NOTES TO CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS
June 28,
2014
1. CONSOLIDATED CONDENSED FINANCIAL
STATEMENTS
The consolidated condensed balance
sheet as of September 28, 2013, which has been derived from audited financial statements included in the Form 10-K, and the unaudited
interim consolidated condensed financial statements have been prepared in accordance with accounting principles generally accepted
in the United States of America (“GAAP”) for interim financial information and pursuant to the rules and regulations
of the Securities and Exchange Commission (the “SEC”). Accordingly, certain information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted.
All adjustments that, in the opinion of management are necessary
for a fair presentation for the periods presented, have been reflected as required by Regulation S-X, Rule 10-01. Such adjustments
are of a normal, recurring nature. These consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and
notes thereto included in the Company’s annual report on Form 10-K for the year ended September 28, 2013. The results of
operations for interim periods are not necessarily indicative of the operating results to be expected for the full year or any
other interim period.
PRINCIPLES OF CONSOLIDATION — The
consolidated condensed interim financial statements include the accounts of Ark Restaurants Corp. and all of its wholly-owned subsidiaries,
partnerships and other entities in which it has a controlling interest, collectively herein referred to as the “Company”.
Also included in the consolidated condensed interim financial statements are certain variable interest entities (“VIEs”).
All significant intercompany balances and transactions have been eliminated in consolidation.
SEASONALITY — The Company has substantial
fixed costs that do not decline proportionally with sales. The first and second fiscal quarters, which include the winter months,
usually reflect lower customer traffic than in the third and fourth fiscal quarters. In addition, sales in the third and fourth
fiscal quarters can be adversely affected by inclement weather due to the significant amount of outdoor seating at the Company’s
restaurants.
FAIR VALUE OF FINANCIAL INSTRUMENTS —
The carrying amount of cash and cash equivalents, receivables, accounts payable and accrued expenses approximate fair value due
to the immediate or short-term maturity of these financial instruments. The fair values of notes receivable and payable are determined
using current applicable rates for similar instruments as of the balance sheet date and approximate the carrying value of such
debt.
CASH AND CASH EQUIVALENTS — Cash
and cash equivalents include cash on hand, deposits with banks and highly liquid investments generally with original maturities
of three months or less. Outstanding checks in excess of account balances, typically vendor payments, payroll and other contractual
obligations disbursed after the last day of a reporting period are reported as a current liability in the accompanying consolidated
condensed balance sheets.
CONCENTRATIONS
OF CREDIT RISK
— Financial instruments that potentially subject the Company to concentrations of credit risk
consist primarily of cash and cash equivalents and accounts receivable. The Company reduces credit risk by placing its cash and
cash equivalents with major financial institutions with high credit ratings. At times, such amounts may exceed Federally insured
limits. The concentration of credit risk with respect to accounts receivable is generally limited due to the short payment terms
extended by the Company and the number of customers comprising the Company’s customer base.
For the 39-week period ended June 28, 2014,
the Company made purchases from one vendor that accounted for approximately 11% of total purchases. For the 39-week period ended
June 29, 2013, the Company made purchases from two vendors that accounted for approximately 22% of total purchases. For the 13-week
periods ended June 28, 2014 and June 29, 2013, the Company made purchases from one vendor that accounted for approximately 11%
and 12%, respectively, of total purchases.
SEGMENT REPORTING — As of June 28,
2014, the Company owned and operated 20 restaurants and bars, 21 fast food concepts and catering operations, exclusively in the
United States, that have similar economic characteristics, nature of products and service, class of customers 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.
RECLASSIFICATIONS — Certain reclassifications
of prior period balances have been made to conform to the current period presentation. Such amounts did not impact results of operations,
cash flows or earnings per share.
NEW ACCOUNTING STANDARDS NOT YET ADOPTED
—
In April 2014, the FASB issued new accounting guidance that changes the definition of a discontinued
operation to include only those disposals of components of an entity that represent a strategic shift that has (or will have) a
major effect on an entity’s operations and financial results.
This guidance is effective for fiscal years ending after
December 15, 2014 and is required to be applied
prospectively. Early adoption is permitted for disposals
that have not been reported in financial statements previously issued. The Company is evaluating the impact of the adoption of
this guidance on its financial condition, results of operations or cash flows.
In May 2014, the FASB issued updated accounting
guidance that provides a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the
transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for
those goods or services. Additionally, this guidance expands related disclosure requirements. The pronouncement is effective for
annual and interim reporting periods beginning after December 15, 2016. Early application is not permitted. This update permits
the use of either the retrospective or cumulative effect transition method. The Company is evaluating the impact of the adoption
of this guidance on its financial condition, results of operations or cash flows as well as the expected adoption method.
In June 2014, the FASB issued guidance
which clarifies the recognition of stock-based compensation over the required service period, if it is probable that the performance
condition will be achieved. This guidance is effective for fiscal years, and interim periods within those years, beginning after
December 15, 2015 and should be applied prospectively. The adoption of this guidance is not expected to have a significant
impact on the Company’s consolidated financial condition or results of operations.
2. VARIABLE
INTEREST ENTITIES
The Company consolidates any variable interest
entities in which it holds a variable interest and is the primary beneficiary. Generally, a variable interest entity, or VIE, is
an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit
the entity to finance its activities without additional subordinated financial support; (b) as a group the holders of the equity
investment at risk lack (i) the ability to make decisions about an entity’s activities through voting or similar rights,
(ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of
the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests and substantially
all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few
voting rights. The primary beneficiary of a VIE is generally the entity that has (a) the power to direct the activities of the
VIE that most significantly impact the VIE’s economic performance, and (b) the obligation to absorb losses or the right to
receive benefits that could potentially be significant to the VIE.
The Company has determined that it is the
primary beneficiary of three VIEs and, accordingly, consolidates the financial results of these entities. Following are the required
disclosures associated with the Company’s consolidated VIEs:
|
|
June 28,
2014
|
|
|
September 28,
2013
|
|
|
|
(in thousands)
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
607
|
|
|
$
|
637
|
|
Accounts receivable
|
|
|
326
|
|
|
|
317
|
|
Inventories
|
|
|
19
|
|
|
|
16
|
|
Prepaid expenses and other current assets
|
|
|
175
|
|
|
|
176
|
|
Due from Ark Restaurants Corp. and affiliates (1)
|
|
|
84
|
|
|
|
157
|
|
Fixed assets – net
|
|
|
65
|
|
|
|
89
|
|
Other assets
|
|
|
71
|
|
|
|
71
|
|
Total assets
|
|
$
|
1,347
|
|
|
$
|
1,463
|
|
|
|
|
|
|
|
|
|
|
Accounts payable – trade
|
|
$
|
52
|
|
|
$
|
70
|
|
Accrued
expenses and other current liabilities
|
|
|
139
|
|
|
|
140
|
|
Operating lease deferred credit
|
|
|
69
|
|
|
|
—
|
|
Total liabilities
|
|
|
260
|
|
|
|
210
|
|
Equity of variable interest entities
|
|
|
1,087
|
|
|
|
1,253
|
|
Total liabilities and equity
|
|
$
|
1,347
|
|
|
$
|
1,463
|
|
(1) Amounts
Due from Ark Restaurants Corp. and affiliates are eliminated upon consolidation.
The liabilities recognized as a result
of consolidating these VIEs do not represent additional claims on our general assets; rather, they represent claims against the
specific assets of the consolidated VIEs. Conversely, assets recognized as a result of consolidating these VIEs do not represent
additional assets that could be used to satisfy claims against our general assets.
3. RECENT
RESTAURANT EXPANSION
On November 28, 2012, a subsidiary
of the Company entered into an agreement to design and lease a restaurant at the Tropicana Hotel and Casino in Atlantic
City, NJ. The cost to construct this restaurant was approximately $1,750,000. The initial term of the lease for this
facility expires June 7, 2023 and has two five-year renewals. The restaurant,
Broadway Burger Bar and Grill
, opened during
the third quarter of fiscal 2013.
On February 24, 2014, the Company, through
a wholly-owned subsidiary, Ark Rustic Inn LLC, completed its acquisition of the assets of
The Rustic Inn Crab House
(“
The
Rustic Inn
”), a restaurant and bar located in Dania Beach, Florida, for a total purchase price of approximately $7,710,000.
The acquisition is accounted for as a business combination and was financed with a bank loan in the amount of $6,000,000 and cash
from operations. The fair values of the assets acquired were allocated as follows:
Inventory
|
|
$
|
210,000
|
|
Land
|
|
|
2,000,000
|
|
Building
|
|
|
2,800,000
|
|
Furniture, fixtures and equipment
|
|
|
200,000
|
|
Trademarks
|
|
|
500,000
|
|
Goodwill
|
|
|
2,000,000
|
|
|
|
|
|
|
|
|
$
|
7,710,000
|
|
The Consolidated Condensed Statements of
Income for the 13 and 39-weeks ended June 28, 2014 include revenues and earnings of approximately $3,634,000 and $546,000 and $5,276,000
and $794,000, respectively, related to
The Rustic Inn
. Transaction costs incurred in the amount of approximately $150,000 are included
in general and administrative expenses in the Consolidated Condensed Statement of Income for the 39 weeks ended June 28, 2014.
The Company expects the Goodwill and indefinite life Trademarks to be deductible for tax purposes.
The unaudited pro forma financial
information set forth below is based upon the Company’s historical Consolidated Condensed Statements of Income for the
13 and 39-week periods ended June 28, 2014 and June 29, 2013. The unaudited pro forma financial information is presented for
informational purposes only and may not be indicative of what actual results of operations would have been had the
acquisition of
The Rustic Inn
occurred on the dates indicated, nor does it purport to represent the results of operations for future
periods.
|
|
13 Weeks Ended
|
|
|
39 Weeks Ended
|
|
|
|
June 28,
2014
|
|
|
June 29,
2013
|
|
|
June 28,
2014
|
|
|
June 29,
2013
|
|
|
|
(in thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
39,110
|
|
|
$
|
39,657
|
|
|
$
|
107,359
|
|
|
$
|
106,110
|
|
Net income
|
|
$
|
2,239
|
|
|
$
|
2,900
|
|
|
$
|
2,966
|
|
|
$
|
3,117
|
|
Net income per share - basic
|
|
$
|
0.68
|
|
|
$
|
0.89
|
|
|
$
|
0.91
|
|
|
$
|
0.96
|
|
Net income per share - diluted
|
|
$
|
0.65
|
|
|
$
|
0.85
|
|
|
$
|
0.87
|
|
|
$
|
0.93
|
|
4. RECENT
RESTAURANT DISPOSITIONS
Lease Expirations
– The Company was advised by the landlord that it would have to vacate
The Sporting House
property located in New
York-New York Hotel and Casino in Las Vegas, NV which was on a month-to-month lease. The closure of this property occurred in June
2014 and did not result in a material charge.
On
May 31, 2014, the Company’s lease at the
Rialto Deli
located at the Venetian Casino Resort in Las Vegas, NV expired.
The closure of this property did not result in a material charge.
Other
– On October 29, 2012, the Company suffered a flood at its
Red
and
Sequoia
properties located in New York,
NY as a result of a hurricane. The Company did not reopen these properties as the underlying leases were due to expire in the second
quarter of fiscal 2013. Losses related to the closure of these properties, in the amount of $256,000, are included in Other Operating
Costs and Expenses in the Consolidated Condensed Statement of Income for the 39 weeks ended June 29, 2013.
5. NOTE
RECEIVABLE
On June 7, 2011, the Company entered into
a 10-year exclusive agreement to manage a yet to be constructed restaurant and catering service at
Basketball City
in New
York City in exchange for a fee of $1,000,000. Under the terms of the agreement, the owner of the property was to construct the
facility at their expense and the Company was to pay the owner an annual fee based on sales, as defined in the agreement. Since
the owner had not delivered the facility to the Company within the specified timeframe, the parties executed a promissory note
for repayment of the $1,000,000 exclusivity fee. The note bears interest at 4.0% per annum and the remaining principal balance
is payable in 44 equal monthly installments of approximately $9,000.
6. INVESTMENT
IN NEW MEADOWLANDS RACETRACK
On March 12, 2013, the Company made a $4,200,000
investment in the New Meadowlands Racetrack LLC (“NMR”) through its purchase of a membership interest in Meadowlands
Newmark, LLC, an existing member of NMR. On November 19, 2013, the Company invested an additional $464,000 in NMR through a purchase
of an additional membership interest in Meadowlands Newmark, LLC resulting in a total ownership of 11.6%. In addition to the Company’s
ownership interest in NMR LLC, if casino gaming is approved at the Meadowlands and NMR is granted the right to conduct said gaming,
the Company shall be granted the exclusive right to operate the food and beverage concessions in the gaming facility with the exception
of one restaurant. This investment has been accounted for based on the cost method and is included in Other Assets in the accompanying
Consolidated Condensed Balance Sheets at June 28, 2014 and September 28, 2013. The Company periodically reviews its investments
for impairment. If the Company determines that an other-than-temporary impairment has occurred, it will write-down the investment
to its fair value. No indication of impairment was noted as of June 28, 2014.
In conjunction with this investment, the
Company, through a 97% owned subsidiary, Ark Meadowlands LLC (“AM VIE”), also entered into a long-term agreement with
NMR for the exclusive right to operate food and beverage concessions serving the new raceway facilities (the “Racing F&B
Concessions”) located in the new raceway grandstand constructed at the Meadowlands Racetrack in northern New Jersey. Under
the agreement, NMR is responsible to pay for the costs and expenses incurred in the operation of the Racing F&B Concessions,
and all revenues and profits thereof inure to the benefit of NMR. AM VIE receives an annual fee equal to 5% of the net profits
received by NMR from the Racing F&B Concessions during each calendar year. At June 28, 2014, it was determined that AM VIE
is a variable interest entity. However, based on qualitative consideration of the contracts with AM VIE, the operating structure
of AM VIE, the Company’s role with AM VIE, and that the Company is not obligated to absorb any expected losses of AM VIE,
the Company has concluded that it is not the primary beneficiary and not required to consolidate the operations of AM VIE.
The Company’s maximum exposure to
loss as a result of its involvement with AM VIE is limited to a receivable from AM VIE’s primary beneficiary (NMR, a related
party) which aggregated approximately $273,000 at June 28, 2014 and is included in Prepaid Expenses and Other Current Assets in
the Consolidated Condensed Balance Sheet.
On April 25, 2014, the Company loaned $1,500,000
to Meadowlands Newmark, LLC. The note bears interest at 3%, compounded monthly and added to the principal, and is due in its entirety
on January 31, 2024. The note may be prepaid, in whole or in part, at any time without penalty or premium. The principal and accrued
interest related to this note is included in Other Assets in the Consolidated Condensed Balance Sheet at June 28, 2014.
7. NOTES
PAYABLE
Treasury Stock Repurchase –
On December 12, 2011, the Company, in a private transaction, purchased 250,000 shares of its common stock at a price of
$12.50 per share, for a total of $3,125,000. Upon the closing of the purchase, the Company paid the seller $1,000,000 in cash and
issued an unsecured promissory note to the seller for $2,125,000. The note bears interest at 0.19% per annum, and is payable in
24 equal monthly installments of $88,541, commencing on December 1, 2012. As of June 28, 2014, the outstanding note payable balance
was approximately $443,000.
Bank –
On February
25, 2013, the Company issued a promissory note, secured by all assets of the Company, to a bank for $3,000,000. The note bore interest
at LIBOR plus 3.0% per annum, and was payable in 36 equal monthly installments of $83,333, commencing on March 25, 2013. On February
24, 2014, in connection with the acquisition of
The Rustic Inn
, the Company borrowed an additional $6,000,000 from this bank under
the same terms and conditions as the original loan which was consolidated with the remaining principal balance from the original
borrowing at that date. The new loan is payable in 60 equal monthly installments of $134,722, which commenced on March 25, 2014.
As of June 28, 2014, the outstanding balance of this note payable was approximately $7,409,000.
The loan agreement provides, among other
things, that the Company meet minimum quarterly tangible net worth amounts, as defined, and minimum annual net income amounts,
and contains customary representations, warranties and affirmative covenants. The agreement also contains 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 debt covenants as of June 28, 2014.
8. ACCRUED EXPENSES AND OTHER CURRENT
LIABILITIES
Accrued expenses and other current liabilities
consist of the following:
|
|
June 28,
2014
|
|
|
September 28,
2013
|
|
|
|
(In thousands)
|
|
|
|
|
|
|
|
|
Sales tax payable
|
|
$
|
991
|
|
|
$
|
783
|
|
Accrued wages and payroll related costs
|
|
|
1,649
|
|
|
|
1,435
|
|
Customer advance deposits
|
|
|
3,629
|
|
|
|
3,356
|
|
Accrued occupancy, gift cards and other operating expenses
|
|
|
3,411
|
|
|
|
3,701
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,680
|
|
|
$
|
9,275
|
|
9. COMMITMENTS
AND CONTINGENCIES
Leases
— The Company
leases its restaurants, bar facilities, and administrative headquarters through its subsidiaries under terms expiring at various
dates through 2032. Most of the leases provide for the payment of base rents plus real estate taxes, insurance and other expenses
and, in certain instances, for the payment of a percentage of the restaurants sales in excess of stipulated amounts at such facility
and in one instance based on profits.
Legal
Proceedings
—
In the ordinary course of its business, the Company is a party to various lawsuits arising from accidents at its restaurants and
worker’s compensation claims, which are generally handled by the Company’s insurance carriers. The employment by the
Company of management personnel, waiters, waitresses and kitchen staff at a number of different restaurants has resulted in the
institution, from time to time, of litigation alleging violation by the Company of employment discrimination laws. Management believes,
based in part on the advice of counsel, that the ultimate resolution of these matters will not have a material adverse effect on
the Company’s consolidated financial position, results of operations or cash flows.
10. STOCK OPTIONS
The Company has options outstanding under
two stock option plans, the 2004 Stock Option Plan (the “2004 Plan”) and the 2010 Stock Option Plan (the “2010
Plan”), which was approved by shareholders in the second quarter of 2010. Effective with this approval, the Company terminated
the 2004 Plan. This action terminated the 400 authorized but unissued options under the 2004 Plan, but it did not affect any of
the options previously issued under the 2004 Plan. Options granted under the 2004 Plan are exercisable at prices at least equal
to the fair market value of such stock on the dates the options were granted. The options expire ten years after the date of grant.
The 2010 Stock Option Plan is the Company’s
only equity compensation plan currently in effect. Under the 2010 Stock Option Plan, 500,000 options were authorized for future
grant. Options granted under the 2010 Plan are exercisable at prices at least equal to the fair market value of such stock on the
dates the options were granted. The options expire ten years after the date of grant.
During the 13-week period ended June
28, 2014, options to purchase 205,500 shares of common stock at an exercise price of $22.50 per share were granted employees
and directors of the Company. Such options are exercisable as to 50% of the shares commencing on the first anniversary of the
date of grant and as to the remaining 50% commencing on the second anniversary of the date of grant. The grant date fair
value of these stock options was $4.03 per share.
The fair value of each of the Company’s
stock options is estimated on the date of grant using a Black-Scholes option-pricing model that uses assumptions that relate to
the expected volatility of the Company’s common stock, the expected dividend yield of our stock, the expected life of the
options and the risk free interest rate. The assumptions used for the 2014 grant include a risk free interest rate of 2.62%, volatility
of 33.8%, a dividend yield of 6.0% and an expected life of 6.25 years.
A summary of stock option activity is presented
below:
|
|
2014
|
|
|
|
Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Contractual
Term
|
|
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding, beginning of period
|
|
|
623,100
|
|
|
$
|
19.56
|
|
|
|
5.50 Years
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
205,500
|
|
|
$
|
22.50
|
|
|
|
10.00 Years
|
|
|
|
|
|
Exercised
|
|
|
(110,363
|
)
|
|
$
|
12.88
|
|
|
|
|
|
|
|
|
|
Canceled or expired
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding and expected to vest, end of period
|
|
|
718,237
|
|
|
$
|
21.43
|
|
|
|
6.00 Years
|
|
|
$
|
2,477,676
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable, end of period
|
|
|
512,737
|
|
|
$
|
21.15
|
|
|
|
4.50 Years
|
|
|
$
|
2,477,676
|
|
Compensation cost charged to operations
for the 39-week periods ended June 28, 2014 and June 29, 2013 was $244,000 and $238,000, respectively, and for the 13-week periods
ended June 28, 2014 and June 29, 2013 was $87,000 and $79,000 respectively. The compensation cost recognized is classified as a
general and administrative expense in the Consolidated Condensed Statements of Income.
As of June 28, 2014,
there was approximately $817,000 of unrecognized compensation cost related to unvested stock options, which is expected to be recognized
over a period of approximately two years.
11. INCOME
TAXES
The Company’s provision for income
taxes consists of Federal, state and local taxes in amounts necessary to align the Company’s year-to-date provision for income
taxes with the effective tax rate that the Company expects to achieve for the full year. The income tax provision on income from
continuing operations for the 39-week periods ended June 28, 2014 and June 29, 2013 reflect effective tax rates of approximately
28% and 26%, respectively. The Company expects its effective tax rate for its current fiscal year to be significantly lower than
the statutory rate as a result of the inclusion of tax credits and operating income attributable to the non-controlling interests
of the VIEs that is not taxable to the Company. The final annual tax rate cannot be determined until the end of the fiscal year;
therefore, the actual tax rate could differ from current estimates.
12. INCOME
PER SHARE OF COMMON STOCK
Net income per share is calculated on the
basis of the weighted average number of common shares outstanding during each period plus, for diluted net income per share, the
additional dilutive effect of potential common stock. Potential common stock using the treasury stock method consists of dilutive
stock options.
For the 13 and 39-week
periods ended June 28, 2014, options to purchase 97,761 shares of common stock at an exercise price of $12.04 per share and options
to purchase 188,476 shares of common stock at an exercise price $14.40 per share were included in diluted earnings per share. Options
to purchase 136,500 shares of common stock at an exercise price of $29.60 per share, options to purchase 90,000 shares of common
stock at an exercise price of $32.15 per share and options to purchase 205,500 shares of common stock at an exercise price of $22.50
per share were not included in diluted earnings per share as their impact was anti-dilutive.
For the 13 and 39-week
periods ended June 29, 2013, options to purchase 165,100 shares of common stock at an exercise price of $12.04 per share and options
to purchase 245,500 shares of common stock at an exercise price $14.40 per share were included in diluted earnings per share. Options
to purchase 139,000 shares of common stock at an exercise price of $29.60 per share and options to purchase 90,000 shares of common
stock at an exercise price of $32.15 per share were not included in diluted earnings per share as their impact was anti-dilutive.
13. DIVIDENDS
On June 4, 2014, the Board of Directors
declared a quarterly dividend of $0.25 per share on the Company’s common stock to be paid on July 3, 2014 to shareholders
of record at the close of business on June 18, 2014. The Company intends to continue to pay such quarterly cash dividends for the
foreseeable future, however, the payment of future dividends is at the discretion of the Company’s Board of Directors and
is based on future earnings, cash flow, financial condition, capital requirements, changes in U.S. taxation and other relevant
factors.
14. SUBSEQUENT EVENTS
On July 18, 2014, the Company, through
a wholly-owned subsidiary, Ark Jupiter RI, LLC, entered into an agreement with Crab House, Inc., and acquired certain assets and
the related lease for a restaurant and bar located in Jupiter, Florida for approximately $250,000. In connection with this transaction,
the Company entered into an amended lease for an initial period expiring through December 31, 2015. The Company has the option
to extend the lease through 2033.