Registration No. 333-_____
RISK FACTORS
This prospectus contains certain forward-looking
statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Actual results could differ
materially from those projected in the forward-looking statements as a result of certain uncertainties set forth below and elsewhere
in this prospectus. An investment in the shares is highly speculative and involves a high degree of risk. Prospective investors,
prior to making an investment decision, should carefully consider the following risk factors, in addition to the other information
set forth in this prospectus, in connection with an investment in the shares offered hereby.
Risks Related To Our Business
We are dependent upon key personnel and may not be able to attract
qualified personnel in the future.
We are dependent upon the continued services
of Michael Weinstein, the Chairman of the Board and Chief Executive Officer, and a number of key management and other team members
who have significant influence over the Company’s business strategy and managerial decisions. In particular, the Company’s
President and Chief Financial Officer. The Company does not have an employment agreement with Mr. Weinstein. The loss of Mr. Weinstein’s
services or other key personnel, or limitations on their involvement with the Company, could have a material adverse effect on
our business or operating results. We do not maintain key person life insurance on any officers of the Company.
Failure of our existing or new restaurants to achieve expected
results could have a negative impact on our revenues and performance results.
Performance results currently achieved by our
restaurants may not be indicative of longer term performance or the potential market acceptance of restaurants in new locations.
We cannot be assured that new restaurants that we open will have similar operating results as existing restaurants. New restaurants
take several months or longer to reach expected operating levels due to inefficiencies typically associated with new restaurants,
including lack of market
awareness, inability to hire sufficient staff
and other factors. The failure of our existing or new restaurants to perform as predicted could negatively impact our revenues
and results of operations.
Our unfamiliarity with new markets may present risks, which could
have a material adverse effect on our future growth and profitability.
Due to higher operating costs caused by temporary
inefficiencies typically associated with expanding into new regions and opening new restaurants, such as lack of market awareness
and acceptance and limited availability of experienced staff, continued expansion may result in an increase in our operating costs.
New markets may have different competitive conditions, consumer tastes and discretionary spending patterns than our existing markets,
which may cause our restaurants in these new markets to be less successful than our restaurants in our existing markets. We cannot
assure you that restaurants in new markets will be successful.
Factors beyond our control could adversely affect our ability
to open new restaurants efficiently, which could cause our operations and financial condition to suffer. These factors include,
but are not limited to:
– Selection and availability of suitable
restaurant sites;
– Negotiation of acceptable lease
or purchase terms for such sites;
– Negotiation of reasonable construction
contracts and adequate supervision of construction;
– Our ability to secure required
governmental permits and approvals for both construction and operation;
– Availability of adequate capital;
– General economic conditions;
and
– Adverse weather conditions.
We may not be successful in addressing these
factors, which could adversely affect our ability to open new restaurants on a timely basis, or at all. Delays in opening or failures
to open new restaurants could cause our business, results of operations and financial condition to suffer.
Increases in the minimum wage may have a
material adverse effect on our business and financial results.
Many of our employees are subject to various
minimum wage requirements. Many of our restaurants are located in states where the minimum wage was recently increased and in other
states in which increases are scheduled or are being considered. In addition, increases in the minimum wage to $15 per hour may
result in further increases in wages to all restaurant workers. Accordingly, there likely will be additional increases implemented
in jurisdictions in
which we operate or seek to operate. These
minimum wage increases may cause us to raise our prices which, in turn, could have a material adverse effect on our business, financial
condition, results of operations and/or cash flows.
Mandatory paid leave and unpaid leave may
have a material adverse effect on our business and financial results.
Starting January 1, 2018, most workers are
able to take up to eight (8) weeks (increasing in New York and other areas to twelve (12) weeks in 2021) of job provided paid leave
for childbirth, care for a seriously ill family member or needs related to a family member’s military deployment. These additional
expenses may cause us to raise our prices. In certain geographic areas which cannot absorb such increases, this could have a material
adverse effect on our business, financial condition; results of operations and/or cash flows.
Ark provides unpaid leave for employees for
covered family and medical reasons, including childbirth, to the extent required by the Family and Medical Leave Act of 1933, as
amended, and applicable state laws. To the extent we need to hire additional employees or pay overtime for such employees on leave,
this would be an added expense which could adversely affect our results of operations.
Our ability to compete with non-tipping restaurants
may be adversely affected.
Certain restaurants in areas in which we operate
have eliminated tipping and more restaurants may decide to follow suit. We have not implemented such a policy and cannot estimate
the effect such change may have on our operations. In the event we are forced to compete and raise our prices to provide for gratuities,
this may have a material adverse effect on our business, financial conditions, results of operations or cash flows.
Disruptions in the overall economy may adversely
impact our business.
Our ability to generate revenue depends significantly
on discretionary consumer spending. Any weakness in discretionary consumer spending could have a material adverse effect on our
revenues, results of operations and financial condition.
The restaurant industry has been affected by
economic factors, including the deterioration of national, regional and local economic conditions, and shifts in consumer spending
patterns. Disruptions in the overall economy have reduced, and may continue to reduce, consumer confidence in the economy, negatively
affecting consumer restaurant spending, which could be harmful to our financial position and results of operations. As a result,
decreased cash flow generated from our business may adversely affect our financial position and our ability to fund our operations.
Future changes in financial accounting standards
may cause adverse unexpected operating results and affect our reported results of operations.
Changes in accounting standards can have a
significant effect on our reported results and may affect our reporting of transactions completed before the change is effective.
New pronouncements and varying interpretations of pronouncements have occurred and may occur in the future. See Note 1 to the Consolidated
Financial Statements related to recently adopted accounting standards.
Changes to existing rules or differing interpretations
with respect to our current practices may adversely affect our reported financial results.
Our profitability is dependent in large
measure on food, beverage and supply costs which are not within our control.
Our profitability is dependent in large measure
on our ability to anticipate and react to changes in food, beverage and supply costs. Various factors beyond our control, including
climate changes and government regulations, may affect food and beverage costs. Specifically, our dependence on frequent, timely
deliveries of fresh beef, poultry, seafood and produce subjects us to the risks of possible shortages or interruptions in supply
caused by adverse weather, food contamination and related recalls or other conditions, which could adversely affect the availability
and cost of any such items. We cannot assure you that we will be able to anticipate or react to increasing food and supply costs
in the future. The failure to react to these increases could materially and adversely affect our business, results of operations
and financial condition.
Rising insurance costs could negatively
impact profitability.
The cost of insurance (workers compensation
insurance, general liability insurance, property insurance, health insurance and directors and officers liability insurance) has
risen significantly over the past few years and is expected to continue to increase. These increases, as well as potential state
legislation requirements for employers to provide health insurance to employees, could have a negative impact on our profitability
if we are not able to negate the effect of such increases with plan modifications and cost control measures or by continuing to
improve our operating efficiencies.
Adverse weather conditions and natural disasters could adversely
affect our restaurant sales.
Adverse weather conditions can impact guest
traffic at our restaurants, cause the temporary underutilization of outdoor patio seating and, in more severe cases such as hurricanes,
tornadoes or other natural disasters, cause temporary closures, sometimes for prolonged periods, which would negatively impact
our restaurant sales. Our restaurants have previously been adversely affected by the flooding caused from Hurricane Sandy, as well
as other adverse weather conditions. Several of our newest restaurants are located on the East Coast of Florida and on the Gulf
Coast of Alabama in low lying areas prone to flooding. Changes in weather could result in construction delays, interruptions to
the availability of utilities, and shortages or interruptions in the supply of food items and other supplies, which could increase
our costs. Some climatologists predict that the long-term effects of climate change and global warming may result in more
severe, volatile weather or extended droughts, which could increase the frequency and duration of weather impacts on our
operations.
Compliance with existing and new regulations
of corporate governance and public disclosure may result in additional expenses.
Compliance with changing laws, regulations
and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, the Dodd-Frank Act,
new SEC regulations and NASDAQ Stock Market rules, has required an increased amount of management attention and external resources.
We are committed to maintaining high standards of corporate governance and public disclosure. This investment, required to comply
with these changing regulations, may result in increased general and administrative expenses and a diversion of management time
and attention from revenue-generating activities to compliance activities.
Intense competition in the restaurant industry
could prevent us from increasing or sustaining our revenues and profitability.
The restaurant industry is intensely competitive
with respect to food quality, price-value relationships, ambiance, service and location, and many restaurants compete with us at
each of our locations. There are a number of well-established competitors with substantially greater financial, marketing, personnel
and other resources than ours, and many of our competitors are well established in the markets where we have restaurants, or in
which we intend to locate restaurants. Additionally, other companies may develop restaurants that operate with similar concepts.
Any inability to successfully compete with
the other restaurants in our markets will prevent us from increasing or sustaining our revenues and profitability and result in
a material adverse effect on our business, financial condition, results of operations and/or cash flows. We may also need to modify
or refine elements of our restaurant system to evolve our concepts in order to compete with popular new restaurant formats or concepts
that may develop in the future. We cannot assure you that we will be successful in implementing these modifications or that these
modifications will not reduce our profitability.
Many of our operations are located in casinos
and our success is dependent on the success of those casinos.
The success of the business of our restaurants
located in Las Vegas, Nevada, Atlantic City, New Jersey, Tampa and Hollywood, Florida, and Ledyard, Connecticut is substantially
dependent on the success of the casinos in which the Company operates in these locations to attract customers for themselves and
for our restaurants. In particular, casinos in Atlantic City have experienced a significant decline in revenues in recent years
as a result of the economic downturn, Hurricane Sandy in 2012, and the fact that numerous casinos have opened in other locations
in the Eastern United States. Three of the twelve casinos in Atlantic City have closed. Although the Company did not operate any
restaurants in the casinos that closed and the Company’s restaurants in Atlantic City actually experienced an increase in
sales of
approximately 7.9% from fiscal 2016 to fiscal
2017, the downturn affecting Atlantic City casinos and tourism in general could have a material adverse effect on our restaurants
in the city.
As more states approve casino gambling, our
business in casinos in existing geographic regions may continue to decline. The successful operation of the casinos in these locations
is subject to various risks and uncertainties including, but not limited to:
– The risk associated with governmental approvals of
gaming;
– The risk of a change in laws regulating gaming operations;
– Operating in a limited market;
– Competitive risks relating to casino operations;
and
– Risks of terrorism and war.
There can be no assurance casino gambling
will ever be approved at New Meadowlands Racetrack.
The Company has invested an aggregate of approximately
$5,108,000 in the New Meadowlands Racetrack (“NMR”) through its investment in Meadowlands Newmark, LLC, an existing
member of NMR to which it has also loaned $1,700,000. The Company has the exclusive right to operate the food and beverage concessions
in a casino at NMR if casino gambling is approved. A November 2016 referendum to approve two new casinos in Northern New Jersey
was defeated. The issue cannot be voted upon for the following two years, but it will not be on the ballot in November 2018, if
ever. As a result, the Company expects it may be subject to additional capital calls in the future that it can either participate
in or have its interest diluted. Although sports betting has commenced at NMR, there can be no assurance that a casino will be
approved at NMR with Meadowlands Newmark LLC being granted the right to conduct gambling at such a casino at any time in the future.
The restaurant industry is affected by changes
in consumer preferences and discretionary spending patterns that could result in a reduction in our revenues.
We continuously need to monitor and to modify
our restaurants’ menus, for changes in consumer preferences. These changes may cause us to lose customers, who are less satisfied
with such modified menu, and we may not be able to attract a new customer base to generate the necessary revenues to maintain our
income from restaurant operations. A change in our menus may also result in us having different competitors. We may not be able
to successfully compete against established competitors in the general restaurant market. Our success also depends on various factors
affecting discretionary consumer spending, including economic conditions, disposable consumer income and consumer confidence. Adverse
changes in these factors could reduce our customer base and spending patterns, either of which could reduce our revenues and results
of operations.
Our geographic concentrations could have
a material adverse effect on our business, results of operations and financial condition.
We currently operate in eight regions, New
York City, Washington, D.C., Las Vegas, Nevada, Florida, Atlantic City, New Jersey, Ledyard, Connecticut, Gulf Shores, Alabama
and Boston, Massachusetts. As a result, we are particularly susceptible to adverse trends and economic conditions in these markets,
including its labor market, which could have a negative impact on our profitability as a whole. In addition, given our geographic
concentration, negative publicity regarding any of our restaurants could have a material adverse effect on our business, results
of operations and financial condition, as could other regional occurrences such as acts of terrorism, local strikes, natural disasters
or changes in laws or regulations.
Our operating results may fluctuate significantly
due to seasonality and other factors beyond our control.
Our business is subject to seasonal fluctuations,
which may vary greatly depending upon the region of the United States in which a particular restaurant is located. In addition
to seasonality, our quarterly and annual operating results and comparable unit sales may fluctuate significantly as a result of
a variety of factors, including, but not limited to:
– The amount of sales contributed by new and existing
restaurants;
– The timing of new openings and closings;
– Increases in the cost of key food or beverage products;
– Labor costs for our personnel;
– Our ability to achieve and sustain profitability on
a quarterly or annual basis;
– Adverse weather;
– Consumer confidence and changes in consumer preferences;
– Health concerns, including adverse publicity concerning
food-related illnesses;
– The level of competition from existing or new competitors;
– Economic conditions generally and in each of the markets
in which we are located; and
– Acceptance of a new or modified concept in each of
the new markets in which we could be located.
These fluctuations make it difficult for us
to predict and address in a timely manner factors that may have a negative impact on our business, results of operations, financial
condition and/or cash flows.
Our expansion may strain our infrastructure,
which could slow restaurant development.
The Company has expanded its operations in
recent years in the States of Florida and Alabama, where we have not previously done business. This and any further expansion may
place a strain on our management systems, financial controls, and information systems. To manage growth effectively, we must maintain
the high level of quality and service at our existing and future restaurants. We must also continue to enhance our operational,
information, financial and management systems and locate, hire, train and retain qualified personnel, particularly restaurant managers.
We cannot predict whether we will be able to respond on a timely basis to all of the changing demands that any expansion will impose
on management and those systems and controls. If we are not able to effectively manage any one or more of these or other aspects
of expansion, our business, results of operations and financial condition could be materially adversely affected.
Our inability to retain key personnel could
negatively impact our business.
Our success will continue to be highly dependent
on our key operating officers and employees. We must continue to attract, retain and motivate a sufficient number of qualified
management and operating personnel, including general managers and chefs. The ability of these key personnel to maintain consistency
in the quality and atmosphere of our restaurants is a critical factor in our success. Any failure to do so may harm our reputation
and result in a loss of business.
We could face labor shortages, increased labor costs and other
adverse effects of varying labor conditions.
The development and success of our restaurants
depend, in large part, on the efforts, abilities, experience and reputations of the general managers and chefs at such restaurants.
In addition, our success depends, in part, upon our ability to attract, motivate and retain a sufficient number of qualified employees,
including restaurant managers, kitchen staff and wait staff. Qualified individuals needed to fill these positions are in short
supply and the inability to recruit and retain such individuals may delay the planned openings of new restaurants or result in
high employee turnover in existing restaurants. A significant delay in finding qualified employees or high turnover of existing
employees could materially and adversely affect our business, results of operations and financial condition. Also, competition
for qualified employees could require us to pay higher wages to attract sufficient qualified employees, which could result in higher,
labor costs. In addition, increases in the minimum hourly wage, employment tax rates and levies, related benefits costs, including
health insurance, and similar matters over which we have no control may increase our operating costs.
Unanticipated costs or delays in the development
or construction of future restaurants could prevent our timely and cost-effective opening of new restaurants.
We depend on contractors and real estate developers
to construct our restaurants. Many factors may adversely affect the cost and time associated with the development and construction
of our restaurants, including, but not limited to:
– Labor disputes;
– Shortages of materials or skilled labor;
– Adverse weather conditions;
– Unforeseen engineering problems;
– Environmental problems;
– Construction or zoning problems;
– Local government regulations;
– Modifications in design; and
– Other unanticipated increases in costs.
Any of these factors could give rise to delays
or cost overruns, which may prevent us from developing additional restaurants within our anticipated budgets or time periods or
at all. Any such failure could cause our business, results of operations and financial condition to suffer.
We may not be able to obtain and maintain
necessary federal, state and local permits which could delay or prevent the opening of future restaurants.
Our business is subject to extensive federal,
state and local government regulations, including regulations relating to:
– Alcoholic beverage control;
– The purchase, preparation and sale of food;
– Public health and safety;
– Sanitation, building, zoning and fire codes; and
– Employment and related tax matters.
All of these regulations impact not only our
current operations, but also our ability to open future restaurants. We will be required to comply with applicable state and local
regulations in
new locations into which we expand. Any difficulties,
delays or failures in obtaining licenses, permits or approvals in such new locations could delay or prevent the opening of a restaurant
in a particular area or reduce operations at an existing location, either of which could materially and adversely affect our business,
results of operations and financial condition.
We are dependent on information technology
and any material failure in the operation or security of that technology or our ability to execute a comprehensive business continuity
plan could impair our ability to efficiently operate our business.
We rely on information systems across our operations,
including, for example, point-of-sale processing in our restaurants, management of our supply chain, collection of cash, payment
of obligations and various other processes and procedures. Our ability to efficiently manage our business depends significantly
on the reliability and capacity of these systems. The failure of these systems to operate effectively, problems with maintenance,
upgrading or transitioning to replacement systems, or a breach in security of these systems could cause delays in customer service
and reduce efficiency in our operations. A security breach or cyber-attack could include theft of credit card data or other personal
information as well as our intellectual property. Significant capital investments might be required to remediate any problems.
Additionally, our corporate systems and processes
and corporate support for our restaurant operations are handled primarily at our corporate office in New York. We have disaster
recovery procedures and business continuity plans in place to address most events of a crisis nature and back up and offsite locations
for recovery of electronic and other forms of data and information. However, if we are unable to fully implement our disaster recovery
plans, we may experience delays in recovery of data, inability to perform vital corporate functions, tardiness in required reporting
and compliance, failures to adequately support restaurant operations and other breakdowns in normal communication and operating
procedures that could have a material adverse effect on our financial condition, results of operation and exposure to administrative
and other legal claims.
Failure to protect the integrity and security
of individually identifiable data of our guests and employees and confidential and proprietary information of the Company could
damage our reputation and expose us to loss of revenues and litigation.
We receive and maintain certain personal information
about our guests and employees in our information technology systems, such as point-of-sale, web and mobile platforms. Additionally
our systems contain proprietary and confidential information related to our business. Use of this information is regulated at the
federal and state levels, as well as by certain third party contracts. If our or our business associates’ information systems
are compromised as a result of a cyber-attack or other external or internal method, or we fail to comply with applicable laws and
regulations, it could result in a violation of the laws and regulations, and an adverse and material impact on our reputation,
operations, results of operations and financial condition. Such security breaches could also result in litigation or governmental
investigation against us or the imposition of penalties. These impacts could also occur if we are perceived either to
have had an attack, failure or to have failed
to properly respond to an incident. Like many other retail companies, we experience frequent attempts to compromise our systems
but none have resulted in a material breach. As privacy and information security laws and regulations change or cyber risks evolve
pertaining to data, we may incur additional costs in technology, third party services and personnel to remain in compliance and
maintain systems designed to anticipate and prevent cyber-attacks. Our security frameworks prevent breaches of our systems and data
loss, but these measures cannot provide assurance that we will be successful in preventing such breaches or data loss.
The restaurant industry is affected by litigation
and publicity concerning food quality, health and other issues, which can cause guests to avoid our restaurants and result in liabilities.
Health concerns, including adverse publicity
concerning food-related illness, although not specifically related to our restaurants, could cause guests to avoid restaurants in
general, which would have a negative impact on our sales. We may also be the subject of complaints or litigation from guests alleging
food-related illness, injuries suffered on the premises or other food quality, health or operational concerns. A lawsuit or claim
could result in an adverse decision against us that could have a material adverse effect on our business and results of operations.
We may also be subject to litigation which, regardless of the outcome, could result in adverse publicity. Adverse publicity resulting
from such allegations may materially adversely affect us and our restaurants, regardless of whether such allegations are true or
whether we are ultimately held liable. Such litigation, adverse publicity or damages could have a material adverse effect on our
competitive position, business, results of operations and financial condition and results of operations.
Violations of the Company’s prohibition
on harassment, sexual or otherwise, could result in liabilities and/or litigation.
We prohibit harassment or discrimination in
the workplace, in sexual on in any other form. This policy applies to all aspects of employment. Notwithstanding our taking disciplinary
action against alleged violations, we may encounter additional costs from claims made and/or legal proceedings brought against
the Company.
Uncertain Effect of Tax Reform Bills on
an Investment in the Company.
The Tax Cuts and Jobs Act (the “Tax Act”)
was enacted into law and the new legislation contains several key tax provisions that affect us. The Tax Act is expected to have
a favorable impact on the Company’s effective tax rate and net income as reported under generally accepted accounting principles
both in the first fiscal quarter of 2018 and subsequent reporting periods to which the Act is effective. However, the Company is
assessing the impact of the Act and there can be no assurances that it will have a favorable impact. The Company’s accounting
for impact of the Tax Act was incomplete as of June 30, 2018. Investors should consult with their tax advisors with respect to
the effect of the Act and any other regulatory or administrative developments and proposals and
their potential effect on your investment in the Company.
Risks Related To Our Common Stock
The fact that a relatively small number
of investors hold our publicly traded common stock could cause our stock price to fluctuate.
The market price of our common stock could
fluctuate as a result of sales by our existing stockholders of a large number of shares of our common stock in the market or the
perception that such sales could occur. A large number of shares of our common stock is concentrated in the hands of a small number
of individual and institutional investors and is thinly traded. An attempt to sell by a large holder could adversely affect the
price of our stock.
Ownership of a substantial majority of our
outstanding common stock by a limited number of stockholders will limit your ability to influence corporate matters.
A substantial majority of our capital stock
is held by a limited number of stockholders. Almost 50% of our common stock is beneficially owned by officers and directors of
the Company. Accordingly, management and a few other stockholders have a strong influence on major decisions of corporate policy,
and the outcome of any major transaction or other matters submitted to our stockholders, including, but not limited to, potential
mergers, acquisitions and/or sale of substantially all assets or other corporate transactions, and amendments to our Amended and
Restated Certificate of Incorporation. Stockholders other than these principal stockholders are therefore likely to have little
influence on decisions regarding such matters.
The price of our common stock may fluctuate
significantly.
The price at which our common stock trades
may fluctuate significantly. A large number of shares of our common stock is concentrated in the hands of a small number of individuals
and institutional investors and is thinly traded. An attempt to sell by a large holder could adversely affect the price of our
stock.
The stock market has from time to time experienced
significant price and volume fluctuations. The trading price of our common stock could be subject to wide fluctuations in response
to a number of factors, including, but not limited to:
– Fluctuations in quarterly or annual results of operations;
– Changes in published earnings estimates by analysts
and whether our actual earnings meet or exceed such estimates;
– Additions or departures of key personnel;
– Our ability to execute our business plan and open
new restaurants;
– Changes in the restaurant industry;
– Competitive pricing pressures;
– Regulatory developments; and
– Changes in overall stock market conditions, including
the stock prices of other restaurant companies.
In addition, our principal stockholders’
ownership may discourage a potential acquirer from making a tender offer or otherwise attempt to obtain control of the Company,
which, in time, could reduce our stock price or prevent our stockholders from realizing a premium over our stock price.
In the past, companies that have experienced
extreme fluctuations in the market price of their stock have been the subject of securities class action litigation. If we were
to be subject to such litigation, it could result in substantial costs and a diversion of our management’s attention and
resources, which may have a material adverse effect on our business, results of operations, and financial condition.