What changed in ARK RESTAURANTS CORP's 10-K — 2022 vs 2023

Item 1. Business COVID-19 Pandemic On March 11, 2020, in light of the rapid spread of the novel Coronavirus (“COVID-19” or “Coronavirus”), the World Health Organization declared the COVID-19 outbreak to be a global pandemic and the United States declared a National Public Health Emergency. The COVID-19 pandemic has significantly disrupted consumer demand, as well as the Company’s restaurant operations.

Following the pandemic declaration in March 2020, federal, state and local governments began to respond to the public health crisis by requiring social distancing, "stay at home" directives, and mandatory closure of all of our locations.

We are subject to continued risks and uncertainties as a result of the outbreak of, and local, state and federal governmental responses to, the COVID-19 pandemic. We experienced significant disruptions to our business as suggested and mandated social distancing and shelter-in-place orders led to the temporary closure of all of our restaurants.

In the third quarter of fiscal 2020, certain jurisdictions began allowing the reopening of restaurant dining rooms, and we began to reopen dining rooms. While restrictions on the type of permitted operating model and occupancy capacity may continue to change, as of October 2, 2021, all of our restaurants were operating with no indoor dining restrictions.

We cannot predict how long the COVID-19 pandemic will last, whether vaccines will be effective at eliminating or slowing the spread of the virus or variants, whether it will reoccur or whether variants will spike, what additional restrictions may be enacted, to what extent we can maintain sales volumes during or following any resumption of mandated social distancing protocols or vaccination or mask mandates and what long-lasting effects the COVID-19 pandemic may have on the restaurant industry as a whole.

The ongoing effects of the COVID-19 pandemic, including, but not limited to, labor-related impacts, supply chain disruption and consumer behavior, will determine the continued significance of the impact of the COVID-19 pandemic to our operating results and financial position. Overview We are a New York corporation formed in 1983.

(3) Assumes the exercise of all of our available lease renewal options. (4) Under the America lease, the sales goal is $6.0 million. Under the Gallagher’s Steakhouse lease, the sales goal is $3.0 million. Under the lease for Gonzalez y Gonzalez and the Village Eateries , the combined sales goal is $10.0 million.

(*) Represents common area seating (**) Represents number of seats in the Bingo Hall at the Foxwoods Resort and Casino where our restaurant is located.

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 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. 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 approximately 15% as each option is exercised. 7 On January 26, 2021, the Company exercised its right-of-first-refusal to acquire the land, building and parking lot associated with JB’s on the Beach and immediately contributed such rights and interest to an unrelated entity ("Newco") that purchased the properties on March 22, 2021.

In exchange, the Company received a 5% interest in Newco, which plans future development of the sites. In addition, all rights and privileges under the current lease were assigned to Newco, as landlord and the lease terms remain unchanged.

Prior to the COVID-19 pandemic, the Company was in the process of developing three restaurants at a large outdoor mall in Easton, Ohio in partnership with the landlord. In connection therewith, the Company had capitalized costs of approximately $400,000, of which $200,000 was reimbursed by the landlord in October 2020. The Company does not expect this project to continue.

Accordingly, the balance of the unreimbursed costs in the amount of $200,000 were written off and are included in general and administrative expenses for the year ended October 3, 2020.

In connection with this notification, the Company recorded a loss of $364,000 during the year ended October 3, 2020 consisting of (i) rent accrued in accordance with the termination provisions of the lease, (ii) the write-off of the unamortized balance of purchased leasehold rights, (iii) the write-off of our security deposit, (iv) the write-off of ROU assets and related lease liabilities, and (v) the write-off of the net book value of fixed assets.

On November 13, 2020, the Company was advised by the landlord that it would have to vacate Gallagher’s Steakhouse and Gallagher’s Burger Bar at the Resorts Casino Hotel located in Atlantic City, NJ which were on a month-to-month, no rent lease.

The closure of these properties occurred on January 2, 2021 and did not result in a material charge to the Company’s operations. As of January 2, 2021, the Company determined that it would not reopen Thunder Grill in Washington, D.C. which had been closed since March 20, 2020.

This closure did not result in a material charge to the Company’s operations. On September 1, 2021, the Company advised the landlord of Clyde Frazier's Wine and Dine that we would be closing the property permanently and terminating the lease.

In connection with this notification, the Company recorded a gain of $810,000 during the year ended October 2, 2021 consisting of: (i) rent and other costs incurred in accordance with the termination provisions of the lease in the amount of $318,000, (ii) impairment of long-lived assets in the amount of $69,000 and (iii) the write-off of our security deposit in the amount of $121,000 offset by the write-off of ROU assets and related lease liabilities in the net amount of $1,318,000.

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.

On June 7, 2018, the New Jersey State Legislature voted to legalize sports betting at casinos and racetracks in the state. Pursuant to this legislation, NMR operates a sports book in partnership with FanDuel, a leading provider of daily fantasy sports. Restaurant Management Each restaurant is managed by its own manager and has its own chef.

Nevertheless, as a result of global restrictions and uncertainty related to the COVID-19 pandemic, we have experienced product supply delays as we and our supply chain partners experience longer lead times and shortages of products and materials.

We believe the impact of the COVID-19 pandemic and government responses to the pandemic will continue to impact the ability of our third-party suppliers to supply products to us at the cost and in the time frames and volumes required by us.

We have experienced aggressive competition for talent, wage inflation and pressure to improve workplace conditions and benefits as a result of the COVID-19 pandemic. The pandemic itself could cause a shortage of labor for restaurant positions as concern over exposure to COVID-19 and other factors could decrease the pool of available qualified talent for key roles.

The New York State Liquor Authority must approve any transaction in which a shareholder of the licensee increases his holdings to 10% or more of the outstanding capital stock of the licensee and any transaction involving 10% or more of the outstanding capital stock of the licensee.

On September 9, 2021, the President announced a proposed new rule requiring that all employers with at least 100 employees require that their employees be fully vaccinated or tested weekly.

At this time, it is unclear, among other things, when such a 10 vaccine mandate, or any other mandate (such as in New York City, as is currently being discussed) will go into effect (or if any will go into effect at all); whether any will apply to all employees or only to employees who work in the office; and how compliance will be documented.

As a company with more than 100 employees, it is anticipated that, should vaccine mandates go into effect, we would be subject to the OSHA regulation concerning COVID-19 vaccination and the vaccine mandate. Should such a mandate apply to us, we may be required to implement a requirement that all of our employees get vaccinated, subject to limited exceptions.

At this time, it is not possible to predict the impact that such a vaccine mandate, any other vaccine mandate, or a vaccine requirement should we adopt one, will have on us or on our workforce.