ONE Group Hospitality, Inc. Fair Value Disclosure
Note 7 – Fair Value of Financial Instruments
Cash and cash equivalents, credit card receivable, accounts receivable, inventory, accounts payable and accrued expenses are carried at cost, which approximates fair value. Long-lived assets are measured and disclosed at fair value on a nonrecurring basis if an impairment is identified. During the year ended December 28, 2025, the Company completed an impairment analysis using Level 3 inputs on assets related to restaurants that have upcoming lease expirations using a discounted cash flow model. The Company recorded non-cash impairment charges of $6.4 million on property and equipment, net and operating lease right-of-use-assets recorded in loss on impairment of non-current assets on the consolidated statement of operations and $0.7 million recorded in lease termination expenses on the consolidated statement of operations.
Goodwill and indefinite-lived intangible assets are measured and disclosed at fair value on a nonrecurring basis if an impairment is identified. During the year ended December 28, 2025, the Company completed an impairment analysis using Level 3 inputs on goodwill, using a weighting of the income approach using a discounted cash flow analysis and the market approach using a guideline public company method. The fair value of the trade names and trademarks is estimated using the relief from royalty method. For the Benihana reporting unit and tradename and RA Sushi tradename, key assumptions include projected revenue growth and operating expenses, discount rates, royalty rates and other factors that could affect fair value or otherwise indicate potential impairment. For the Kona Grill tradename, key assumptions include projected weighted average revenue growth of approximately -1.8%, driven by the optimization of the Grill Concepts that took place during 2025 and 2026; discount rate of approximately 10.5%; royalty rate of approximately 1.5%; and other factors that could affect fair value or otherwise indicate potential impairment. The Company recorded non-cash charges of $4.2 million on the Kona Grill tradename within intangible assets on the consolidated balance sheets recorded in loss on impairment of non-current assets on the consolidated statement of operations.
The Company’s long-term debt, which is valued using Level 2 inputs, approximates fair value as such debt bears interest at variable rates which approximates market rates.
The Company’s purchase price allocations for the Benihana Acquisition were measured at fair value on a nonrecurring basis primarily using Level 3 inputs.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Mar 19, 2026 | Showing above |
| 2024 | Mar 10, 2025 | |
| 2019 | Mar 26, 2020 | |
| 2018 | Mar 28, 2019 | |
About Fair Value Disclosures
Fair value disclosures classify all assets and liabilities measured at fair value into a three-level hierarchy: Level 1 (quoted market prices), Level 2 (observable inputs like yield curves), and Level 3 (unobservable inputs requiring management estimates). The proportion of Level 3 assets directly reflects how much of the balance sheet depends on internal models rather than market evidence.
Key signals: a growing Level 3 balance relative to total fair-value assets increases valuation uncertainty and earnings volatility risk. Watch for transfers between levels — assets moving from Level 2 to Level 3 often signal deteriorating market liquidity. Unrealized gains and losses on Level 3 positions flow through earnings or other comprehensive income, so large swings deserve scrutiny. For financial institutions, examine the sensitivity disclosures that show how Level 3 valuations change under alternative assumptions. Compare the fair value of debt against its carrying amount to gauge hidden leverage.