Greetings and welcome to Ark Restaurants' Second Quarter 2021 Results Conference Call. As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Ms. Sonal Shah, General Counsel. Thank you. You may begin.

My name is Sonal Shah and I'm General Counsel of Ark Restaurant. With me on the call today is Michael Weinstein, our Chairman and CEO. For those of you who have not yet obtained a copy of our press release, it was issued over the wires yesterday and is available on our website. To review the full text of that press release, along with the associated financial tables, please go to our homepage at www.arkrestaurants.com. Before we begin, however, I'd like to read the safe harbor statement. I need to remind everyone that part of our discussion this morning will include forward-looking statements, and that these statements are not guarantees of future performance, and therefore, undue reliance should not be placed on them. We refer everyone to our filings with the Securities and Exchange Commission for a more detailed discussion of the risks that might have a direct bearing on our operating results, performance and financial condition. I'll now turn the call over to Michael.

Hi everybody. First of all, I want to point out that Anthony Sirica, our CFO, is not on the call today. He is ill, not with COVID, it is not anything extreme. He will get better in the next couple of days. But today he was at his doctor's office taking some tests. So, he apologizes for not being here. I'll do the best I can with any financial questions that you may have during the Q&A. I would like to just make a statement related to how fortunate we are in our company to have had the cooperation of all our employees during a very, very difficult time. These restaurants have been up and running for some time now, but during the shutdown and for a few months into the beginnings of reopening, most of our key employees had given up anywhere from 50% to 90% of their base pay to remain with us. And that was a big help in enabling us to get these operations open quickly, getting them running smoothly. We are, as many companies are complaining, trying to find good people to work. There is a shortage right now, but we are operating at very good smooth levels and seeing a lot of revenue come into these restaurants. And we're very happy with where we are now. A couple of things that I'm sort of facile with, but Anthony would have been better explaining it. For the quarter we showed negative EBITDA after adjusting for the PPP loan forgiveness of $495,000. That means we removed from the EBITDA some $4 million plus of loan forgiveness. So, this is truly an operating number without any influence from the PPP forgiveness. So, it was negative $495,000 for the quarter. However, we had two other adjustments that we cannot include in the EBITDA, but we increased our vacation pay accrual of $500,000 after discussions with our outside auditors. That's a non-cash item, but it shows as a non-cash expense which reduced EBITDA by that amount. We also had $700,000 in lease adjustments because of the new accounting rules regarding straight-line leases. Thus, if we were to add back around $1,000,001 to $1,000,002 of additional non-cash expenses to EBITDA, our adjusted number would have shown a positive cash flow of somewhere between $600,000 and $650,000 for the quarter. What we experienced during the quarter was a very bad January and February. Somewhere toward the middle of the third week in February, we started to see a huge pickup in revenue in Las Vegas, Alabama, and Florida. Those restaurants continue to do extremely well. Florida usually slows down right after Mother's Day. It's too early to tell, but we're somewhat confident that we're not going to see the usual slowdown that's typical for Southern Florida. That seems to be a lot more activities in the first few days post-Mother's Day. So, we're very excited about that. We're doing well when the weather's good in Sequoia in Washington, D.C. We have 600 outdoor seats. We've been under restrictions of 25% of indoor seating in Washington, D.C. That will probably go away in the next couple of weeks. We've also been under severe restrictions in New York and Washington D.C. in what we're allowed to do with events. Events are very important to us at Robert in New York, Bryant Park in Sequoia. We are seeing demand for events in Washington, D.C. And as the restrictions are relaxed, we think we'll see a significant return of events volume. But we're doing well in Sequoia when the weather is nice. The weather is nice right now. Therefore, we’re seeing some good cash flow numbers. New York is still a problem for us. Bryant Park sits in the middle of the city. There are 6 million square feet of office buildings facing us. The last survey done, showed that only 9% are occupied. There's very little tourism. There is no theater district, all of which Bryant Park relies on heavily. So lines there, during early January and February before the weather got nice, those volumes were probably down to 10% of what we usually do. To give you an example, this past week, with the weather being somewhat nice on certain days, we did $200,000 compared to a $600,000 week last year. So those volumes are severely low. Robert, at the top of the museum of art and design, is also suffering. We're on the ninth floor. The museum has had scant visitation. It relies on tourism and to the extent, we rely on events there. There have been none. It's a 150-seat restaurant with social distancing. When we had 25% occupancy allowed, we had just 35 seats. So both Robert and Bryant Park have suffered. El Rio Grande in New York is doing well; it has outdoor seating. Clyde's is not doing well. So New York remains the problem for us, but our cash flows, given the unexpected strong revenues in Florida, Las Vegas, and Washington are really compensating for the strong cash flows that would have come from New York, where our office G&A is down during the pandemic. We let go of certain positions. We're operating more efficiently on a payroll basis. We also have a better lease situation with our office. Our landlord was very generous to us there. We signed a new long-term lease that allowed for certain abatements from our old lease in the restaurants in general. We're also more efficient with payroll. Some of that has to do with the fact that we can't even fill certain jobs, but overall I think the payroll will continue to remain more efficient than it was in the past. As volumes continue to trend upwards, I think cash flows and margins will be much better. We are seeing price inflation in certain commodities we use to our surprise, where we had thought we had no elasticity, especially at Rustic Inn where shellfish prices have gone literally up 20%. We've been able to raise prices and get customer acceptance. Rustic has seen record weeks lately. Some of it has to do with price increase, which has been accepted, but it also relates to what's going on in Southern Florida and pent-up demand. We've put price increases into about half of our restaurants, and we're seeing no pushback whatsoever. So that's the situation. We expect a very strong third quarter. It remains to be seen how the lifting of the COVID restrictions will influence our event business. But if our event business starts to come through, I think we'll do markedly better in New York and that's our current situation. On a balance sheet basis, as the press release indicated, we've converted some $4 million of the $15 million in PPP money that we applied for and received. So far, about $4 million of that has been granted. When we're all done about $13 million will be forgiven. Our balance sheet right now looks like, with all $13 million forgiven, it will probably leave us with net debt of something like $7 million to $8.5 million, meaning long-term debt, less cash. That's the best position we've been in a long time. The cash flow is very strong at this point, as they should be during this period. With that, let me take questions and see if I could be helpful.

Our first question comes from the line of Jeffrey Kaminski with JJK Consulting. You may proceed with your question.

Hi, Michael. Good afternoon. Congratulations on continuing to come through a rather difficult time. I've been on these calls for a while, years now, as you know, and I've generally asked questions specific to some development, whether it be at Meadowlands or last year the PPP situation. My question today is more big picture. This has been a transformational period, and I just was wondering it looks like you closed a few properties. You lost a lease here and there. You've come through—or we've come through a situation where outdoor seating is at a premium and maybe events less. So do you see going forward, Michael, any redirection or pivot to a different strategy for Ark, or have you learned anything that might change the direction of the company, whether it be more emphasis on bar liquor or less emphasis on the events? Just your thoughts on, you've had plenty of time to think about things given the trying period we've just come through. So I was curious if there's a strategy that may change going forward?

The answer is the strategy changed some time ago and we are pretty much staying the course where we would be more inclined to buy properties with cash flow as opposed to building properties ourselves and taking that risk. The properties we've bought, for which we own the land underneath another one in which JB’s is in Florida, where we are partnering with someone who bought the land for us in development. We just think owning the property, if we can, is a big advantage for us. That's the situation we are looking for. These one-off restaurants where people are retiring or no longer have an appetite to continue in their business, if their cash flow is positive and if they have a long lease—for instance, Blue Moon has a 26-year lease. We can buy those properties at very attractive prices. It makes far more sense than building ourselves. That’s our basic strategy. We think those properties will continue to come up. We are one of the few buyers for those properties. The reason for that is we can offer an all-cash deal where restaurants are generally bought locally for 30% down with some notes, and people who are retiring don’t generally want to deal with the notes. So we’ll favor somebody that can do an all-cash deal. We have a lot of confidence that we can buy these things and run them well. Everything that we’ve purchased so far—Rustic, Shuckers, JB’s on the Beach, Blue Moon, the two properties in Alabama—they’re running at probably the best revenues in their history. We retained management in all of those cases. We have a great experience with them, but we're able to lend some knowledge to them that has helped them become more efficient. They are all ideally located on the water or in spectacularly important locations. So that’s what we’re truly looking for. You mentioned Meadowlands; we continue to be highly optimistic that we will get a casino license there. Right now, the Meadowlands post-pandemic, to the extent we can consider it post-pandemic, has been cash flow positive throughout the whole period. We have been cash flow positive because of sports betting, which was fortunate for us; New Jersey legalized sports betting. But the real payoff there will be a casino license, and we consistently think we’re closer and closer, but closer and closer may mean another two years. So, we have a strategy that we’re following. We’re not looking to buy 15 restaurants a year; one to two good properties come up. We’ll buy them and feel very comfortable that we can absorb them without extending our balance sheet.

Thank you.

You're welcome, Jeff.

Our next question comes from the line of Roger Lipton with Lipton Financial Services. You may proceed with your question.

Yes. Hi, Michael. Always nice to talk to you. A simple question which is on everybody's mind, and I just thought I would ask you. Are you giving any thought yet to the timing of the dividend, reinstituting the dividend?

We have not had any discussions with the Board regarding that. There would be, I imagine, historically the Board would like—not only for me, but for Anthony as well—to remain very concerned that our balance sheet remains very strong. Once all the loans of the $13 million of the $15 million that we think will be granted are granted, the balance sheet will be in a strong position. I think before we decide on a dividend, we would like to be more satisfied that the world is safe.

All right.

I think we're probably six months to a year away from knowing that. I'm just taking a guess; I'm not an epidemiologist. So, I think there will be a waiting period even if we could comfortably afford to issue a dividend. The argument against that—because historically we want to do that—the only strong argument against that is what can we do with the money? I mean, we've had spectacular results finding these properties. The recent acquisition of Blue Moon was something like $1,000,007 down and another $1 million in notes over four years. I think Blue Moon earns a million dollars in the first year after we have it. Now, some of that has to do with pent-up demand from the pandemic, and we're seeing that demand flow into the restaurant. But Rustic, we bought it for $7.5 million including the land, when it was making $1.5 million. Pre-pandemic, we were making $3.4 million. These returns are outsized. If we can continue to find these things, maybe we don't want to be so aggressive in reinstituting a dividend if we have a better use for the money. We'll see. But we're six months to a year away from making that decision, I would think, Roger.

Okay. For what it's worth, you may realize Bloomberg predicts that it might go back, and we have how they put this prediction together, I have no idea.

They didn't talk to me.

Yes, they're predicting that in September…

Okay.

…you will reinstitute $0.12. The only thing I would suggest in your contemplation—and you've thought about this—is that would allow the stock—if the stock doesn't begin to reflect the value of the company in terms of your various properties. And who knows when the stock will more accurately reflect what you've created over the last 30 years or so. So, while we're all waiting for the monetization of the various properties, it doesn't hurt either. And you can also, for a compelling deal, borrow $5 million or $10 million, obviously.

Yes.

So that you could still pay a dividend. So, because it's straight to our low and will remain low. So, there is that trade-off, but you thought of all that, I'm just—as a shareholder, I would kind of like to get some sort of a cash return while I'm waiting for the stock to do what it ought to do.

Okay.

But, good job, of course.

Thank you. Thanks, Roger.

Okay.

Ladies and gentlemen, we have reached the end of today's question-and-answer session. I would like to turn this call back over to Mr. Michael Weinstein for closing remarks.

Thank you all for participating. I'll speak to you next quarter. And stay well.

Thank you for joining us today. This concludes today's conference. You may disconnect your lines at this time.