UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q


	(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Quarterly Period Ended March 31, 2024

	OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from to

Commission File Number 001-37379

THE ONE GROUP HOSPITALITY, INC.

(Exact name of registrant as specified in its charter)


Delaware		14-1961545
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1624 Market Street, Suite 311, Denver, Colorado		80202
(Address of principal executive offices)		Zip Code

646-624-2400

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	STKS	Nasdaq

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 during the preceding 12 months (or for such 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. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ⌧ No ◻

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


Large accelerated filer ◻	Accelerated filer ⌧
Non-accelerated filer ◻	Smaller reporting company ⌧
	Emerging growth company ◻

If an emerging growth company, indicate by a check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) 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). Yes ☐ No ⌧

Number of shares of common stock outstanding as of April 30, 2024: 31,419,869

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PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

THE ONE GROUP HOSPITALITY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share information)


	March 31,		December 31,
	2024		2023
ASSETS	(Unaudited)
Current assets:
Cash and cash equivalents	$	15,374	$	21,047
Accounts receivable		12,172		17,264
Inventory		5,395		6,184
Other current assets		4,646		1,809
Due from related parties		376		376
Total current assets		37,963		46,680

Property and equipment, net		147,304		139,908
Operating lease right-of-use assets		87,900		95,075
Deferred tax assets, net		15,141		14,757
Intangibles, net		15,305		15,306
Other assets		4,819		4,636
Security deposits		883		883
Total assets	$	309,315	$	317,245

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	15,819	$	19,089
Accrued expenses		31,525		28,333
Deferred gift card revenue and other		2,006		2,077
Current portion of operating lease liabilities		7,534		6,897
Current portion of long-term debt		1,856		1,500
Other current liabilities		310		266
Total current liabilities		59,050		58,162


Operating lease liabilities, net of current portion		113,191		120,481
Long-term debt, net of current portion		70,207		70,410
Other long-term liabilities		771		832
Total liabilities		243,219		249,885

Commitments and contingencies (Note 14)

Stockholders’ equity:
Common stock, $0.0001 par value, 75,000,000 shares authorized; 33,584,949 issued and 31,308,496 outstanding at March 31, 2024 and 33,560,428 issued and 31,283,975 outstanding at December 31, 2023		3		3
Preferred stock, $0.0001 par value, 10,000,000 shares authorized; no shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively		—		—
Treasury stock, 2,276,453 shares at cost at March 31, 2024 and December 31, 2023		(15,051)		(15,051)
Additional paid-in capital		59,504		58,270
Retained earnings		26,815		28,884
Accumulated other comprehensive loss		(2,998)		(2,930)
Total stockholders’ equity		68,273		69,176
Noncontrolling interests		(2,177)		(1,816)
Total equity		66,096		67,360
Total liabilities and equity	$	309,315	$	317,245

See notes to the condensed consolidated financial statements.

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THE ONE GROUP HOSPITALITY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(Unaudited, in thousands, except income per share and related share information)


	For the three months ended March 31,
	2024		2023
Revenues:
Owned restaurant net revenue	$	81,508	$	78,579
Management, license and incentive fee revenue		3,487		3,977
Total revenues		84,995		82,556
Cost and expenses:
Owned operating expenses:
Owned restaurant cost of sales		18,714		18,855
Owned restaurant operating expenses		49,638		46,827
Total owned operating expenses		68,352		65,682
General and administrative (including stock-based compensation of $1,358 and $1,320 for the three months ended March 31, 2024 and 2023, respectively)		7,534		7,484
Depreciation and amortization		5,260		3,656
Pre-opening expenses		2,914		1,299
Transaction and exit costs		1,523		—
Other expenses		32		157
Total costs and expenses		85,615		78,278
Operating (loss) income		(620)		4,278
Other expenses, net:
Interest expense, net of interest income		2,078		1,787
Total other expenses, net		2,078		1,787
(Loss) income before provision for income taxes		(2,698)		2,491
(Benefit) provision for income taxes		(268)		161
Net (loss) income		(2,430)		2,330
Less: net loss attributable to noncontrolling interest		(361)		(276)
Net (loss) income attributable to The ONE Group Hospitality, Inc.	$	(2,069)	$	2,606
Currency translation loss		(68)		(70)
Comprehensive (loss) income attributable to The ONE Group Hospitality, Inc.	$	(2,137)	$	2,536

Net (loss) income attributable to The ONE Group Hospitality, Inc. per share:
Basic net (loss) income per share	$	(0.07)	$	0.08
Diluted net (loss) income per share	$	(0.07)	$	0.08

Shares used in computing basic (loss) income per share		31,306,417		31,677,232
Shares used in computing diluted (loss) income per share		31,306,417		32,997,751

See notes to the condensed consolidated financial statements.

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THE ONE GROUP HOSPITALITY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(Unaudited, in thousands, except share information)


										Accumulated
						Additional				other
	Common stock			Treasury		paid-in		Retained		comprehensive		Stockholders’		Noncontrolling
	Shares	Par value		stock		capital		Earnings		loss		equity		interests		Total
Balance at December 31, 2023	31,283,975	$	3	$	(15,051)	$	58,270	$	28,884	$	(2,930)	$	69,176	$	(1,816)	$	67,360
Stock-based compensation			—		—		1,358		—		—		1,358		—		1,358
Issuance of vested restricted shares, net of tax withholding	24,521		—		—		(124)		—		—		(124)		—		(124)
Loss on foreign currency translation, net	—		—		—		—		—		(68)		(68)		—		(68)
Net loss	—		—		—		—		(2,069)		—		(2,069)		(361)		(2,430)
Balance at March 31, 2024	31,308,496	$	3	$	(15,051)	$	59,504	$	26,815	$	(2,998)	$	68,273	$	(2,177)	$	66,096

Balance at December 31, 2022	31,735,423	$	3	$	(7,169)	$	55,583	$	24,166	$	(2,869)	$	69,714	$	(1,124)	$	68,590
Stock-based compensation	16,205		—		—		1,320		—		—		1,320		—		1,320
Issuance of vested restricted shares, net of tax withholding	247,536		—		—		(1,432)		—		—		(1,432)		—		(1,432)
Purchase of treasury stock	(118,085)				(735)		—		—		—		(735)		—		(735)
Loss on foreign currency translation, net	—		—		—		—		—		(70)		(70)		—		(70)
Net income (loss)	—		—		—		—		2,606		—		2,606		(276)		2,330
Balance at March 31, 2023	31,881,079	$	3	$	(7,904)	$	55,471	$	26,772	$	(2,939)	$	71,403	$	(1,400)	$	70,003

See notes to the condensed consolidated financial statements.

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THE ONE GROUP HOSPITALITY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, in thousands)


	For the three months ended March 31,
	2024		2023
Operating activities:
Net (loss) income	$	(2,430)	$	2,330
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		5,260		3,656
Non-cash exit costs		263		—
Stock-based compensation		1,358		1,320
Amortization of debt issuance costs		185		186
Deferred taxes		(384)		(3)
Changes in operating assets and liabilities:
Accounts receivable		5,080		4,638
Inventory		789		731
Other current assets		(2,837)		(262)
Security deposits		—		(2)
Other assets		(408)		(246)
Accounts payable		(1,433)		(1,667)
Accrued expenses		4,433		(4,160)
Operating lease liabilities and right-of-use assets		522		611
Other liabilities		(20)		(511)
Net cash provided by operating activities		10,378		6,621

Investing activities:
Purchase of property and equipment		(15,795)		(11,852)
Net cash used in investing activities		(15,795)		(11,852)

Financing activities:
Repayments of long-term debt and financing lease liabilities		(68)		(229)
Tax-withholding obligation on stock-based compensation		(124)		(156)
Purchase of treasury stock		—		(735)
Net cash used in financing activities		(192)		(1,120)
Effect of exchange rate changes on cash		(64)		(71)
Net decrease in cash and cash equivalents		(5,673)		(6,422)
Cash and cash equivalents, beginning of period		21,047		55,121
Cash and cash equivalents, end of period	$	15,374	$	48,699
Supplemental disclosure of cash flow data:
Interest paid, net of capitalized interest	$	26	$	1,969
Income taxes paid	$	61	$	15
Accrued purchases of property and equipment	$	9,506	$	4,235

See notes to the condensed consolidated financial statements.

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Note 2 – Property and Equipment, net

Property and equipment, net consist of the following (in thousands):


	March 31,		December 31,
	2024		2023
Furniture, fixtures and equipment	$	49,744	$	49,753
Leasehold improvements		134,127		130,136
Less: accumulated depreciation		(63,526)		(60,128)
Subtotal		120,345		119,761
Construction in progress		23,524		17,044
Restaurant smallwares		3,435		3,103
Total	$	147,304	$	139,908

Depreciation related to property and equipment was $5.3 million and $3.6 for the three months ended March 31, 2024 and 2023, respectively. The Company depreciates construction in progress upon such assets being placed into service.

Note 3 – Accrued Expenses

Accrued expenses consist of the following (in thousands):


	March 31,		December 31,
	2024		2023
Payroll and related	$	5,385	$	5,655
Interest		4,705		2,396
New restaurant construction		4,529		6,318
Legal, professional and other services		4,492		1,364
VAT and sales taxes		3,985		4,238
Amounts due to landlords		2,529		2,753
Insurance		316		545
Income taxes and related		90		30
Other⁽¹⁾		5,494		5,034
Total	$	31,525	$	28,333

(1)	Amount primarily relates to recurring restaurant operating expenses.

Note 4 – Long-Term Debt

Long-term debt consists of the following (in thousands):


	March 31,		December 31,
	2024		2023
Term loan agreements	$	23,750	$	23,750
Revolving credit facility		—		—
Delayed draw term facility		49,750		49,750
Total long-term debt		73,500		73,500
Less: current portion of long-term debt		(1,856)		(1,500)
Less: debt issuance costs		(1,437)		(1,590)
Total long-term debt, net of current portion	$	70,207	$	70,410

Interest expense for the Company’s debt arrangements, excluding the amortization of debt issuance costs and other discounts and fees, was $2.0 million for both the three months ended March 31, 2024 and 2023. Capitalized interest was $0.3 million for the three months ended March 31, 2024. There was no capitalized interest for the three months ended March 31, 2023.

As of March 31, 2024, the Company had $1.4 million in standby letters of credit outstanding for certain restaurants and $10.6 million available in its revolving credit facility, subject to certain conditions.

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Credit and Guaranty Agreement

On October 4, 2019, in conjunction with the acquisition of Kona Grill, the Company entered into a credit agreement with Goldman Sachs Bank USA (the “Credit Agreement”). On August 6, 2021, the Company entered into the Third Amendment to the Credit Agreement to extend the maturity date for both the term loan and revolving credit facility to August 2026, to eliminate all financial covenants except a maximum net leverage ratio of 2.00 to 1.00, and to eliminate restrictions on the maximum amount of capital expenditures, the maximum number of Company-owned new locations, and credit extensions under the revolving credit facility. As amended, the Credit Agreement provides for a secured revolving credit facility of $12.0 million and a $25.0 million term loan (reduced from $48.0 million). The term loan is payable in quarterly installments of $0.1 million, with the final payment due in August 2026.

On December 13, 2022, the Company entered into the Fourth Amendment to the Credit Agreement that:

●

Allows for a new $50.0 million delayed draw term facility, available to draw for twelve months and subject to a 1.75x Net Leverage Ratio incurrence test (as defined in the Credit Agreement) for permitted acquisitions, stock repurchases and new restaurant capital expenditures;

●

Allows the Company to redeem, repurchase or otherwise acquire its own capital stock in an aggregate amount of up to $50 million subject to a 1.75x Net Leverage Ratio incurrence test and no default or event of default; and

●

Changes the interest rate from London Interbank Offered Rate (“LIBOR”) plus a margin to Secured Overnight Financing Rate (“SOFR”) plus an applicable margin.

The Company borrowed $50.0 million on the delayed draw term facility on December 28, 2022. The delayed draw term loan is payable in quarterly installments of $0.25 million beginning December 31, 2023, with the final payment due in August 2026.

Loans under the amended Credit Agreement bear interest at a rate per annum using the SOFR rate subject to a 1.00% floor plus an interest rate margin of 6.50%.

The Company’s weighted average interest rate on the borrowings under the amended Credit Agreement as of March 31, 2024 and December 31, 2023 was 12.15% and 12.40%, respectively.

The Credit Agreement contains customary representations, warranties and conditions to borrowing including customary affirmative and negative covenants, among other things, that limit or restrict the Company’s ability to incur indebtedness and other obligations, grant liens to secure obligations, make investments, merge or consolidate, alter the organizational structure of the Company and its subsidiaries, and dispose of assets outside the ordinary course of business, in each case subject to customary exceptions for credit facilities of this size and type.

The Company and certain operating subsidiaries of the Company guarantee the obligations under the amended Credit Agreement, which also are secured by liens on substantially all of the assets of the Company and its subsidiaries.

As of March 31, 2024, the Company had $1.4 million of debt issuance costs related to the amended Credit Agreement, which were capitalized and are recorded as a direct deduction to long-term debt and $0.3 million in debt issuance costs recorded in Other Assets on the condensed consolidated balance sheets. As of March 31, 2024, the Company was in compliance with the financial covenants required by the Credit Agreement.

Note 5 – Fair Value of Financial Instruments

Cash and cash equivalents, accounts receivable, inventory, accounts payable and accrued expenses are carried at cost, which approximates fair value due to their short maturities. Long-lived assets are measured and disclosed at fair value on a nonrecurring basis if an impairment is identified. There were no long-lived assets measured at fair value as of March 31, 2024.

The Company’s long-term debt, including the current portion, is carried at cost on the condensed consolidated balance sheets. The fair value of long-term debt, including the current portion, is valued using Level 2 inputs including current applicable rates for similar instruments and approximates the carrying value of such obligations.

Note 6 – Income Taxes

Income taxes are recorded at the Company’s estimated annual effective income tax rate, subject to adjustments for discrete events, should they occur. The Company recorded a benefit for income taxes of $0.3 million for the first quarter of 2024 compared to income

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tax expense of $0.2 million for the first quarter of 2023. The Company’s effective income tax rate including discrete events was 9.9% for the three months ended March 31, 2024 compared to 6.5% for the three months ended March 31, 2023. The Company’s projected annual effective tax rate differs from the statutory U.S. tax rate of 21% primarily due to the following: (i) tax credits for FICA taxes on certain employees’ tips (ii) taxes owed in foreign jurisdictions with tax rates that differ from the U.S. statutory rate; (iii) taxes owed in state and local jurisdictions; and (iv) the tax effect of non-deductible compensation. Income tax provision recorded for the three months ended March 31, 2024 and 2023 included the discrete period tax benefits resulting from the vesting of restricted stock units.

The Company is subject to U.S. federal, state, local and various foreign income taxes for the jurisdictions in which it operates. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. In the normal course of business, the Company is subject to examination by the federal, state, local and foreign taxing authorities. There are no ongoing federal, state, local, or foreign tax examinations as of March 31, 2024.

Note 7 – Revenue Recognition

The following table provides information about contract liabilities, which include deferred license revenue, deferred gift card revenue, advanced party deposits and the Konavore rewards program (in thousands):


	March 31,		December 31,
	2024		2023
Deferred license revenue ⁽¹⁾	$	206	$	218
Deferred gift card and gift certificate revenue ⁽²⁾	$	1,315	$	1,716
Advanced party deposits ⁽²⁾	$	691	$	361
Konavore rewards program ⁽³⁾	$	182	$	177

(1)	Includes the current and long-term portion of deferred license revenue which are included in other current liabilities and other long-term liabilities on the condensed consolidated balance sheets.

(2)	Deferred gift card revenue and advance party deposits on goods and services yet to be provided are included in deferred gift card revenue and other on the condensed consolidated balance sheets.

(3)	Konavore rewards program is included in accrued expenses on the condensed consolidated balance sheets.

Revenue recognized during the period from contract liabilities as of the preceding fiscal year end date is as follows (in thousands):


	March 31,		March 31,
	2024		2023
Revenue recognized from deferred license revenue	$	12	$	20
Revenue recognized from deferred gift card revenue	$	595	$	571
Revenue recognized from advanced party deposits	$	361	$	271

The estimated deferred license revenue to be recognized in the future related to performance obligations that are unsatisfied as of March 31, 2024 were as follows for each year ending (in thousands):


2024, nine months remaining	$	32
2025		44
2026		37
2027		34
2028		34
Thereafter		25
Total future estimated deferred license revenue	$	206

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Note 8 – Leases

The components of lease expense for the three months ended March 31, 2024 and 2023 were as follows (in thousands):


	March 31,			March 31,
	2024			2023
Lease cost
Operating lease cost	$	4,289		$	3,894
Finance lease cost
Amortization of ROU assets		55			51
Interest on lease liabilities		19			21
Total finance lease cost		74			72
Variable lease cost ⁽¹⁾		3,089			2,610
Short-term lease cost		316			275
Total lease cost	$	7,768		$	6,851

Weighted average remaining lease term
Operating leases		13 years			13 years
Finance leases		4 years			5 years
Weighted average discount rate
Operating leases		8.79	%		8.45	%
Finance leases		9.16	%		9.01	%

(1)	Variable lease cost is comprised of percentage rent and common area maintenance.

The components of finance lease assets and liabilities on the condensed consolidated balance sheet were as follows (in thousands):


	March 31,		December 31,
	2024		2023
Finance lease right-of-use assets ⁽¹⁾	$	794	$	850
Current portion of finance lease liabilities ⁽¹⁾		266		222
Long-term portion of finance lease liabilities ⁽¹⁾		609		658

(1)	Finance lease assets and liabilities are included in other assets, other current liabilities, and other long-term liabilities on the condensed consolidated balance sheet.

Supplemental cash flow information related to leases for the period was as follows (in thousands):


	March 31,		March 31,
	2024		2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	4,171	$	3,472
Operating cash flows from finance leases	$	55	$	51
Financing cash flows from finance leases	$	68	$	104
Right-of-use assets obtained in exchange for lease obligations:
Operating leases	$	—	$	3,178
Finance leases	$	—	$	41

The Company has entered into six operating leases for future restaurants that have not commenced as of March 31, 2024. The present value of the aggregate future commitment related to these leases totals $6.8 million. The Company expects these leases, which have an initial lease term of 10 years, to commence within the next twelve months.

During the three months ended March 31, 2024, the Company decided not to renew the lease for STK Westwood, which will terminate within the next twelve months. As a result, the right-of-use asset was reduced by $5.5 million, and the right-of-use liability decreased $5.7 million.

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As of March 31, 2024, maturities of the Company’s operating lease liabilities are as follows (in thousands):


2024, nine months remaining	$	6,721
2025		16,669
2026		16,278
2027		16,671
2028		16,977
Thereafter		146,779
Total lease payments		220,095
Less: imputed interest		(99,370)
Present value of operating lease liabilities	$	120,725

As of March 31, 2024, maturities of the Company’s finance lease liabilities are as follows (in thousands):


2024, nine months remaining	$	265
2025		266
2026		266
2027		221
Total lease payments		1,018
Less: imputed interest		(143)
Present value of finance lease liabilities	$	875

Note 9 – Earnings Per Share

Basic earnings per share is computed using the weighted average number of common shares outstanding during the period and income available to common stockholders. Diluted earnings per share is computed using the weighted average number of common shares outstanding during the period plus the dilutive effect of potential shares of common stock including common stock issuable pursuant to stock options, warrants, and restricted stock units.

For the three months ended March 31, 2024 and 2023, the net (loss) income per share was calculated as follows (in thousands, except net (loss) income per share and related share data):


	Three months ended March 31,
	2024		2023
Net (loss) income attributable to The ONE Group Hospitality, Inc.	$	(2,069)	$	2,606

Basic weighted average shares outstanding		31,306,417		31,677,232
Dilutive effect of stock options, warrants and restricted share units		—		1,320,519
Diluted weighted average shares outstanding		31,306,417		32,997,751

Net (loss) income available to common stockholders per share - Basic	$	(0.07)	$	0.08
Net (loss) income available to common stockholders per share - Diluted	$	(0.07)	$	0.08

For the three months ended March 31, 2024 and 2023, 1.2 million and 0.1 million, respectively, of stock options, warrants and restricted share units were determined to be anti-dilutive and were therefore excluded from the calculation of diluted earnings per share.

Note 10 – Stockholder’s Equity

Preferred Stock

The Company is authorized to issue 10,000,000 shares of preferred stock with a par value of $0.0001. There were no shares of preferred stock that were issued or outstanding at March 31, 2024 or December 31, 2023.

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Common Stock

Stock Purchase Program

The Company’s Board of Directors authorized a repurchase program of up to $15.0 million of outstanding common stock that was completed in December 2023. In March 2024, the Company’s Board of Directors authorized an additional $5.0 million of repurchases under this program. There were no stock repurchases in the first quarter of 2024.

Note 11 – Stock-Based Compensation and Warrants

As of March 31, 2024, the Company had 3,723,300 shares available for issuance under the Equity Incentive Plan.

Stock-based compensation cost for the three months ended March 31, 2024 and 2023 was $1.4 million and $1.3 million, respectively. Stock-based compensation is included in general and administrative expenses in the condensed consolidated statements of operations and comprehensive income. Included in stock-based compensation cost for the three months ended March 31, 2024 and 2023, was $0.1 million of cost related to stock granted to directors. Such grants were awarded consistent with the Board of Director’s compensation practices. Stock-based compensation for both the three months ended March 31, 2024 and 2023 included $0.2 million of compensation costs for performance stock units that contain both a market condition and time element (“PSUs”).

Stock Option Activity

Stock options in the table below include both time based and market condition-based awards. Changes in stock options during the three months ended March 31, 2024 were as follows:


				Weighted
		Weighted		average	Intrinsic
		average exercise		remaining	value
	Shares	price		contractual life	(thousands)
Outstanding and Exercisable at December 31, 2023	673,942	$	2.35	3.24 years	$	2,540
Granted	—		—
Exercised	—	$	—
Cancelled, expired or forfeited	—		—
Outstanding and Exercisable at March 31, 2024	673,942	$	2.35	2.99 years	$	2,169

All outstanding stock options are fully vested.

Restricted Stock Unit Activity

The Company issues restricted stock units (“RSUs”) under the 2019 Equity Plan. The fair value of time-based RSUs is determined based upon the closing fair market value of the Company’s common stock on the grant date.

A summary of the status of RSUs and changes during the three months ended March 31, 2024 is presented below:


		Weighted average
	Shares	grant date fair value
Non-vested RSUs at December 31, 2023	1,020,556	$	8.08
Granted	15,000		5.62
Vested	(206,985)		7.06
Cancelled, expired or forfeited	(21,114)		7.98
Non-vested RSUs at March 31, 2024	807,457	$	8.30

As of March 31, 2024, the Company had approximately $5.3 million of unrecognized compensation costs related to RSUs, which will be recognized over a weighted average period of 1.8 years.

Table of Contents

Performance Stock Unit Activity

The Company issues performance stock units (“PSUs”) under the 2019 Equity Plan. PSUs in the table below includes both time based and market condition-based awards and are valued using the Monte Carlo Simulation.

A summary of the status of PSUs and changes during the three months ended March 31, 2024 is presented below:


		Weighted average
	Shares	grant date fair value
Non-vested PSUs at December 31, 2023	375,000	$	5.89
Granted	—		—
Vested	—		—
Cancelled, expired or forfeited	—		—
Non-vested PSUs at March 31, 2024	375,000	$	5.89

As of March 31, 2024, the Company had approximately $1.8 million of unrecognized compensation costs related to PSUs, which will be recognized over a weighted average period of 2.4 years.

Note 12 – Segment Reporting

The Company has identified its reportable operating segments as follows:

●

STK. The STK segment consists of the results of operations from STK restaurant locations, competing in the full-service dining industry, as well as management, license and incentive fee revenue generated from the STK brand and pre-opening expenses associated with new STK restaurants under development.

●

Kona Grill. The Kona Grill segment includes the results of operations of Kona Grill restaurant locations and pre-opening expenses associated with new Kona Grill restaurants under development.

●

ONE Hospitality. The ONE Hospitality segment is composed of the management, license and incentive fee revenue and results of operations generated from the Company’s other brands and venue concepts, not including STK or Kona Grill, which include Bao Yum, Heliot, Hideout, Radio and Rivershore Bar & Grill. Additionally, this segment includes the results of operations generated from F&B hospitality management agreements with hotels, casinos and other high-end locations.

●

Corporate. The Corporate segment consists of the following: general and administrative costs, stock-based compensation, lease termination expenses, transaction costs and other income and expenses. This segment also includes STK Meat Market, an e-commerce platform that offers signature steak cuts nationwide and revenue generated from gift card programs. The Corporate segment’s total assets primarily include cash and cash equivalents, the Kona Grill tradename, and deferred tax assets.

The Company’s Chief Executive Officer, who is the Company’s Chief Operating Decision Maker, manages the business and allocates resources via a combination of restaurant sales reports and operating segment profit information, defined as revenues less operating expenses, related to the Company’s four operating segments.

Certain financial information relating to the three months ended March 31, 2024 and 2023 for each segment is provided below (in thousands).


	STK		Kona Grill		ONE Hospitality		Corporate		Total
For the three months ended March 31, 2024
Total revenues	$	54,450		30,149		301		95		84,995
Operating income (loss)	$	8,860		(503)		(145)		(8,832)		(620)
Capital asset additions⁽¹⁾	$	13,010		2,587		25		173		15,795
As of March 31, 2024
Total assets	$	154,991		96,194		2,021		56,109		309,315


	STK		Kona Grill		ONE Hospitality		Corporate		Total
For the three months ended March 31, 2023
Total revenues	$	51,138		30,909		401		108		82,556
Operating income (loss)	$	12,096		(25)		(46)		(7,747)		4,278
Capital asset additions⁽¹⁾	$	4,277		6,476		21		1,078		11,852
As of December 31, 2023
Total assets	$	153,769		97,840		5,868		59,768		317,245

(1)	Capital asset additions for the Corporate segment include furniture, fixtures, and equipment for restaurants that the Company plans to open in the future.


	Page
PART I – Financial Information
Item 1. Financial Statements	3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3. Quantitative and Qualitative Disclosures About Market Risk	27
Item 4. Controls and Procedures	27

PART II – Other Information
Item 1. Legal Proceedings	27
Item 1A Risk Factors	28
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 5. Other Information	29
Item 6. Exhibits	30

Signatures	31