SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

For the quarterly period ended June 29,December 28, 2013

Commission file number 1-09453

  (Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (212) 206-8800

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”) during the preceding 12 months (or for shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

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Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).

YesS No£

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

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Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

On one or more occasions, we may make statements in this Quarterly Report on Form 10-Q regarding our assumptions, projections, expectations, targets, intentions or beliefs about future events. All statements, other than statements of historical facts, included or incorporated by reference herein relating to management’s current expectations of future financial performance, continued growth and changes in economic conditions or capital markets are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

Words or phrases such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “targets,” “will likely result,” “hopes,” “will continue” or similar expressions identify forward-looking statements. Forward-looking statements involve risks and uncertainties which could cause actual results or outcomes to differ materially from those expressed. We caution that while we make such statements in good faith and we believe such statements are based on reasonable assumptions, including without limitation, management’s examination of historical operating trends, data contained in records and other data available from third parties, we cannot assure you that our projections will be achieved. Factors that may cause such differences include: economic conditions generally and in each of the markets in which we are located, the amount of sales contributed by new and existing restaurants, labor costs for our personnel, fluctuations in the cost of food products, adverse weather conditions, changes in consumer preferences and the level of competition from existing or new competitors.

We have attempted to identify, in context, certain of the factors that we believe may cause actual future experience and results to differ materially from our current expectation regarding the relevant matter or subject area. In addition to the items specifically discussed above, our business, results of operations and financial position and your investment in our common stock are subject to the risks and uncertainties described in “Item 1A Risk Factors” in Part I of our Annual Report on Form 10-K for the fiscal year ended September 29, 201228, 2013 as may be updated by the information contained under the caption “Item 1A. Risk Factors” in Part II of this Quarterly Report on Form 10-Q.

From time to time, oral or written forward-looking statements are also included in our reports on Forms 10-K, 10-Q and 8-K, our Schedule 14A, our press releases and other materials released to the public. Although we believe that at the time made, the expectations reflected in all of these forward-looking statements are and will be reasonable; any or all of the forward-looking statements may prove to be incorrect. This may occur as a result of inaccurate assumptions or as a consequence of known or unknown risks and uncertainties. Many factors discussed in this Quarterly Report on Form 10-Q, certain of which are beyond our control, will be important in determining our future performance. Consequently, actual results may differ materially from those that might be anticipated from forward-looking statements. In light of these and other uncertainties, you should not regard the inclusion of a forward-looking statement in this Quarterly Report on Form 10-Q or other public communications that we might make as a representation by us that our plans and objectives will be achieved, and you should not place undue reliance on such forward-looking statements.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. However, your attention is directed to any further disclosures made on related subjects in our subsequent periodic reports filed with the Securities and Exchange Commission on Forms 10-K, 10-Q and 8-K and Schedule 14A.

Unless the context requires otherwise, references to “we,” “us,” “our,” “ARKR” and the “Company” refer specifically to Ark Restaurants Corp., and its subsidiaries, partnerships, variable interest entities and predecessor entities.

Part I. Financial Information

Item 1. Consolidated Condensed Financial Statements

ARK RESTAURANTS CORP. AND SUBSIDIARIES

CONSOLIDATED CONDENSED BALANCE SHEETS

(In Thousands, Except Per Share Amounts)

See notes to consolidated condensed financial statements.

ARK RESTAURANTS CORP. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF INCOME (Unaudited)

(In Thousands, Except Per Share Amounts)

See notes to consolidated condensed financial statements.

ARK RESTAURANTS CORP. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (Unaudited)
CHANGES IN EQUITY

FOR THE 13 WEEKS ENDED DECEMBER 28, 2013 AND DECEMBER 29, 2012

(In Thousands)

See notes to consolidated condensed financial statements.

ARK RESTAURANTS CORP. AND SUBSIDIARIES

CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN EQUITY (Unaudited)
FOR THE 39 WEEKS ENDED JUNE 29, 2013 AND JUNE 30, 2012
CASH FLOWS

(In Thousands)

See notes to consolidated condensed financial statements.

ARK RESTAURANTS CORP. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(In Thousands)

See notes to consolidated condensed financial statements.

ARK RESTAURANTS CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

June 29,December 28, 2013

(Unaudited)

1.CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

The consolidated and condensed balance sheet as of September 29, 2012,28, 2013, which has been derived from audited financial statements included in the Form 10-K, and the unaudited interim consolidated and 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”). 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. 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. 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 29, 2012.28, 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. 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.

RECLASSIFICATIONS — Certain reclassifications of prior period balances have been made to conform to the current period presentation. In connection with the planned or actual sale or closure of various restaurants, the operations of these businesses have been presented as discontinued operations in the consolidated condensed financial statements. Accordingly, the Company has reclassified its consolidated condensed statements of operations for the prior periods presented. These dispositions are discussed below in “Recent Restaurant Dispositions.”

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, investments, receivables, accounts payable and accrued expenses approximate fair value due to the immediate or short-term maturity of these financial instruments. The fair valuevalues of notes receivable and payable isare determined using current applicable rates for similar instruments as of the balance sheet date and approximates 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.

Available-for-Sale Securities— Available-for-sale securities consist primarily of United States Treasury Bills and Notes, all of which have a high degree of liquidity and are reported at fair value, with unrealized gains and losses recorded in Accumulated Other Comprehensive Income. The cost of investments in available-for-sale securities is determined on a specific identification basis. Realized gains or losses and declines in value judged to be other than temporary, if any, are reported in Other (Income) Expense, Net. The Company evaluates its investments periodically for possible impairment and reviews factors such as the length of time and extent to which fair value has been below cost basis and the Company’s ability and intent to hold the investment for a period of time which may be sufficient for anticipated recovery in market value. Proceeds from the sale and redemption of investment securities amounted to $75,000 and $3,062,000 for the 39-week periods ended June 29, 2013 and June 30, 2012, respectively. No realized gains or losses were included in Other Income (Expense), net for the 13 and 39-week periods ended June 29, 2013 and June 30, 2012.

CONCENTRATIONS OF CREDIT RISK— Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents.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 29, 2013, the Company made purchases from two vendors that accounted for approximately 22% of total purchases. For the 39-week period ended June 30, 2012, the Company made purchases from one vendor that accounted for approximately 12% of total purchases. For the 13-week period ended June 29,December 28, 2013, the Company made purchases from one vendor that accounted for approximately 12% of total purchases. For the 13-week period ended June 30,December 29, 2012, no vendorthe Company made purchases from two vendors that accounted for more than 10%approximately 22% of total purchases.

SEGMENT REPORTING — As of June 29,December 28, 2013, the Company owned and operated 20 restaurants and bars, 22 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.

RECENTLY ADOPTED ACCOUNTING STANDARDS —In JuneDecember 2011, the Financial Accounting Standards Board (the “FASB”) issued new accounting guidance onamended standards to increase the presentationprominence of other comprehensive income. The new guidance eliminated the option to present the components of other comprehensive income as part of the statement of changesoffsetting assets and liabilities reported in equity. Instead,financial statements. These amendments require an entity has the option to present the total of comprehensive income, the components of net incomedisclose information about offsetting and the componentsrelated arrangements to enable users of other comprehensive income either in a single continuous statementits financial statements to understand the effect of comprehensive income or in two separate but consecutive statements. The new accounting guidancethose arrangements on its financial position. These revised standards became effective for fiscal years,annual reporting periods beginning on or after January 1, 2013, and interim periods within those years, beginning after December 15, 2011, with early adoption permitted. Full retrospective application is required. annual periods and are to be retrospectively applied.The adoption of this guidance did not have a material impact on the Company’s consolidated condensed financial statements,statements.

NEW ACCOUNTING STANDARDS NOT YET ADOPTED — In February 2013, the FASB issued guidance for the recognition, measurement, and disclosure of obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date, except for obligations addressed within existing guidance. This guidance is effective for fiscal years ending after December 15, 2014 and is required to be applied retrospectively to all prior periods presented for those obligations that existed upon adoption. The Company does not expect the adoption this guidance to have a significant impact on its consolidated financial condition or results of operations.

In July 2013, the FASB issued new accounting guidance which requires entities to present unrecognized tax benefits as a reduction of a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except to the extent the net operating loss carryforwards or tax credit carryforwards are not available to be used at the reporting date to settle additional income taxes, and the statementsentity does not intend to use them for this purpose. The new accounting guidance is consistent with how the Company has historically accounted for unrecognized tax benefits, therefore the Company does not expect the adoption of comprehensive income were presentedthis guidance to have a significant impact on its consolidated financial statements.

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 separate consecutive statement followinggroup the Consolidated Condensed Statementsholders of Income.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.

2.VARIABLE INTEREST ENTITIES

Upon adoption of the accounting guidance for VIEs on October 3, 2010, theThe Company has determined that it wasis the primary beneficiary of twothree VIEs which had not been previously consolidated,Ark Hollywood/Tampa Investment, LLCand,Ark Connecticut Investment, LLC,as accordingly, consolidates the guidance requires that a single party (including its related parties and de facto agents) be able to exercise their rights to removefinancial results of these entities. Following are the decision maker in order for the “kick-out” rights to be considered substantive. Previously, a simple majority of owners that could exercise kick-out rights was considered a substantive right. This change resulted in the need for consolidation.

During the 39-weeks ended June 29, 2013, the Company purchased an additional 14.39% of the membership interests ofArk Hollywood/Tampa Investment, LLC, directly from the individuals that held such interests, for an aggregate consideration of $2,964,512. In connection with this transaction, the Company recorded a reduction to additional paid-in capital of $2,684,896 representing the excess of the amount paid over the carrying value ($279,616) of the non-controlling interests acquired as the acquisition of an additional interest in a less than wholly-owned subsidiary where control is maintained is treated as an equity transaction. In addition, the Company also recorded an increase to additional paid-in capital in the amount of $1,020,261 representing the related deferred tax benefit of the transaction.

As a result of the above, Ark Hollywood/Tampa Investment, LLCis no longer considered a VIE as the Company now owns 64.39% of the voting membership interests. Accordingly, the followingrequired disclosures associated with the Company’s VIEs do not includeArk Hollywood/Tampa Investment, LLC as of June 29, 2013:consolidated VIEs:

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 March 18, 2011, a subsidiary of the Company entered into a lease agreement to operate a restaurant and bar in New York City namedClyde Frazier’s Wine and Dine. In connection with the agreement, the landlord agreed to contribute up to $1,800,000 towards the construction of the facility (of which $1,500,000 was received as of June 29, 2013 and is being deferred over the lease term), which totaled approximately $7,000,000. The initial term of the lease for this facility expires on March 31, 2027 and has one five-year renewal. This restaurant opened during the second quarter of fiscal 2012.

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 $1,350,000.$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, opened during the third quarter of fiscal 2013 and, as a result, the Consolidated Statement of Income for the 39-weeks ended June 29, 2013 includes approximately $100,000 of pre-opening and early operating losses related to this property.2013.

4.RECENT RESTAURANT DISPOSITIONS

Lease Expirations– On July 8, 2011, the Company entered into an agreement with the landlord ofTheGrill Room property located in New York City, whereby in exchange for a payment of $350,000 the Company vacated the property on October 31, 2011. Such payment and the related loss on closure of the property, in the amount of $179,000, are included in Other Operating Costs and Expenses in the Consolidated Condensed Statement of Income for the 39-weeks ended June 30, 2012. This lease was scheduled to expire on December 31, 2011.

The Company was advised by the landlord that it would have to vacate theAmerica property located in Washington, DC, which was on a month-to-month lease. The closure of this property occurred on November 7, 2011. The related loss on closure of this property, in the amount of $186,000, is included in Other Operating Costs and Expenses in the Consolidated Condensed Statement of Income for the 39-weeks ended June 30, 2012.

Discontinued Operations – Effective March 15, 2012, the Company vacated its food court operations at theMGM Grand Casino at the Foxwoods Resort Casino in Ledyard, CT. The Company determined that it would not be able to operate this facility profitably at this location at the current rent. During the quarter ended June 29, 2013, the Company reclassified the remaining non-controlling interest of $691,000 to additional paid-in capital upon the final dissolution of this partnership as no amounts were due to the non-controlling interests based on the priority of liquidation as set out in the operating agreement.

The results of discontinued operations were as follows:

Other– On October 29, 2012, the Company suffered a flood at itsRed andSequoia 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-weeks13-weeks ended December 29, 2012.

5. NOTE RECEIVABLE

On June 29,7, 2011, the Company entered into a 10-year exclusive agreement to manage a yet to be constructed restaurant and catering service atBasketball 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 is payable in 48 equal monthly installments of $22,579, which commenced on December 1, 2013.

5.COST METHOD

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. In conjunction with this investment,On November 19, 2013, the Company also entered intoinvested an additional $464,000 in NMR through a long-term agreement with NMR to provide food and beverage services for the new racing facilities being constructed at thepurchase of an additional membership interest in Meadowlands RacetrackNewmark, LLC resulting in northern New Jersey. NMR has a long-term lease with the Statetotal ownership of New Jersey and expects the new facility to be open in November 2013. The Company’s agreement extends to any future development at the race track site.

11.6%. This investment has been accounted for based on the cost method and is included in Other Assets in the accompanying Consolidated Condensed Balance SheetSheets at June 29,December 28, 2013 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 29,December 28, 2013.

6.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 to provide food and beverage management services for the new racing facilities constructed at the Meadowlands Racetrack in northern New Jersey. Despite the ownership percentage the company only participates in 5% of the profits and has no capital at risk. At December 28, 2013, it was determined that this entity 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.

Our maximum exposure to loss as a result of our involvement with AM VIE is limited to our receivable from AM VIE’s primary beneficiary (NMR, a related party) which aggregated approximately $321,000 at December 28, 2013 and is included in Prepaid Expenses and Other Current Assets in the Consolidated Condensed Balance Sheet.

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, or 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 29,December 28, 2013, the outstanding note payable balance was approximately $1,416,000.$974,000.

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 bears interest at LIBOR plus 3.0% per annum, and is payable in 36 equal monthly installments of $83,333, commencing on March 25, 2013. As of June 29,December 28, 2013, the outstanding balance of this note payable was approximately $2,667,000.$2,167,000. The 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 29,December 28, 2013.

7.RELATED PARTY TRANSACTIONS

The Company’s former President and Chief Operating Officer resigned effective January 1, 2012. In connection therewith, the Company forgave loans due totaling $66,000 ($29,000 for stock option exercises receivable and $37,000 for other loans) and has recorded additional compensation in the amount of $475,400 in accordance with his separation agreement and release. Such amounts are included in General and Administrative Expenses in the Consolidated Condensed Statement of Income for the 39-weeks ended June 30, 2012.

Employee loans totaled approximately $350,000 and $339,000 at June 29, 2013 and September 29, 2012. Such amounts are payable on demand and bear interest at the minimum statutory rate (0.18% at June 29, 2013 and 0.19% at September 29, 2012).

8.ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of the following:

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.

LegalProceedings— 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.

Other— On November 22, 2013, the Company, through a wholly-owned subsidiary, Ark Rustic Inn LLC, entered into an Asset Purchase Agreement with W and O, Inc. to purchase the Rustic Inn Crab House, a restaurant and bar in Dania Beach, Florida, for $7,500,000 plus inventory. The acquisition is scheduled to close on or before February 28, 2014, subject to satisfactory completion of due diligence, execution of employment and non-competition agreements, Florida Liquor Authority approval and customary closing conditions. In connection with the signing of this agreement the Company made an initial deposit toward the purchase in the amount of $500,000 which is included in Other Assets in the Consolidated Condensed Balance Sheet at December 28, 2013. The balance of the purchase price is expected to be financed with bank borrowings.

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. No options were issued during the 13-week period ended December 28, 2013.

9.COMMITMENTS AND CONTINGENCIES

10.STOCK OPTIONS

During fiscal 2012, options to purchase 251,500 shares of common stock at an exercise price of $14.40 per share were granted and 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 $2.57 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 2012 grant include a risk free interest rate of 1.67%, volatility of 36.2%, a dividend yield of 6.1% and an expected life of 6.25 years. No options were issued during the 39-week period ended June 29, 2013.

A summary of stock option activity is presented below:

Compensation cost charged to operations for the 39-week periods ended June 29, 2013 and June 30, 2012 was $238,000 and $29,000, respectively, and for theboth 13-week periods ended June 29,December 28, 2013 and June 30,December 29, 2012 was $79,000 and $29,000, respectively.$80,000. The compensation cost recognized is classified as a general and administrative expense in the Consolidated Condensed Statements of Income.

As of June 29,December 28, 2013, there was approximately $300,000$142,000 of unrecognized compensation cost related to unvested stock options, which is expected to be recognized over a period of approximately one year.six months.

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-week13-week periods ended June 29,December 28, 2013 and June 30,December 29, 2012 reflect effective tax rates of approximately 26% and 28%, respectively.32%. 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 (loss) 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 periods13-week period ended June 29,December 28, 2013, options to purchase 165,100156,300 shares of common stock at an exercise price of $12.04 per share and options to purchase 245,500237,300 shares of common stock at an exercise price $14.40 per share were included in diluted earnings per share. Options to purchase 139,000136,500 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.

For the 13 and 39-week periods13-week period ended June 30,December 29, 2012, options to purchase 176,600165,100 shares of common stock at an exercisea price of $12.04 per share and options to purchase 251,500245,500 shares of common stock at an exercisea price of $14.40 per share were included in diluted earnings per share. Options to purchase 145,500139,000 shares of common stock at an exercisea price of $29.60 per share and options to purchase 100,00090,000 shares of common stock at an exercisea price of $32.15 per share were not included in diluted earnings per share as their impact was anti-dilutive.antidilutive.

13.DIVIDENDS

On December 28, 2012, March 28, 2013 and June 28,4, 2013, the Company paidBoard of Directors declared a quarterly cash dividend in the amount of $0.25 per share on the Company’s common stock.stock to be paid on December 30, 2013 to shareholders of record at the close of business on December 16, 2013. The Company intends to continue to pay such quarterly cash dividend 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 January 31, 2014, the Company, through a wholly-owned subsidiary, Ark Jupiter RI, LLC, entered into an agreement with Crab House, Inc., to purchase the assets of a restaurant and bar in Jupiter, Florida for $250,000, of which a $50,000 initial deposit was made. The purchase is subject to, among other things, the landlord’s consent to the assignment and assumption of the lease and execution and delivery of an amendment to the lease which is satisfactory to Ark.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

As of June 29,December 28, 2013, the Company owned and operated 20 restaurants and bars, 22 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 periods ended June 29,December 28, 2013 and June 30,December 29, 2012 included 13 and 39 weeks.

Reclassifications

Certain reclassifications of prior period balances have been made to conform to the current period presentation. In connection with the planned or actual sale or closure of various restaurants, the operations of these businesses have been presented as discontinued operations in the consolidated condensed financial statements. Accordingly, the Company has reclassified its consolidated condensed statements of operations for the prior periods presented. These dispositions are discussed below in “Recent Restaurant Dispositions.”

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.

Results of Operations

The Company’s operating income was $4,387,000$1,201,000 for both the 13 and 39-weeksweeks ended June 29,December 28, 2013 as compared to operating income of $4,512,000 and $6,186,000$282,000 for the 13 and 39-weeksweeks ended June 30, 2012, respectively. These decreasesDecember 29, 2012. This increase resulted from a combination of factors including: (i) decreased traffic atstrong catering revenues in New York, (ii) significant improvement in the performance ofClyde Frazier’s Wine and Dine, (iii) the negative effects of Hurricane Sandy in the prior period on our propertiesbusinesses located in New York, Atlantic City, NJ and Washington, DC, due to poor weather and increased competition, (ii)all partially offset by increased competition and a decrease in the usage of complimentaries by the ownership of the casinos at our Florida properties (iii) professional fees related to the unsolicited bid made for the Company by Landry’s, (iv)and the negative impact of additional room capacity without a corresponding increase in overall traffic in Las Vegas, (v) the closure of our propertiesRed andSequoia located in New York, NY in October 2012 as a result of a hurricane, and (vi) early operating losses in the amount of $100,000 at our new restaurant,Broadway Burger Bar, at the Tropicana Hotel and Casino in Atlantic City, NJ, all partially offset by strong catering revenues in NY combined with a significant improvement in the performance ofClyde Frazier’s Wine and Dine, which opened in March 2012. Vegas.

The following table summarizes the significant components of the Company’s operating results for the 13 and 39-week13-week periods ended June 29,December 28, 2013 and June 30,December 29, 2012, respectively:

Revenues

During the Company’s 13 and 39-week periods13-week period ended June 29,December 28, 2013, revenues decreased 6.9% and 5.0%increased 2.6% as compared to revenues in the 13 and 39-week periods13-week period ended June 30,December 29, 2012. This decreaseincrease resulted primarily from: (i) strong catering revenues in New York, (ii) revenues related to our new restaurant in Atlantic City, NJ,Broadway Burger Bar and Grill,which opened in June 2013, and (iii) the negative effectsimpacts of Hurricane Sandy onin the prior period, particularly at our businesses locatedproperties in New York, Atlantic City, NJ partially offset by increased competition and Washington, DCa decrease in the usage of complimentaries by the ownership of the casinos at our Florida properties and the related closure of our propertiesRed andSequoia located in New York, NY in October 2012 as a result, and (ii) the negative impact of additional room capacity without a corresponding increase in overall traffic in Las Vegas, NV, partially offset by strong catering revenues in NY combined with revenues related to our new restaurant in New York City,Clyde Frazier’s Wine and Dine,which opened in March 2012.Vegas.

Food and Beverage Same-Store Sales