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 June 27, 2026, the Company owned and operated 16 restaurants and bars, 12 fast food concepts and catering operations, exclusively in the United States. The Company’s operating components have been aggregated into one reportable segment. See Note 12 — Segment Information to the consolidated condensed financial statements. 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 June 27, 2026 and June 28, 2025 each included 13 and 39 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 the Bryant Park Grill, the Bryant Park Café and The Porch 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. As discussed above under “Recent Developments” and in Note 8 to the consolidated condensed financial statements, the Company is currently operating the Bryant Park Grill , the Bryant Park Café and The Porch at Bryant Park pursuant to a court-ordered stay of an order of ejectment, which is currently expected to expire on or about October 16, 2026, a date that falls within the first quarter of our fiscal year 2027. Unless the Court’s decisions are reversed on appeal or the stay is extended or further relief is obtained, the Company will be required to vacate these premises and cease operations at these locations upon the expiration of the stay. Because these locations have historically been among the most significant contributors to our peak warm-weather results, the loss of these operations would both reduce our overall revenues and increase the seasonality of our remaining business, as the seasonal strength these locations have historically provided would no longer be available to offset the weaker performance of our other locations during the winter months. Recent Developments Bryant Park Grill, the Bryant Park Café and The Porch at Bryant Park The Company’s lease agreements for the Bryant Park Grill and the Bryant Park Café expired on April 30, 2025 and for The Porch at Bryant Park expired on March 31, 2025. 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 - 23 - selection of a new operator for these locations; however, to the best of our knowledge, 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. On March 28, 2025, the Company filed a complaint in New York State Supreme Court challenging the lease award process and asserting its contractual rights, including its right of first lease in connection with the Bryant Park Café . On January 9, 2026, the landlord moved for summary judgment and the Company cross-moved for summary judgment on its causes of action for enforcement of its right of first lease and for age discrimination. By decision and order dated June 18, 2026, and entered on June 22, 2026, the Court granted the landlord's motion for summary judgment, in part, and granted and denied the Company's cross-motion for summary judgment, in part. The Court granted the Company's motion for summary judgment on its breach of contract claim, ruling that the Company is entitled to damages to the extent it was harmed by the landlord's breach of the Company's right of first lease. A trial will be held to determine the Company's damages, with a pre-trial conference scheduled for September 22, 2026. The Court granted judgment in favor of the landlord on its counterclaims for ejectment and use and occupancy and ruled that the Company be ejected from the Bryant Park Grill , the Bryant Park Café and The Porch at Bryant Park premises. On June 26, 2026, the Court issued a judgment of ejectment with respect to those premises. Also on June 26, 2026, the Company filed a notice of appeal to the Appellate Division of the Supreme Court of the State of New York, First Judicial Department, from the Court's June 22, 2026 decision and order. On June 30, 2026, the Company moved, by order to show cause, to fix an undertaking pursuant to CPLR 5519(a)(6) arguing that it has an automatic right to stay enforcement of the order of ejectment pending appeal of the Court's decision on the motions for summary judgment. In connection with that motion, the Court entered a temporary restraining order enjoining the landlord and its agents from ejecting or evicting the Company, or otherwise disturbing the Company's possession of the premises, pending argument of the motion. On July 1, 2026, the landlord moved for leave to reargue that portion of the Court's decision granting the Company summary judgment on its breach of contract claim based on the right of first lease. Following oral arguments held on July 16, 2026, the Court issued a decision and order dated July 16, 2026, and entered on July 17, 2026, granting the Company's motion in part and staying enforcement of the order of ejectment for three months (i.e., through on or about October 16, 2026), conditioned upon the Company: (i) filing an undertaking in the amount of $125,000 on or before July 23, 2026 and (ii) continuing to make the monthly use and occupancy payments previously ordered by the Court until the termination of the stay. Under the terms of the order, failure to timely file the undertaking would result in the stay being vacated, and if the Company fails to make the required use and occupancy payments, the Landlord may move on three days’ notice to vacate the stay. On July 21, 2026, the Company filed the required undertaking and a notice of compliance with the Court. The Company has continued to make the required use and occupancy payments. The Company intends to move in the Appellate Division of the Supreme Court of the State of New York, First Judicial Department, to extend the current stay of enforcement of the order of ejectment beyond the three months through the pendency of the Company's appeal of the Court's June 22, 2026 summary judgment decision. On August 3, 2026, the Court denied the Landlord's motion to reargue that portion of the Court’s decision granting the Company summary judgment on its breach of contract claim based on the right of first lease. As of the date of this filing, we continue to operate the Bryant Park Grill , the Bryant Park Café and The Porch at Bryant Park pursuant to the stay described above and intend to do so while we pursue our appeal and all other available options to protect the Company’s interests. However, unless the Court’s decisions are reversed on appeal or the stay is extended or further relief is obtained, the Company will be required to vacate these premises and cease operations at these locations upon the expiration of the stay, currently expected to occur on or about October 16, 2026. Management, after consultation with legal counsel, is unable to predict the outcome of the appeal or related proceedings at this time. The Bryant Park Grill , the Bryant Park Café and The Porch at Bryant Park represented a significant portion of the Company’s revenues, collectively accounting for $17.1 million and $19.7 million, or approximately 14.5% and 15.4%, of total revenues for the 39 weeks ended June 27, 2026 and June 28, 2025, respectively. The uncertainty related to this dispute has had, and is expected to continue to have, a material adverse impact on our business, financial condition, and results of operations, and the loss of these operations upon expiration of the stay, or the Company’s inability to otherwise retain these locations on favorable terms, or at all, would have a material adverse impact on our business, financial condition, and results of operations. Historically, the Company has made rent payments related to the Bryant Park Grill and the Bryant Park Café based on prior year sales as required in the relevant agreements. As a result of the decline in sales due to the above litigation, such payments were in excess of the contractual minimums and were recorded as prepaid rent as they were expected to be applied against future lease obligations or otherwise recovered. Based on the status of the legal proceedings, and in consultation with external legal counsel, management determined that the prepaid rent balance is not probable of recovery, and during the 13 weeks ended March 28, 2026, the Company recorded a charge of $566,000 to write off the amount of prepaid rent, which is included in occupancy expenses in the accompanying consolidated condensed statements of operations. Were the Company to prevail on appeal, it is possible these amounts could be recovered. Further discussion related to these matters is included in Note 8 of the consolidated condensed financial statements. - 24 - Investment in and Receivable From New Meadowlands Racetrack LLC ("NMR") NMR has been actively pursuing a full casino license (including slots and table games such as 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 an amendment requires a three-fifths vote in both legislative chambers followed by a voter referendum in a general election before becoming law. No vote on this amendment had been taken by the state legislature as of the date of this filing, which is beyond the August 3, 2026 deadline for submission of proposed amendments to the State of New Jersey Constitution to be voted upon at the November 2026 general election. As a result, the proposed amendment will not appear on the ballot, and no voter referendum on casino gaming at the Meadowlands will occur in 2026. The proposed amendment, or a similar amendment, may be placed on the ballot at a future general election, which could occur as early as November 2027 or in a subsequent general election; however, no assurance can be given as to whether or when the state legislature will approve such an amendment or a voter referendum will be held. If a referendum were ultimately held and the voting results were favorable, NMR could possibly open a temporary gaming facility within approximately one year following voter approval and a permanent facility within approximately two years thereafter, subject to the issuance of a license by the New Jersey Casino Control Commission and completion of any required development. NMR may require significant additional capital in connection with any future development efforts, including funding for potential referendum-related activities. To the extent the Company does not participate in such funding, or if NMR raises capital from third parties, the Company’s ownership interest may be diluted. The Company evaluated its investment in NMR for impairment, including consideration that no voter referendum on casino gaming at the Meadowlands will occur in 2026, and concluded that its fair value exceeds the carrying value. Accordingly, the Company did not record any impairment during the 13 and 39 weeks ended June 27, 2026. If a referendum is ultimately held and the amendment is rejected by voters, or if the Company otherwise concludes that the approval of casino gaming at the Meadowlands is no longer reasonably possible, the value of the investment would be based solely on NMR’s existing horse racing and sports betting operations, which may not support the current carrying value of the investment, and the Company would expect to record an impairment charge at that time, which could be material. The Company will continue to monitor legislative and other developments concerning gaming at the Meadowlands and will continue to evaluate the investment for impairment each reporting period. The Company does not rely on NMR to fund its operations, meet its liquidity needs or drive its near-term financial performance. Further discussion related to these matters is included in Note 4 of the consolidated condensed financial statements. Sequoia Lease Amendment Subsequent to the end of the quarter, on July 15, 2026, the Company entered into an amendment to the lease for its Sequoia restaurant located in Washington, D.C., one of the Company’s largest restaurants. The amendment provides for a two-year lease restructure period commencing April 1, 2026 and ending March 31, 2028 (the “Lease Restructure Term”), during which the Company will pay annual base rent of $1,350,000, payable in monthly installments of $112,500, in lieu of its obligations to pay base rent, percentage rent, its share of real estate taxes, and certain utility and miscellaneous billback charges otherwise required under the lease, together with percentage rent equal to 10% of gross sales in excess of an annual breakpoint of $10,000,000. Upon expiration of the Lease Restructure Term, the contractual rent provisions of the existing lease will resume through the lease expiration date of November 30, 2034. The amendment also provides the landlord a termination right if the Company fails to achieve specified gross sales thresholds following the Lease Restructure Term, exercisable upon not less than six months’ prior written notice. Further discussion related to this matter is included in Note 6 of the consolidated condensed financial statements. Results of Operations The Company's operating loss of $141,000 for the 13 weeks ended June 27, 2026 decreased 95.9% as compared to an operating loss of $3,415,000 in the same period of the prior year (which includes a gain on the closure of El Rio Grande in the amount of $178,000 and impairment charges of $2,940,000 and $1,760,000 related to Sequoia's ROU and long-lived assets, respectively). Excluding these items, operating results declined by $1,248,000, from adjusted operating income of $1,107,000 for the 13 weeks ended June 28, 2025 to an adjusted operating loss of $141,000 for the 13 weeks ended June 27, 2026. The Company's operating loss of $704,000 for the 39 weeks ended June 27, 2026 (which includes a one-time, non-recurring prepaid rent write-off in the amount of $566,000 related to the Bryant Park Grill and the Bryant Park Café as discussed above) decreased 69.9% as compared to an operating loss of $2,342,000 in the same period of the prior year (which includes: (i) a gain on the closure of El Rio Grande of $173,000, (ii) a gain on the termination of our Tampa Food Court lease of $5,235,000, (iii) impairment charges of $2,940,000 and $1,760,000 related to Sequoia's ROU and long-lived assets, respectively, and (iv) a - 25 - goodwill impairment charge of $3,440,000). Excluding these items, operating results declined by $528,000, from adjusted operating income of $390,000 for the 39 weeks ended June 28, 2025 to an adjusted operating loss of $138,000 for the 39 weeks ended June 27, 2026. In addition to financial measures prepared in accordance with generally accepted accounting principles ("GAAP"), the above discussion includes adjusted operating income (loss), a non-GAAP financial measure that excludes certain items management believes are not reflective of the Company's ongoing operating performance. Management presents this measure because it believes it provides investors with a more meaningful comparison of the Company's core operating results across periods by excluding items that are non-recurring, infrequent, or otherwise not indicative of the Company's underlying business trends. Adjusted operating income (loss) should not be considered as an alternative to operating income (loss) or any other measure of financial performance calculated in accordance with GAAP, and may not be comparable to similarly titled measures used by other companies. The table below reconciles GAAP operating income (loss) to adjusted operating income (loss) for each period presented. 13 Weeks Ended 39 Weeks Ended June 27, 2026 June 28, 2025 June 27, 2026 June 28, 2025 (in thousands) (in thousands) GAAP operating income (loss) $ (141) $ (3,415) $ (704) $ (2,342) Prepaid rent write-off (a) — — 566 — Gain on closure of El Rio Grande (b) — (178) — (173) Gain on termination of Tampa Food Court lease (c) — — — (5,235) Impairment losses on right-of-use and long-lived assets (d) — 4,700 — 4,700 Goodwill impairment (e) — — — 3,440 Adjusted operating income (loss) $ (141) $ 1,107 $ (138) $ 390 _________________________________ (a) Represents a one-time, non-recurring charge to write off prepaid rent related to the Bryant Park Grill and the Bryant Park Café. See Note 8 — Commitments and Contingencies. (b) Represents the gain recognized during the 13 weeks ended June 28, 2025 as a result of refinements of estimates related to final lease negotiations with the El Rio Grande landlord, partially offset by operating losses prior to closure incurred during the 39-week period. (c) Represents the gain recognized in connection with the early termination of the Company's lease for the Tampa Food Court at The Hard Rock Hotel and Casino. (d) Represents losses recognized as a result of lower than expected operating results and related recoverability testing and discounted cash flow analysis. (e) Represents a non-cash impairment charge to write off the remaining balance of goodwill during the 13 weeks ended March 29, 2025. - 26 - The following table summarizes the significant components of the Company’s operating results for the 13 weeks ended June 27, 2026 and June 28, 2025: 13 Weeks Ended Variance 39 Weeks Ended Variance June 27, 2026 June 28, 2025 $ % June 27, 2026 June 28, 2025 $ % (in thousands) (in thousands) REVENUES: Food and beverage sales $ 40,309 $ 42,937 $ (2,628) -6.1 % $ 116,703 $ 126,503 $ (9,800) -7.7 % Other revenue 572 778 (206) -26.5 % 1,511 1,925 (414) -21.5 % Total revenues 40,881 43,715 (2,834) -6.5 % 118,214 128,428 (10,214) -8.0 % COSTS AND EXPENSES: Food and beverage cost of sales 11,257 12,060 (803) -6.7 % 32,318 35,650 (3,332) -9.3 % Payroll expenses 15,314 15,280 34 0.2 % 43,169 46,103 (2,934) -6.4 % Occupancy expenses 5,131 5,444 (313) -5.7 % 16,980 17,128 (148) -0.9 % Other operating costs and expenses 5,940 6,038 (98) -1.6 % 16,334 17,422 (1,088) -6.2 % General and administrative expenses 2,779 2,822 (43) -1.5 % 8,323 9,292 (969) -10.4 % Depreciation and amortization 601 964 (363) -37.7 % 1,794 2,443 (649) -26.6 % Gain on closure of El Rio Grande — (178) 178 N/A — (173) 173 N/A Gain on termination of Tampa Food Court lease — — — N/A — (5,235) 5,235 N/A Impairment losses on right-of- use and long-lived assets — 4,700 (4,700) N/A — 4,700 (4,700) N/A Goodwill impairment — — — N/A — 3,440 (3,440) N/A Total costs and expenses 41,022 47,130 (6,108) -13.0 % 118,918 130,770 (11,852) -9.1 % OPERATING LOSS $ (141) $ (3,415) $ 3,274 95.9 % $ (704) $ (2,342) $ 1,638 69.9 % Revenues During the 13- and 39-week periods ended June 27, 2026, revenues decreased 6.5% and 8.0%, respectively, as compared to revenues for the 13- and 39-week periods ended June 28, 2025. We attribute these decreases primarily to the decreases in same-store sales discussed below and, in the 39-week periods, the closures of El Rio Grande and the Tampa Food Court . Food and Beverage Same-Store Sales On a Company-wide basis, same-store sales decreased 6.6% during the 13 weeks ended June 27, 2026 as compared to the same period of last year as follows: 13 Weeks Ended Variance June 27, 2026 June 28, 2025 $ % (in thousands) Las Vegas $ 11,711 $ 13,225 $ (1,514) -11.4 % New York 8,063 8,273 (210) -2.5 % Washington, D.C. 2,630 2,515 115 4.6 % Atlantic City, NJ 606 595 11 1.8 % Alabama 5,415 5,333 82 1.5 % Florida 11,494 12,801 (1,307) -10.2 % Same-store sales 39,919 42,742 $ (2,823) -6.6 % Other 390 195 Food and beverage sales $ 40,309 $ 42,937 Same-store sales in Las Vegas decreased 11.4%, which we attribute primarily to lower revenues at our America property as a result of partial closure for renovations. Same-store sales in New York decreased 2.5%, which we attribute primarily to decreases - 27 - in our a la carte revenue at the Bryant Park Grill and the Bryant Park Café as a result of the negative publicity related to our dispute with the landlord. Same-store sales in Washington, D.C. increased 4.6%, which we attribute primarily to our event business. Same-store sales in Atlantic City, NJ increased 1.8%, which we attribute primarily to better than expected customer traffic at the property where we are located. Same-store sales in Alabama increased 1.5%, which we attribute primarily to better-than-expected customer traffic. Same-store sales in Florida decreased 10.2%, which we attribute primarily to lower headcounts from increased competition. On a Company-wide basis, same-store sales decreased 7.2% during the 39 weeks ended June 27, 2026 as compared to the same period of last year as follows: 39 Weeks Ended Variance June 27, 2026 June 28, 2025 $ % (in thousands) Las Vegas $ 38,119 $ 41,479 $ (3,360) -8.1 % New York 21,124 23,474 (2,350) -10.0 % Washington, D.C. 5,865 5,907 (42) -0.7 % Atlantic City, NJ 1,680 1,825 (145) -7.9 % Alabama 12,086 12,076 10 0.1 % Florida 36,144 39,141 (2,997) -7.7 % Same-store sales 115,018 123,902 $ (8,884) -7.2 % Other 1,685 2,601 Food and beverage sales $ 116,703 $ 126,503 Same-store sales in Las Vegas decreased 8.1%, 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 10.0%, which we attribute primarily to decreases in both catering and a la carte revenue at the Bryant Park Grill and the Bryant Park Café as a result of the negative publicity related to our dispute with the landlord. Same-store sales in Washington, D.C. decreased 0.7%, which we attribute primarily to lower headcounts as a result of decreased customer traffic at the complex where we are located partially offset by a strong event business in the current quarter. Same-store sales in Atlantic City, NJ decreased 7.9%, which we attribute primarily to lower than expected customer traffic in the first two quarters at the property where we are located. Same-store sales in Alabama were essentially flat, with first quarter weakness offset by better-than-expected traffic in the second and third quarters. Same-store sales in Florida decreased 7.7%, which we attribute primarily to lower headcounts from increased competition. Other food and beverage sales consist of sales related primarily to properties that were closed. Costs and Expenses Costs and expenses for the 13 and 39 weeks ended June 27, 2026 and June 28, 2025 were as follows (in thousands): 13 Weeks Ended June 27, 2026 % to Total Revenues 13 Weeks Ended June 28, 2025 % to Total Revenues Increase (Decrease) 39 Weeks Ended June 27, 2026 % to Total Revenues 39 Weeks Ended June 28, 2025 % to Total Revenues Increase (Decrease) $ % $ % Food and beverage cost of sales $ 11,257 27.5 % $ 12,060 27.6 % $ (803) -6.7 % $ 32,318 27.3 % $ 35,650 27.8 % $ (3,332) -9.3 % Payroll expenses 15,314 37.5 % 15,280 35.0 % 34 0.2 % 43,169 36.5 % 46,103 35.9 % (2,934) -6.4 % Occupancy expenses 5,131 12.6 % 5,444 12.5 % (313) -5.7 % 16,980 14.4 % 17,128 13.3 % (148) -0.9 % Other operating costs and expenses 5,940 14.5 % 6,038 13.8 % (98) -1.6 % 16,334 13.8 % 17,422 13.6 % (1,088) -6.2 % General and administrative expenses 2,779 6.8 % 2,822 6.5 % (43) -1.5 % 8,323 7.0 % 9,292 7.2 % (969) -10.4 % Depreciation and amortization 601 1.5 % 964 2.2 % (363) -37.7 % 1,794 1.5 % 2,443 1.9 % (649) -26.6 % Gain on closure of El Rio Grande — — % (178) -0.4 % 178 N/A — — % (173) (0.1) % 173 N/A Gain on termination of Tampa Food Court lease — — % — — % — N/A — — % (5,235) -4.1 % 5,235 N/A Impairment losses on right- of-use and long-lived assets — — % 4,700 10.8 % (4,700) N/A — — % 4,700 3.7 % (4,700) N/A Goodwill impairment — — % — — % — N/A — — % 3,440 2.7 % (3,440) N/A Total costs and expenses $ 41,022 $ 47,130 $ (6,108) $ 118,918 $ 130,770 $ (11,852) - 28 - Food and beverage costs as a percentage of total revenues for the 13 and 39 weeks ended June 27, 2026 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 June 27, 2026 increased as compared with the same period of last year as a result of lower revenues. Payroll expenses as a percentage of total revenues for the 39 weeks ended June 27, 2026 increased as compared with the same period of last year as a result of lower revenues, partially offset by better shift management of overtime hours and lower performance bonuses in the current year. Occupancy expenses as a percentage of total revenues for the 13 weeks ended June 27, 2026 were consistent with the same period of last year. Occupancy expenses as a percentage of total revenues for the 39 weeks ended June 27, 2026 increased as compared with the same period of last year primarily as a result of one-time, non-recurring prepaid rent write-off in the amount of $566,000 related to the Bryant Park Grill and the Bryant Park Café as discussed above 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 and 39 weeks ended June 27, 2026 increased as compared to the same period of last year primarily as a result of higher costs attributable to inflation partially offset by implementing a credit card surcharge. General and administrative expenses (which relate solely to the corporate office in New York City and are relatively fixed) for the 13 and 39 weeks ended June 27, 2026 decreased as compared to the same periods of last year primarily as a result of lower commissions and bonus accruals and lower consulting fees related to the Bryant Park Grill and the Bryant Park Café litigation . Depreciation and amortization expense for the 13 and 39 weeks ended June 27, 2026 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 . Gain 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. 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 June 28, 2025, the Company recognized a gain of $178,000 as a result of refinements of estimates. During the 39 weeks ended June 28, 2025, the Company recognized a gain in the amount of $173,000 as a result of additional operating losses offset by the above refinements of estimates. 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 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. During the 13 weeks ended March 29, 2025, Ark Hollywood/Tampa Investment LLC distributed approximately $1,710,000 of the net proceeds, after expenses, to the other equity holders of Ark Hollywood/Tampa Investment LLC. Impairment Losses on Right-of-Use and Long-lived Assets During the 13 weeks ended June 28, 2025, impairment indicators were identified at our Sequoia property located in Washington, D.C. due to lower than expected operating results. Accordingly, the Company tested the recoverability of Sequoia's ROU and long-lived assets and concluded they were not recoverable. Based on a discounted cash flow analysis, the Company recognized impairment charges of $2,940,000 and $1,760,000 during the 13 weeks ended June 28, 2025 related to Sequoia's ROU and long-lived assets, respectively. No impairment charges related to ROU and long-lived assets were recognized during the 13 and 39 weeks ended June 27, 2026. See Note 1 for a discussion of the Company’s triggering-event assessment as of June 27, 2026 and of the amendment to the Sequoia lease entered into subsequent to the end of the quarter. Given the inherent uncertainty in projecting results of operations, the Company will continue to monitor the recoverability of the carrying value of the assets of Sequoia and several other restaurants on an ongoing basis. If expected performance is not realized, further impairment charges may be recognized in future periods, and such charges could be material. - 29 - Goodwill Impairment 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. During the 13 weeks ended March 29, 2025, the Company identified a triggering event in accordance with the Financial Accounting Standards Board (“FASB”), Accounting Standards Codification ("ASC") Topic 350, “Intangibles—Goodwill and Other,” primarily related to a decline in the Company's stock price in the second quarter of fiscal 2025 and the continued uncertainty related to the expiration of the Bryant Park Grill, the Bryant Park Café and The Porch at Bryant Park leases (see Note 8 - Commitments and Contingencies). As a result, the Company performed an interim quantitative impairment test and based on the results of the assessment, the fair value of our equity was determined to be less than its carrying amount. Accordingly, the Company recognized a non-cash impairment charge of the remaining balance of its goodwill in the amount of $3,440,000 in our consolidated condensed statements of operations for the 13 and 26 weeks ended March 29, 2025. The Company did not record any impairment to its goodwill during the 13 and 39 weeks ended June 27, 2026. 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 have utilized 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 June 27, 2026, we had cash and cash equivalents of $9,492,000, total debt of $7,117,000 (excluding a $324,000 stand-by letter of credit in favor of the landlord for our corporate headquarters) and a working capital deficit of $4,411,000 as compared with a working capital deficit of $5,377,000 at September 27, 2025. The Credit Agreement provides for maximum permitted obligations of $20,000,000, inclusive of all outstanding promissory notes. As of June 27, 2026, total obligations outstanding under the Credit Agreement were $7,441,000, comprised of $5,000,000 in revolving borrowings, a $2,117,000 outstanding note and a $324,000 stand-by letter of credit. Accordingly, as of June 27, 2026, we had approximately $12,559,000 of additional borrowing capacity available under the Credit Agreement, subject to continued compliance with the financial covenants thereunder. We expect additional capital expenditures for fiscal 2026 to be approximately $1,000,000, primarily related to required leasehold improvements, maintenance capital expenditures at existing locations, and completion of renovation commitments in Las Vegas. We anticipate funding these expenditures through a combination of cash on hand, including the recent borrowings under our revolving credit facility. Our anticipated cash requirements over the next twelve months include, among other things, operating expenses, debt service obligations, lease payments, and planned capital expenditures. We expect these obligations to be funded through cash generated from operations, existing cash balances, and available borrowings under our credit facility. Other than the matters described above, including the status of the Bryant Park Grill , the Bryant Park Café and The Porch at Bryant Park and the amendment to the Sequoia lease, we are not aware of any other trends or events that would materially affect our capital requirements or liquidity. Based on our current operating plan and financial projections, we believe that our existing cash balances, internal cash-generating capabilities and availability under our revolving credit facility are sufficient to finance our capital expenditures, debt maturities and other operating activities for at least the next twelve months, including under scenarios in which we are required to cease operations at the Bryant Park locations upon the expiration of the stay; however, in such scenarios we may rely more heavily on borrowings under our revolving credit facility, and our liquidity could be adversely affected by, among other factors, the timing and outcome of the appeal, compliance with the financial covenants under our Credit Agreement, and general economic conditions impacting our operating results. 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, - 30 - 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 39 Weeks Ended June 27, 2026 and June 28, 2025 Net cash used in operating activities for the 39 weeks ended June 27, 2026 was $872,000 as compared to net cash provided by operating activities of $1,119,000 in the same period as last year. This decrease resulted primarily from a decrease in adjusted operating income and an increase in accounts receivable balances, reflecting the timing of collections from hotel operators and credit card processors at period end. Net cash used in investing activities for the 39 weeks ended June 27, 2026 was $4,046,000 as compared to net cash provided by investing activities of $4,662,000 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 as well as higher capital expenditures in connection with the renovation of our America property in Las Vegas. Net cash provided by financing activities for the 39 weeks ended June 27, 2026 was $3,086,000 as compared to net cash used in financing activities of $3,729,000 in the same period as last year. This increase resulted primarily from a $5,000,000 borrowing under our revolving facility and the lower distribution payments to non-controlling interests in the current period. 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, which was subsequently amended to $25,000,000 on March 28, 2026, 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 June 27, 2026, borrowings of $5,000,000 were outstanding under our revolving facility under our Credit Agreement. As of June 27, 2026, the weighted average interest on the outstanding BHBM indebtedness was approximately 7.3%. 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. The Company was in compliance with all of its financial covenants under the Credit Agreement as of June 27, 2026. Cash Flow Outlook As discussed above and in Note 8 to the consolidated condensed financial statements, the Company is currently operating the B ryant Park Grill , the Bryant Park Café and The Porch at Bryant Park pursuant to a court-ordered stay of an order of ejectment, which is currently expected to expire on or about October 16, 2026, a date that falls within the first quarter of our fiscal year 2027. These locations collectively accounted for $17.1 million, or approximately 14.5%, of our total revenues for the 39 weeks ended June 27, 2026. Unless the Court’s decisions are reversed on appeal or the stay is extended or further relief is obtained, the Company will be required to vacate these premises and cease operations at these locations upon the expiration of the stay, and the resulting loss of revenues and associated operating cash flows, beginning in the first quarter of fiscal 2027, would materially and adversely affect our results of operations, cash flows and liquidity. In that event, the Company would also expect to incur costs in - 31 - connection with vacating the premises and could experience reduced customer advance deposits on future catered events, and the loss of these operations could adversely affect our ability to remain in compliance with the financial covenants under our Credit Agreement, including the minimum tangible net worth and fixed charge coverage ratio requirements, in future periods. The long-lived assets and right-of-use assets at these locations were fully depreciated and amortized upon the expiration of the related agreements in fiscal 2025, and accordingly the Company does not expect to record an impairment or write-off of such assets in connection with vacating the premises. In the interim, the Company is required to continue to make the monthly use and occupancy payments previously ordered by the Court as a condition of the stay. In addition, as discussed above, the amendment to the Sequoia lease is expected to reduce the Company’s cash rent obligations at that location during the Lease Restructure Term. Other than the matters described above, including the status of the Bryant Park Grill , the Bryant Park Café and The Porch at Bryant Park and the amendment to the Sequoia lease, we are not aware of any other trends or events that would materially affect our capital requirements or liquidity. Based on our current operating plan and financial projections, we believe that our existing cash balances, internal cash-generating capabilities and availability under our revolving credit facility are sufficient to finance our capital expenditures, debt maturities and other operating activities for at least the next twelve months, including under scenarios in which we are required to cease operations at the Bryant Park locations upon the expiration of the stay; however, in such scenarios we may rely more heavily on borrowings under our revolving credit facility, and our liquidity could be adversely affected by, among other factors, the timing and outcome of the appeal, compliance with the financial covenants under our Credit Agreement, and general economic conditions impacting our operating results. 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 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.