the landlord. General and administrative expenses (which relate solely to the corporate office in New York City and are relatively fixed) for the 13 weeks ended December 27, 2025 increased as compared to the same periods of last year primarily as a result of the sales decreases discussed above. Depreciation and amortization expense for the 13 weeks ended December 27, 2025 decreased as compared to the same periods of last year primarily as a result of certain assets becoming fully depreciated and the removal of assets associated with the Tampa Food Court . Loss on Closure of El Rio Grande In October 2024, the Company advised the landlord of El Rio Grande we would be terminating the lease and closing the property permanently. In connection with this notification, the Company recorded a loss of $876,000 during the year ended September 28, 2024. The property closed permanently on January 3, 2025 and was vacated and delivered to the landlord on April 30, 2025. During the 13 weeks ended December 28, 2024, the Company incurred additional operating losses of $146,000. Gain on Termination of Tampa Food Court Lease On November 26, 2024, the Company agreed to terminate its lease for the food court at The Hard Rock Hotel and Casino in Tampa, FL and, accordingly, vacated the premises on December 15, 2024. In connection with this, Ark Hollywood/Tampa Investment LLC, a subsidiary of the Company, (in which we own a 65% interest) received a termination payment in the amount - 23 - of $5,500,000; all obligations under the lease ceased and we recorded a gain, net of expenses, in the amount of $5,235,000 during the 13 weeks ended December 28, 2024. Liquidity and Capital Resources Our primary source of capital has been cash provided by operations and, in recent years, bank and other borrowings to finance specific transactions, acquisitions and large remodeling projects. We utilize cash generated from operations to fund the cost of developing and opening new restaurants and smaller remodeling projects of existing restaurants we own. Consistent with many other restaurant operators, we typically use operating lease arrangements for our restaurants. In recent years we have been able to acquire the underlying real estate at several locations along with the restaurant operation. We believe that our operating lease arrangements provide appropriate leverage of our capital structure in a financially efficient manner. As of December 27, 2025, we had a cash and cash equivalents balance of $9,139,000, total debt of $2,987,000 and a working capital deficit of $4,954,000 as compared with a working capital deficit of $5,377,000 at September 27, 2025. Inflation Our profitability is dependent on, among other things, our ability to anticipate and react to changes in the cost of food and other raw materials, labor, energy and other supplies and services. While we have not had material disruptions in our supply chain, we have experienced some product shortages and higher costs for many commodities. There has also been a general shortage in the availability of restaurant staff and hourly workers in certain geographic areas in which we operate which has caused increases in the costs of recruiting and compensating such employees. In addition, certain operating and other costs, including health benefits, taxes, insurance, and other outside services, continue to increase with the general level of inflation and may also be subject to other cost and supply fluctuations outside of our control. While we have been able to offset inflation and other changes in the costs of key operating resources by targeted increases in menu prices, coupled with more efficient purchasing practices, there can be no assurance that we will be able to continue to do so in the future. From time to time, competitive conditions will limit our menu pricing flexibility. In addition, macroeconomic conditions that impact consumer discretionary spending for food away from home could make additional menu price increases imprudent. There can be no assurance that all of our future cost increases can be offset by higher menu prices or that higher menu prices will be accepted by our restaurant customers without any resulting changes in their visit frequencies or purchasing patterns. Cash Flows for 13 Weeks Ended December 27, 2025 and December 28, 2024 Net cash used in operating activities for the 13 weeks ended December 27, 2025 was $550,000 as compared to $1,346,000 in the same period of last year. This decrease resulted primarily from a decrease in catered events. Net cash used in investing activities for the 13 weeks ended December 27, 2025 was $858,000 as compared to net cash provided by investing activities of $4,895,000 in the same period as last year. This decrease resulted primarily from the payment received in connection with the termination of our Tampa Food Court lease in the prior period. Net cash used in financing activities for the 13 weeks ended December 27, 2025 and December 28, 2024 was $777,000 and $721,000, respectively, and resulted primarily from principal payments on notes payable and the payment of distributions to non-controlling interests. Recent Developments Bryant Park Grill As further described above in the “Overview” section of the Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Quarterly Report, the Company's agreements with the Bryant Park Corporation for the Bryant Park Grill & Café expired on April 30, 2025 and for The Porch at Bryant Park expired on March 31, 2025. As of the date of this filing, we continue to operate the above properties and intend to do so until we are either awarded the lease extensions or ordered to vacate the premises. The underlying lawsuit filed by the Company to protect its rights continues, and we will pursue all available options to protect the Company's interests. Management, after consultation with legal counsel, is unable to predict the outcome of this matter at this time. While the outcome of these proceedings cannot be predicted with certainty, the Bryant Park Grill & Cafe and The Porch at Bryant Park , collectively, accounted for $7.9 million and $9.9 million of our total revenues for the 13 weeks ended December 27, 2025 and December 28, 2024, respectively, which represented approximately 19.5% and 22.3% of our total revenue for such periods, respectively. - 24 - The uncertainty related to this dispute has had a material adverse impact on our business, financial condition, and results of operations and will continue to do so while the dispute is litigated and if we are unable to prevail in the above actions and/or are unable to extend or renew these leases on favorable terms, if at all. Investment in and Receivable from New Meadowlands Racetrack LLC As further described above in in the “Overview” section of the Management’s Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this Quarterly Report, since March 2013, the Company has made investments in New Meadowlands Racetrack LLC (“NMR”) through its purchase of membership interests in Meadowlands Newmark, LLC, an existing member of NMR. As of the date of this report, the Company has made a total investment of $5,256,000. In January 2026, the New Jersey Senate Government, Wagering, Tourism & Historic Preservation Committee proposed a constitutional amendment to allow the legislature to authorize casino gambling at both the Monmouth Park and Meadowlands Racetracks. Such amendment will require a three-fifths vote in both legislative chambers followed by a voter referendum in a general election before becoming law. It is possible that a referendum could be on the ballot in November 2026 and if it were to pass, NMR could open a temporary facility in 2027 and a permanent one by 2028. In conjunction with such referendum, NMR will need to raise substantial capital to fund a marketing campaign to support the passage of the referendum. To the extent the Company does not contribute to this effort, or if NMR raises outside capital, our interests will be diluted. There can be no assurances that the above referendum will be included in the November 2026 election ballot or that it will pass if it is included. If either of these do not occur, the Company’s investment in NMR will be evaluated based on the existing horse racing and sports betting operations and may be subject to substantial impairment. 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. (“BHBM”) which originally matured on June 1, 2025. On May 29, 2025, the Company entered into an Omnibus Amendment to the Credit Agreement which: (i) extended the maturity date of the Credit Agreement to June 1, 2028, (ii) amended the terms of the outstanding promissory notes, (iii) reduced the maximum permitted obligations outstanding under the Credit Agreement from $30,000,000 to $20,000,000 (including the outstanding promissory notes), (iv) increased the minimum tangible net worth covenant from $22,000,000 to $28,000,000, and (v) removed the annual net income covenant. Advances and loans 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 facility. As of December 27, 2025, no advances were outstanding under the Credit Agreement. As of December 27, 2025, the weighted average interest on the outstanding BHBM indebtedness was approximately 7.5%. Borrowings and all other obligations under the Credit Agreement, which include the promissory notes as discussed in Note 7 of the consolidated condensed financial statements, 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. The Credit Agreement also requires, among other things, that the Company meet minimum quarterly tangible net worth amounts and maintain a minimum fixed charge coverage ratio. The Credit 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. Cash Flow Outlook Other than the status of the Bryant Park Grill & Cafe and The Porch at Bryant Park , we are not aware of any other trends or events that would materially affect our capital requirements or liquidity. We believe that our existing cash balances, internal cash-generating capabilities and current banking facilities are sufficient to finance our capital expenditures, debt maturities and other operating activities for at least the next 12 months. Critical Accounting Estimates The preparation of financial statements requires the Company to make estimates and assumptions of future events. In the process of preparing its consolidated condensed financial statements, the Company estimates the appropriate carrying value of certain assets and liabilities, which are not readily apparent from other sources. The critical accounting estimates underlying the Company’s consolidated condensed financial statements include projected cash flows for fixed asset impairments, allowances for - 25 - potential bad debts on accounts and notes receivable, assumptions regarding discount rates related to lease accounting, the useful lives and recoverability of its long-lived assets, such as property and intangibles, fair values of financial instruments, the realizable value of its tax assets and other matters. Management bases its estimates on certain assumptions, which it believes are reasonable in the circumstances, and actual results could differ from those estimates. Although management does not believe that any change in those assumptions in the near term would have a material effect on the Company’s consolidated condensed financial position or the results of operations, differences in actual results could be material to the consolidated condensed financial statements. There have been no material changes in our critical accounting policies and estimates from those disclosed in Item 7 of our Annual Report on Form 10-K for the year ended September 27, 2025. Item 3. Quantitative and Qualitative Disclosures about Market Risk Not Applicable.