Greetings, and welcome to Ark Restaurants Fourth Quarter and Fiscal Year Ended Results. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. As a reminder, this conference is being recorded. It is now my pleasure to introduce Christopher Love, Secretary. Thank you. You may begin.

Thank you, operator. Good morning, and thank you for joining us on our conference call for the fourth quarter and fiscal year ended September 30, 2023. My name is Christopher Love, and I am the Secretary of Ark Restaurants. With me on the call today is Michael Weinstein, our Chairman and CEO; and Anthony Sirica, our President and Chief Financial Officer. For those of you who have not yet obtained a copy of our press release, it was issued over the Newswires yesterday and is available on our website. To review the full text of that press release, along with the associated financial tables, please go to our homepage at www.arkrestaurants.com. Before we begin, however, I'd like to read the safe harbor statement. I will need to remind everyone that part of our discussion this morning will include forward-looking statements and that these statements are not guarantees of future performance and therefore, undue reliance should not be placed on them. We refer everyone to our filings with the Securities and Exchange Commission for a more detailed discussion of the risks that may have a direct bearing on our operating results, performance and financial condition. I'll now turn the call over to Michael.

Before I start, I want to bring in Anthony, our CFO and President, to talk about our balance sheet and the write-off of the goodwill to try to give you better explanation.

Good morning, everyone. Our balance sheet at year-end continues to be strong. Our cash position was about $13.5 million. Currently, it's probably tracking a little higher than that. Our debt is $7.2 million compared to $20-some-odd million last year, $24 million last year. As you might be aware, we paid off about $16 million of our notes late March, early April with our new credit agreement. The only other significant change, as you read in the release, was a goodwill impairment of $10 million. As we got into the quarter close, we realized that there was a triggering event related to our goodwill assessment due to the decline in the stock price and the upcoming expiration of the Bryant Park leases and the related RFPs that were issued for the spaces. So as a result, we performed a quantitative assessment based on the income approach utilizing a discounted cash flow analysis. The analysis took into account the estimating future after-tax cash flows, discounting them back to present value and the possibility that the leases may not be renewed. So given all that, we also consulted with third-party experts. The impairment came up to about $10 million. And that's really the highlight of the balance sheet. On the P&L, Michael is going to talk about.

Yes. So, the EBITDA for the year, and I'm going to get to the larger elephants in the room in a few seconds. But the P&L for the year or the EBITDA for the year was about $9.6 million. I would say pretty much on the conservative side, the redo of Gallagher's in addition to the capital improvement cost of some $2 million, probably cost us some $1.6 million, $1.7 million in cash flow. The reason for that is that our deal going in when we redid the leases at New York-New York, is we agreed that even during the refurbishing periods, we would continue to pay rent. And in addition to paying rent, we were paying full payrolls, insurance premiums, everything related to the cost of operating a restaurant with the exception of the purchase of food and beverages. So food and beverage costs at Gallagher's were about 32% between the closing and the slow uptake on revenue when we reopened, there was about $2.2 million, $2.3 million in missing sales. Gallagher's is actually now presently, at least this month, performing better than it ever performed. So we think the refurbishing is working in our favor, in terms of revenue. But during that period of time, I would put a number of 15, 16, 17, something in that area of lost cash flow. So the $9.6 million EBITDA, if we had not closed Gallagher's conceivably could have been $11 million plus. We suffered dramatically the last four months and continue to suffer with sales at our full-service restaurants in Southern Florida. That means JBs, Blue Moon, Shuckers and up until recently, Rustic, which is now -- revenues are on pace with the prior year. But in the other three, we're down 10%, 15% on a weekly basis and it…

Late October.

No, November 1. October 26 is when we responded. It was due on November 1. All we know so far is that we're a finalist in the process. I really don't have very much to say about it. I've been not excited, not unexcited, I think we made a great presentation. We've done a great job for the Park. That restaurant is one of the highest grossing restaurants in the United States, considering that it's not allowed to do late night service. We close for reservations on most nights at 9:00 because Park closes at 10. There is a requirement that noise levels because it's residential around it, be kept to a minimum. So, there's no such thing as parking or bottle service. And in the RFP, it mentioned that the restaurant was one of the largest grossing restaurants in the United States. So, I have no indication of where we stand other than we're a finalist in the process. It went out to everybody. And it's been whittled down to a few. Meadowlands, we continue to be hopeful that there'll be a casino license issued at some point, but the plan is for New Jersey is that we don't think they're going to make a move until New York issues its downstate liquor licenses, we can't figure out what the legislature is doing. But we're in the best position to get casino license, if the state moves to have a casino in the North. I hope that gives you a little idea of how this business is performing, and I'm open for questions.

[Operator Instructions] Our first question comes from the line of Jeff Kaminski with JJK Consultants. Please proceed with your question.

Just reviewing the goodwill impairment test as per the press release and Anthony mentioned it again a few minutes ago that there was a triggering event, singular, triggering event -- and it follows, it says due to the volatility of the Company's stock price, I've been doing this a while, from top to bottom in terms of the stock price, the low trading volume stock maybe high high-17s, low-18s to high-14s or 15s, that's from top to bottom maybe 20% movement in stock. I don't know who can say is that volatile to triggering events. So I'd like some color on that. And secondly, you include as part of the triggering event, and again, you make a sound the event as if it's a singular event, but you also include that the upcoming expiration of the Bryant Park Properties and lease and related proposals. So what was the trigger? Is the trigger of the volatility on the price? Or was the trigger the Bryant Park situation and the Bryant Park situation has not yet been resolved. So should it resolve favorably, are you then going to reverse the $10 million goodwill impairment? Could you clarify that? It makes no sense.

Sure. Well, okay. So the way the assessment works is the first test is you compare the value of your shares, the entity value to the book value of the Company. So what you do is you take your shares outstanding at the end of the quarter. It's a point in time test multiplied by the publicly trading price. For all prior quarters up until the fourth quarter, our stock was trading above $17.50, $18 and we were covered. Our fair value of the shares was higher than the book value of the equity. At the end of the quarter, the stock was around 15%, 15.5%, which was still at up until yesterday around that price. And when you did the test, there was a significant shortfall. It was below the book value by about -- I forget what the number was $6 million, $7 million. So now you have to go to the second step of the goodwill impairment. The second step is you have to look at discounted cash flows and you have to model it out. And when you start looking at that, you had to take into consideration multiple scenarios. You couldn't just project out that you were going to keep Bryant Park for the next 10 years. You had to factor in a scenario, a weighted scenario that you could lose it and therefore lose the cash flows associated with that. And that's what we did. And that's how we came up with the impairment.

Had the stock price held then you wouldn't have had to consider the Bryant Park lease expiration. It was the triggering event was the stock price vis-à-vis the book value?

Yes.

So the answer to that, Jeffrey, is two-fold. Number one, if the stock price had held, we once we've gone through this process and then the outside consultants and our own J. H. Cohn, who are our auditors, once they've had to go further and say, what if and what if, all right? I don't want anybody to think that, us considering Bryant Park's lease in this scenario of refiguring taking the write-off of goodwill has anything to do with characterizing our chances of renewing the lease. This is strictly a mathematical computation. It doesn't take into account at all any feelings about where we stand in the process of renewing that lease. It just says basically the lease comes due in May of 2025. And what happens if we don't get it, and this would be the result. And it's all triggered by the stock price falling below a certain point where this whole process begins. All right, it has nothing to do with our feelings about whether or not we're going to renew that rate.

Okay. So should you get the lease back and the stock should probably bounce, are you then going to have to reconsider the goodwill situation again because now you're going to have at least to another 20 or 30 days from a stock the accounting standards.

No. The accounting standards, once you write-off the goodwill, it's gone. You don't put it back on the books. The stock would go to 50%, you don't put it back on the books. That's the accounting standards. I mean, it's not.

Last point in hindsight 2020, there have been people on this call that have mentioned perhaps having some sort of buyback in place, stabilizing mechanism in a very, very illiquid stock, which has been, and we're paying interest on a $7 million loan for the moment we don't need, and again, hindsight is 2020, but might have been prudent to have a small buyback in place, and you might have this exercise wouldn't be necessary because it wouldn't have taken much to keep the stock at $17, $18, and $19?

So, that's a good point. The best way for me to answer this is there are certain moving parts in the way this occurred or even with the stock at $15, $16. We continue to have an eye on making some acquisitions. So we like the fact that we have this $14 million, $15 million balance to make acquisitions, and we're constantly looking at it. And I'd rather be buying what I consider reliable cash flow then buy back my stock and have to borrow money to make acquisitions. So that's part of this. The second part, honestly, the stock is very, very thin. It's very hard to buy it. I assume that at some point, the stock price will rationalize itself if we perform well. I'm not interested in being a support for the stock unless I had a lot of money that I didn't see having anything any targets out there to use the money for. So if we were in that position, yes, would I buy back the stock? Yes. But how much am I going to be able to buy back. It's not going to be meaningful. What's more meaningful is having the money available to make a meaningful acquisition that gives us long-term cash flow. So that's been my position. Would we do a transaction to try to take the Company private? Well, that presents problems also because certainly, certain shareholders will get screwed by that. Others would do well. But the big problem would be how do you evaluate the value of our deal at the Meadowlands. And if that were to become a casino, everybody that was bought out would feel that we knew something and took advantage of some information that wasn't available to them, which is not the case. But we still viewed that way. So I'm comfortable at the moment in terms of the Company's cash balances to leave those in place and try to find something that enhances the Company's cash flow long term.

Our next question comes from the line of [Peter Jackson], a Private Investor. Please proceed with your question.

Couple of questions. First of all, do you have any sense of timing on when the Bryant Park decision would be made?

We are told sometime in spring of this year, this coming year.

Okay. And how does it work in terms of the way they view, if another restaurant group that's larger and well-financed, better-financed arguably comes along, does tie go to the runner -- does the fact that you've been in there and performed well. Do we have sort of the lead position there? Or is it completely starting from scratch and they'll look at anybody equally?

I have no idea what they're trying to do in terms of the goals or I think this is a requirement of the Parks Department at the end of the lease and we've submitted our proposal. We know other people who submitted their proposals. As I said, we're a finalist. We do not know what their goals are or other than to put out an RFP.

Okay. In terms of acquisition, obviously...

By the way, excuse me. We've disciplined ourselves here not to drive ourselves crazy by speculating.

Okay. You mentioned you want to -- you're always taking a hard look at acquisitions and certainly the prices you've paid in the past have been fantastic. But given, I guess I want to just understand about the price increases. So, I totally understand that you don't want to raise prices or you want to keep them down as low as possible. On the other hand, you have increased payroll costs, insurance, utilities, which presumably all your competitors face as well and varying degrees. At what point I mean, the problem is that that's not doing a lot for margins when you're not raising prices and you have these increased costs. So what gives there? And why are we in a different position from any other restaurants are?

So, good question, and thank you. So I will mention something that's in our response to the RFP and Bryant Park. Post pandemic, we raised our prices 7%. So you're talking a couple of years here. That's the average price increase. Our revenues this year -- or excuse me, our revenues post pandemic are up 12%, which means we're adding headcounts. I would tell you the same thing is true in Vegas. Now Vegas, it's not necessarily us setting the headcounts, Vegas is exploding, but we're adding headcounts in Vegas. We're very, very sensitive to headcounts as opposed to revenues. And we have long-term leases, where we're -- Rustic is a great example. We were forced to raise prices in Rustic by more than 7% because the price of cabs went from $23 a pound to $54 a pound. At one point, we were charging -- and we put two pounds on the plate. So we're at $135 right now for something at one point, which was costing us $108 to put on the plate. But I have a blue collar -- a large segment of my customer base at Rustic is blue collar, and they use that restaurant for celebrations of anniversaries, birthday parties, blah, blah, blah. Some people don't care. They're very wealthy, and they want a great meal of crabs and they come to Rustic. But in all of our restaurants, we have a pretty broad spectrum of people on where they stand on the economic ladder. I don't want to get a reputation that we're too expensive. And that's the way we ran this company from day one. We've always had sort of an umbrella of safety as opposed to the quality of our product and services and our architecture and decor as compared to other…

Okay. That makes sense. Going back to Bryant Park, did you -- I don't think you disclosed -- or maybe it was in the 10-K, but have you disclosed what the revenue is there and what would be lost for some reason we didn't get it?

So, we don't disclose revenues for any individual restaurant, no profits. All right. In this case, the landlord knows what the revenues are, because we're -- we have a percentage lease there. But we've never allowed individual restaurants to promo gate through us what their revenues are. We think that's a disadvantage to landlord negotiations.

Okay. And then going back to Meadowlands, certainly, as a long-term investor, I appreciate your point about not wanting to take the Company private because you potentially deprive shareholders of the upside from the Meadowlands. But with that said, obviously, that's something that may not happen or may not happen for a long time. And obviously, it's hard to make a plan when it involves governments and legislation. It's hard to really handicap when that's going to happen, if it happens, would it ever make sense? You said in prior calls, I think, that maybe Hard Rock would be the natural people to buy us out of our interest there. Presumably, they see the value there. They're not going to pay as much today as they would if it were a sure thing, right? And if it was a sure thing, it wouldn't make sense to do anything now. But is there a way to sort of bake into some kind of price with Hard Rock where they give us some value that reflects the potential while also on their side, reflecting the fact that may not happen. I'm not really saying that the proper way, but you know what I'm getting that?

Yes. So first of all, Hard Rock is a 20% owner of the limited partnership, that's the partnership in the Meadowlands. But since -- when we made those statements like three, four quarters ago, and before that, that they would be a natural buyer, Hard Rock is now part of bidding process with Steve Cohen to put a casino in Queens by say stating. So if that were to go through, we're not so sure Hard Rock will continue with us as an operator. They certainly would continue as an investor unless we bought them out or some other operator bought them out. So that conversation with Hard Rock, it doesn't make sense at this point. And it would make sense perhaps if they are the operator and there seems to be some movement favorably toward getting a casino license in the North. So that's not a conversation you can have right now. By the way, it's a conversation I don't think I want to have because we still are of the opinion that the likelihood of us getting a casino license there is pretty strong. It's just a matter of when does New Jersey's legislatures react to downstate casino licenses in New York, which have not been issued yet. And we don't think they're going to be issued for another year to 18 months. In terms of trying to -- your question sort of begs an answer to taking this thing private. I go back to my statement. I'd rather buy recurring cash flow for our shareholders then to get our shareholders out of the way and try to take advantage of price, but I have a Board of Directors, and that, in large part, becomes their decision. And it's a discussion that does come up. So I'm just…

There are no further questions in the queue. I'd like to hand the call back to management for closing remarks.

All right. Thank you. There are some good questions. I appreciate the time you're spending with us, and we look forward to our next call with you. Have a happy holiday season, everybody.

Ladies and gentlemen, this does conclude today conference call. You may disconnect your lines at this time, and have a wonderful day.