Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Statement Regarding Forward-Looking Disclosure
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our Consolidated Financial Statements and related notes included under Item 8 of this annual report. This discussion contains forward-looking statements, which involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of certain factors, including but not limited to, those discussed elsewhere in this annual report. Please see the discussion of forward-looking statements at the beginning of this annual report under "Special Note Regarding Forward-Looking Statements".
Inflation
In recent years, our operating results were impacted by geopolitical and other macroeconomic events, causing supply chain challenges and significantly increased commodity and wage inflation. While we have seen improvements in many of these areas, some of these factors continued to impact our operating results in fiscal 2025. The ongoing impact of these events could lead to further shifts in consumer behavior, wage inflation, staffing challenges, product and services cost inflation, disruptions in our supply chain and delays in opening and acquiring new restaurants. If these factors significantly impact our cash flow in the future, we may again implement mitigation actions such as suspension of dividends, increasing borrowings or modifying our operating strategies. Some of these measures may have an adverse impact on our business, including possible impairments of assets.
Overview
As of September 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 segments into a single reporting 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 fiscal years ended September 27, 2025 and September 28, 2024 both included 52 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 as a result of prior acquisitions is expected to continue to mitigate some of the risk. For instance, the second quarter of our fiscal year, consisting of the non-holiday portion of the cold weather season in New York and Washington (January, February and March), is the poorest performing quarter; however, in recent years this has been 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 Grill & Caf é 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 indoor 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
The Company's agreements with the Bryant Park Corporation (the “Landlord”) (a private non-profit corporation that operates and maintains Bryant Park under agreements with the City of New York Department of Parks & Recreation), for the Bryant Park Grill & Café expired on April 30, 2025 and for The Porch at Bryant Park expired on March 31, 2025.
In July of 2023 (for the Bryant Park Grill & Café ) and September of 2023 (for The Porch at Bryant Park ), the Company received requests for proposals (the "RFPs") from the Landlord to which we responded on October 26, 2023. The agreements offered under the RFPs for both locations were for new 10-year agreements, with one five-year renewal option. In the second quarter of 2025, the Landlord stated publicly that it had selected a new operator for the Bryant Park Grill & Café and The Porch at Bryant Park . However, to the best of our knowledge, no agreements between the Landlord and the selected operator have received the approvals of either the City of New York Department of Parks & Recreation or the New York Public Library, of which both approvals are required before any new lease can become effective.
Management has been working with outside advisors to assist our efforts to ensure that the RFP awards process was both fair and transparent and to enforce the Company's right of first lease under our lease agreements, and otherwise to protect the Company’s rights with respect to these matters. For a discussion of the related claims filed by the Company, please see Note 10 - Commitments and Contingencies to the Consolidated Financial Statements.
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 & Caf é and The Porch at Bryant Park , collectively, accounted for $25.5 million and $31.1 million of our total revenues for the years ended September 27, 2025 and September 28, 2024, respectively, which represented approximately 15.4% and 17.4% of our total revenue for such periods, respectively.
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
Since March 12, 2013, the Company has made investments in the 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. See Note 4 - Investment in and Receivable from New Meadowlands Racetrack to the Consolidated Financial Statements for a discussion of our investment in NMR and our rights relating to operating the food and beverage concessions at a future gaming facility at the Meadowlands Racetrack.
For several years, New York State has been conducting a bidding process to award up to three downstate casino licenses and on December 1, 2025, the New York State Gaming Facility Location Board approved three applications for casino gaming licenses. The New York State Gaming Commission is expected to issue licenses for the three approved applications by December 31, 2025. Concurrent with the New York process, NMR has been actively pursuing a full casino license to supplement its existing horse racing and sports betting operations. Any gaming license in the state of New Jersey outside of Atlantic City, including at the Meadowlands Racetrack, requires ratification of an amendment to the State of New Jersey constitution, followed by issuance of a license by the New Jersey Casino Control Commission. In May 2025, a Senate Concurrent Resolution was introduced proposing a ballot referendum to authorize casinos at both the Monmouth Park and Meadowlands Racetracks. It requires a three-fifths vote in both legislative chambers to reach the ballot in November 2026. If the referendum passes, NMR aims for a temporary facility potentially opening 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 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.
Results of Operations
The Company’s operating loss for the year ended September 27, 2025 (which includes a gain on the closure of El Rio Grande of $173,000, a gain on the termination of our Tampa Food Court lease of $5,235,000, impairment losses on right-of-use and long-lived assets in the amount of $4,700,000 related to Sequoia and a goodwill impairment charge of $3,440,000) was $4,064,000, down 5.4% as compared to an operating loss of $4,294,000 for the year ended September 28, 2024 (which includes a loss on the closure of El Rio Grande of $876,000, impairment losses on right-of-use and long-lived assets in the amount of $2,500,000 related to Sequoia and a goodwill impairment charge of $4,000,000). Excluding the above items in the current and prior periods, our adjusted operating for the year ended September 27, 2025 decreased 143.2% to $1,331,000 as compared to operating income of $3,082,000 for the year ended September 28, 2024.
The following table summarizes the significant components of the Company’s operating results for the years ended September 27, 2025 and September 28, 2024, respectively:
Year Ended
Variance
September 27,
September 28,
REVENUES:
(in thousands)
Food and beverage sales
Other revenue
Total revenues
COSTS AND EXPENSES:
Food and beverage cost of sales
Payroll expenses
Occupancy expenses
Other operating costs and expenses
General and administrative expenses
Depreciation and amortization
(Gain) loss on closure of El Rio Grande
Gain on termination of Tampa Food Court lease
Impairment losses on right-of-use and long-lived assets
Goodwill impairment
Total costs and expenses
OPERATING LOSS
Revenues
During the year ended September 27, 2025, revenues decreased 9.7% as compared to revenues for the year ended September 28, 2024. We attribute this decrease primarily to the changes in same-store sales discussed below and the closures of El Rio Grande and the Tampa Food Court .
Food and Beverage Same-Store Sales
On a Company-wide basis, same-store food and beverage sales for the year ended September 27, 2025 decreased 4.2% as compared with the year ended September 28, 2024 as follows:
Year Ended
Variance
September 27,
September 28,
(in thousands)
Las Vegas
New York
Washington, D.C.
Atlantic City, NJ
Alabama
Florida
Same-store sales
Other
Food and beverage sales
Same-store sales in Las Vegas decreased 3.7% as a result of lower customer traffic. Same-store sales in New York decreased 10.8% which we attribute primarily to decreases in both catering and a la carte revenue at the Bryant Park Grill as a result of the negative publicity related to our dispute with the landlord. Same-store sales in Washington, D.C. decreased 14.9% which we attribute primarily to lower headcounts as a result of challenging conditions associated with hybrid work schedules, government layoffs and elevated crime rates. Same-store sales in Atlantic City, NJ decreased 10.2% which we primarily attribute to lower customer traffic at the property where we are located. Same-store sales in Alabama decreased 2.4% which we attribute primarily to lower customer traffic as a result of economic pressures on the customers who frequent our properties. Same-store sales in Florida increased 1.6% which we attribute primarily to menu price increases.
Our restaurants generally do not achieve substantial increases in revenue from year to year, which we consider to be typical of the restaurant industry. To achieve significant increases in revenue or to replace revenue of restaurants that lose customer favor or which close because of lease expirations or other reasons, we would have to open additional restaurant facilities or expand existing restaurants. There can be no assurance that a restaurant will be successful after it is opened, particularly since in many instances we do not operate our new restaurants under a trade name currently used by us, thereby requiring new restaurants to establish their own identity.
Other Revenues
Included in other revenues are food and beverage sales related to properties that were closed during the respective period, merchandise sales, rental income, property management fees and other rentals as well as, in 2024, purchase service fees related to an affiliate that the Company no longer has an interest in, which represent commissions earned for providing services to other restaurant groups. The decrease in other revenues for the year ended September 27, 2025, as compared to the year ended September 28, 2024, is primarily due to the sales related to El Rio Grande and the Tampa Food Court ( which were closed in December 2024) and purchase service fees in the amount of $1,337,000 in the prior year.
Costs and Expenses
Costs and expenses for the years ended September 27, 2025 and September 28, 2024 were as follows (in thousands):
Year Ended
September 27,
Total Revenues
Year Ended
September 28,
Total Revenues
Increase
(Decrease)
Food and beverage cost of sales
Payroll expenses
Occupancy expenses
Other operating costs and expenses
General and administrative expenses
Depreciation and amortization
(Gain) loss on closure of El Rio Grande
Gain on termination of Tampa Food Court lease
Impairment losses on right-of-use and long-lived assets
Goodwill impairment
Total costs and expenses
Food and beverage costs as a percentage of total revenues for the year ended September 27, 2025 increased as compared to last year as a result of increases in commodity prices, which had been easing for several quarters, combined with a weaker event business in New York City and Washington, D.C. in the current year compared to the prior year.
Payroll expenses as a percentage of total revenues for the year ended September 27, 2025 increased marginally as compared to last year as a result of increasing minimum wages in the states where we operate partially offset by better shift management and related overtime hours.
Occupancy expenses as a percentage of total revenues for the year ended September 27, 2025 increased marginally as compared to last year primarily as a result of increases in base rents and 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 year ended September 27, 2025 increased as compared to last year primarily as a result of inflation and 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) for the year ended September 27, 2025 decreased marginally as compared to last year primarily as a result of the reversal of compensation expense in the prior year in the amount of $1,134,000 related to options that expired or were cancelled unexercised partially offset by increased legal and consulting expenses.
Depreciation and amortization expense for the year ended September 27, 2025 decreased compared to last year primarily as a result of certain assets becoming fully depreciated and the removal of assets associated with El Rio Grande and the Tampa Food Court .
(Gain) 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 year ended September 27, 2025, the Company recognized a gain of $173,000 as a result of 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, primarily net of write-offs of ROU and long-lived assets, in the amount of $5,235,000 during the year ended September 27, 2025 and 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 year ended September 28, 2024, 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 $1,561,000 and $939,000 related to Sequoia's ROU assets and long-lived assets, respectively. The Company continued to monitor the performance of Sequoia throughout fiscal 2025 and, as a result of lower than expected operating results, we tested the recoverability of its ROU and long-lived assets again and, based on a discounted cash flow analysis, we recognized additional impairment charges of $2,940,000 and $1,760,000 during the year ended September 27, 2025 related to Sequoia's ROU and long-lived assets, respectively.
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.
In accordance with ASU 350-20, Intangibles—Goodwill and Other , the Company identified a triggering event during the three months ended March 29, 2025 primarily related to a decline in the Company's stock price during the second quarter of fiscal 2025 and the continued uncertainty related to the expiration of the Bryant Park Grill & Caf é and The Porch at Bryant Park leases (see Note 10 - 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 statement of operations for the year ended September 27, 2025.
As of September 28, 2024, the Company performed a qualitative assessment of its goodwill whereby the fair value of the equity was determined using the income approach. Given the relatively low volume of shares traded as of September 28, 2024, the Company determined the income approach provided the best approximation of fair value. 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 & Caf é and The Porch at Bryant Park leases may not be renewed beyond their expirations on April 30, 2025, and the time value of money. This approach required 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 at September 28, 2024. Accordingly, during the fourth quarter of fiscal 2024, the Company recorded a goodwill impairment charge of $4,000,000, of which $4,000,000 was deductible for tax purposes and resulted in a deferred income tax of $1,074,000. Such was 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 .
Income Taxes
Our income tax expense, deferred tax assets and liabilities, and liabilities for uncertain tax positions reflect management’s best estimate of current and future taxes to be paid. We are subject to income tax in various state taxing jurisdictions. Significant judgment and estimates are required in the determination of consolidated income tax expense. The provision for income taxes reflects federal and state income taxes.
Deferred income taxes arise from temporary differences between the tax bases of assets and liabilities and their reported amounts in the consolidated financial statements, which will result in taxable or deductible amounts in the future. In evaluating our ability to recover our deferred tax assets in the jurisdiction from which they arise, we consider all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax-planning strategies, and results of recent operations. As of September 27, 2025, as a result of recent cumulative losses, we have recorded a full valuation allowance against our deferred tax assets. If these estimates and assumptions change in the future, the Company may be required
to reduce its existing valuation allowance resulting in less income tax expense. The Company evaluates the likelihood of realizing its deferred tax assets at each interim period based on the weight of available evidence.
On July 4, 2025, President Trump signed H.R. 1, the “One Big Beautiful Bill Act” (“OBBBA”) into law. The OBBBA makes permanent many of the tax provisions previously enacted as part of the 2017 Tax Cut and Jobs Act that were set to expire at the end of 2025. The OBBBA also includes (i) the restoration of immediate expensing for domestic research and development expenditures, (ii) the reinstatement of 100% bonus depreciation for qualified property and (iii) favorably modifying the Internal Revenue Code Section 163(j) interest limitation from tax adjusted EBIT to EBITDA. FASB Topic 740, Income Taxes, requires the tax effects of changes in tax laws or rates be recognized in the period in which the law is enacted. The enactment of the OBBBA did not have a material impact on the Company’s effective tax rate, or deferred tax balances as of September 27, 2025.
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 September 27, 2025, we had a cash and cash equivalents balance of $11,324,000. The Company had a working capital deficit of $5,377,000 at September 27, 2025 as compared to working capital deficit of $10,659,000 at September 28, 2024. This decrease in the deficit is primarily the result of the payment received in connection with the termination of the Tampa Food Court lease, amendments to the due dates of our notes payable and proceeds from the sales of the two condominiums, partially offset by operating losses and capital expenditures in connection with the renovations at our properties in Las Vegas (see Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources - Restaurant Expansion and Other Developments).
We believe that our existing cash balances, internal cash-generating capabilities, current banking facilities and ability to secure additional financing, if necessary, are sufficient to finance our capital expenditures, debt maturities and other operating activities for at least the next 12 months and the foreseeable future.
Inflation
While we have been able to partially 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 the Years Ended September 27, 2025 and September 28, 2024
Net cash provided by operating activities for the year ended September 27, 2025 decreased to $1,752,000 as compared to $4,654,000 for the year ended September 28, 2024. This decrease resulted primarily from a decrease in operating income, excluding the previously discussed (i) gain on the termination of our Tampa Food Court lease of $5,235,000 in fiscal 2025, (ii) impairment charges related to Sequoia's ROU and long-lived assets of $4,700,000 and $2,500,000 in fiscal 2025 and fiscal 2024, respectively, (iii) goodwill impairment charges of $3,440,000 and $4,000,000 in fiscal 2025 and fiscal 2024, respectively, and (iv) effects of the closure of El Rio Grande in both periods, partially offset by changes in working capital related to accounts receivable and accrued expenses.
Net cash provided by investing activities for the year ended September 27, 2025 was $3,427,000 compared to net cash used in investing activities of $2,392,000 for the year ended September 28, 2024. This increase resulted primarily from the payment received in connection with the termination of our Tampa Food Court lease and the proceeds received from the sale of condominiums partially offset by higher purchases of fixed assets.
Net cash used in financing activities for the years ended September 27, 2025 and September 28, 2024 was $4,128,000 and $5,404,000, respectively, and resulted primarily from principal payments on notes payable and the payment of distributions to non-controlling interests and in the prior year the payment of dividends.
On November 8, 2023, February 6, 2024, and May 7, 2024, the Board declared quarterly cash dividends of $0.1875, $0.1875, and $0.1875, respectively, per share, which were paid on December 13, 2023, March 13, 2024, and June 12, 2024, respectively, to the stockholders of record of the Company's common stock at the close of business on November 30, 2023, February 29, 2024, and May 31, 2024, respectively. The Board has not declared any dividends since May 7, 2024. Future decisions to pay dividends are at the discretion of the Board and will depend upon operating performance and other factors.
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 Annual 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 & Caf é and The Porch at Bryant Park , collectively, accounted for $25.5 million and $31.1 million of our total revenues for the years ended September 27, 2025 and September 28, 2024, respectively, which represented approximately 15.4% and 17.4% of our total revenue for such periods, respectively.
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 Annual 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 May 2025, a Senate Concurrent Resolution was introduced proposing a ballot referendum to authorize casinos at both the Monmouth Park and Meadowlands Racetracks. It requires a three-fifths vote in both legislative chambers to reach the ballot in November 2026. If the referendum passes, NMR aims for a temporary facility potentially opening 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.
Restaurant Expansion and Other Developments
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 March 31, 2026, as extended, subject to further extension as set out in the agreement. To date approximately $1,600,000 has been spent on 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 December 31, 2025, as extended. As part of this refresh, on November 11, 2024, the Company opened a new
concept called Lucky Pig in the Village Eateries at a cost of approximately $850,000. In addition, the Company has spent an additional $950,000 to date on refreshing Broadway Burger Bar and Grill , Gonzalez y Gonzalez and other areas of the Village Eateries. We expect to complete all work related to these projects by December 31, 2025.
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.
Our restaurants generally do not achieve substantial increases in revenue from year to year, which we consider to be typical of the restaurant industry. To achieve significant increases in revenue or to replace revenue of restaurants that lose customer favor or which close because of lease expirations or other reasons, we would have to open additional restaurant facilities or expand existing restaurants. There can be no assurance that a restaurant will be successful after it is opened, particularly since in many instances we do not operate our new restaurants under a trade name currently used by us, thereby requiring new restaurants to establish their own identity.
We may take advantage of other opportunities we consider to be favorable, when they occur, depending upon the availability of financing and other factors.
Recent Restaurant Dispositions
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 year ended September 27, 2025, the Company recognized a gain in the amount of $173,000 as a result of refinements of estimates.
On November 26, 2024, a subsidiary of the Company, in which we own a 65% interest, Ark Hollywood/Tampa Investment LLC 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 agreement all obligations under the lease ceased and Ark Hollywood/Tampa Investment LLC received a termination payment in the amount of $5,500,000. Accordingly, a gain, primarily net of write-offs of ROU and long-lived assets, in the amount of $5,235,000 was recognized during the year ended September 27, 2025 and 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.
During the year ended September 27, 2025, the Company sold three of the 14 condominium units it owns at the Island Beach Resort in Jensen Beach, FL which is adjacent to our Shuckers restaurant. In connection with the sales, the Company received net proceeds of $1,203,000 and recorded a gain of $594,000. The Company intends to sell the remaining units subject to market forces.
Notes Payable – Bank
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 as further discussed in Note 9 - Notes Payable to the Consolidated Financial Statements; (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 September 27, 2025, no advances were outstanding under the Credit Agreement. As of September 27, 2025, the weighted average interest on the outstanding BHBM indebtedness was approximately 8.0%.
Borrowings under the Credit Agreement, which include the promissory notes as discussed in Note 9 of the consolidated financial statements in the aggregate amount of $3,609,000, 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 loan agreements provide, among other things, that the Company meet minimum quarterly tangible net worth amounts and maintain a minimum fixed charge coverage ratio. The loan agreements also contain 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.
Critical Accounting Policies and Estimates
Our significant accounting policies are more fully described in Note 1 to our consolidated financial statements. While all of these significant accounting policies impact our financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our consolidated financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates.
We believe that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause a material effect on our consolidated results of operations, financial position or cash flows for the periods presented in this report.
Below are listed certain policies that management believes are critical:
Revenue Recognition
We recognize revenue when it satisfies a performance obligation by transferring control over a product or service to a restaurant guest or other customer. Revenues from restaurant operations are presented net of discounts, coupons, employee meals and complimentary meals and recognized when food, beverage and retail products are sold. Sales tax collected from customers is excluded from sales and the obligation is included in sales tax payable until the taxes are remitted to the appropriate taxing authorities. Catering service revenue is generated through contracts with customers whereby the customer agrees to pay a contract rate for the service. Revenues from catered events are recognized in income upon satisfaction of the performance obligation (the date the event is held) and all customer payments, including nonrefundable upfront deposits, are deferred as a liability until such time.
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.
Other revenues include purchase service fees which represent commissions earned by a subsidiary of the Company for providing purchasing services to other restaurant groups, as well as license fees, property management fees and other rentals.
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. 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) assumptions regarding discount rates related to lease accounting, (iv) the useful lives and recoverability of our long-lived assets, such as fixed assets and intangibles, (v) uncertain tax positions, and (vi) 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.
Long-Lived Assets
Long-lived assets, such as property, plant and equipment subject to amortization, and right-of-use assets ("ROU assets") are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In the evaluation of the fair value and future benefits of long-lived assets, the Company performs an analysis of the anticipated undiscounted future net cash flows of the related long-lived assets. If the carrying value of the related asset exceeds the undiscounted cash flows, the carrying value is reduced to its fair value. Various factors including estimated future sales growth and estimated profit margins are included in this analysis.
The Company considers a triggering event related to long-lived 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 consistent 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. The fair value is measured on a nonrecurring basis using unobservable (Level 3) inputs. There is uncertainty in the projected undiscounted future cash flows used in the Company's impairment review analysis, which requires the use of estimates and assumptions. 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.
During the year ended September 28, 2024, 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 $1,561,000 and $939,000 related to Sequoia's ROU and long-lived assets, respectively. The Company continued to monitor the performance of Sequoia throughout fiscal 2025 and, as a result of lower than expected operating results we tested the recoverability of its ROU and long-lived assets again and based on a discounted cash flow analysis, we recognized additional impairment charges of $2,940,000 and $1,760,000 during the year ended September 27, 2025 related to Sequoia's ROU and long-lived assets, respectively.
Recoverability of Investment in New Meadowlands Racetrack (“NMR”)
The carrying value of our investment in Meadowlands Newmark LLC, which has a 63.7% ownership in NMR, is determined using the cost method. In accordance with the cost method, our initial investment is recorded at cost and we record dividend income when applicable, if dividends are declared. We review our investment in NMR each reporting period to determine whether a significant event or change in circumstances has occurred that may have an adverse effect on its fair value.
As a result, we performed an assessment of the recoverability of our indirect investment in NMR as of September 27, 2025 which involved critical accounting estimates. These estimates require significant management judgment, include inherent uncertainties and are often interdependent; therefore, they do not change in isolation. Factors that management estimated include, among others, the probability of gambling being approved in northern New Jersey and NMR obtaining a license to operate a casino, revenue levels, cost of capital, marketing spending, tax rates and capital spending.
In performing this assessment, we estimate the fair value of our investment in NMR using our best estimate of these assumptions which we believe would be consistent with what a hypothetical marketplace participant would use. The variability of these factors depends on a number of conditions, including uncertainty about future events and our inability as a minority shareholder to control certain outcomes and, thus, our accounting estimates may change from period to period. If other assumptions and estimates had been used when these tests were performed, impairment charges could have resulted.
As mentioned above, these factors do not change in isolation and, therefore, we do not believe it is practicable or meaningful to present the impact of changing a single factor. Furthermore, if management uses different assumptions or if different conditions occur in future periods, future impairment charges could result. See Note 4 - I nvestment in and Receivable from New Meadowlands Racetrack LLC to the Consolidated Financial Statements for additional discussion.
Leases
We determine if an arrangement contains a lease at inception. An arrangement contains a lease if it implicitly or explicitly identifies an asset to be used and conveys the right to control the use of the identified asset in exchange for consideration. As a lessee, we include operating leases in Operating lease ROU assets and Operating lease liabilities in our consolidated balance sheet. ROU assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized upon commencement of the lease based on the present value of the lease payments over the lease term. As most of our leases do not provide an implicit interest rate, we use our incremental borrowing rate based on the information available at commencement date to determine the present value of lease payments. Our lease terms may include options to extend or terminate the lease. Options are included when it is reasonably certain that we will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. Amendments or modifications to lease terms are accounted for as variable lease payments. Leases with a lease term of 12 months or less are accounted for using the practical expedient which allows for straight-line rent expense over the remaining term of the lease.
Deferred Income Tax Valuation Allowance
We provide such allowance due to uncertainty that some of the deferred tax amounts may not be realized. Certain items, such as state and local tax loss carryforwards, are dependent on future earnings or the availability of tax strategies. Future results could require an increase or decrease in the valuation allowance and a resulting adjustment to income in such period.
Goodwill and Trademarks
Goodwill and trademarks are not amortized, but are subject to impairment analysis. We assess the potential impairment of goodwill and trademarks annually (at the end of our fourth quarter) and on an interim basis whenever events or changes in circumstances indicate that the carrying value may not be recoverable. If we determine through the impairment review process that goodwill or trademarks are impaired, we record an impairment charge in our consolidated statements of operations.
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.
In accordance with ASU 350-20, Intangibles—Goodwill and Other , the Company identified a triggering event during the three months ended March 29, 2025 primarily related to a decline in the Company's stock price during the second quarter of fiscal 2025 and the continued uncertainty related to the expiration of the Bryant Park Grill & Caf é and The Porch at Bryant Park leases (see Note 10 - 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 statement of operations for the year ended September 27, 2025.
As of September 28, 2024, the Company performed a qualitative assessment of its goodwill whereby the fair value of the equity was determined using the income approach. Given the relatively low volume of shares traded as of September 28, 2024, the Company determined the income approach provided the best approximation of fair value. 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 & Caf é and The Porch at Bryant Park leases may not be renewed beyond their expirations on April 30, 2025, and the time value of money. This approach required 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 at September 28, 2024. Accordingly, during the fourth quarter of fiscal 2024, the Company recorded a goodwill impairment charge of $4,000,000, of which $4,000,000 was deductible for tax purposes and resulted in a deferred income tax of $1,074,000. Such was 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 .
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 27, 2025 and September 28, 2024, our impairment analysis did not result in any other charges related to trademarks.
Recently Adopted and Issued Accounting Standards
See Note 1 of Notes to Consolidated Financial Statements for a description of recent accounting pronouncements, including those adopted in fiscal 2025 and the expected dates of adoption and the anticipated impact on the consolidated financial statements.
Recent Developments
None
Item 7A . Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 8 . Financial Statements and Supplementary Data
Our consolidated financial statements are included in this report immediately following Part IV.
