/2H1      d 1$&%*-'ARK RESTAURANTS CORP. AND SUBSIDIARIES"'CONSOLIDATED BALANCE SHEETS^October 3,^September 27, 'ASSETS ^1998 ^1997'CURRENT ASSETS: 'Cash and cash equivalents"$ 1,023,046"$ 722,283 'Accounts receivable "2,507,307 "1,975,4348 'Current portion of long-term receivables (Note 2) "415,755 "277,402 'Inventories "1,950,146 "2,044,689& 'Deferred income taxes (Note 12) "908,468 "915,5340 'Prepaid expenses and other current assets "491,129 "432,816'Total current assets"7,295,851"6,368,158%'LONG-TERM RECEIVABLES (Note 2)"1,119,110"971,023$'ASSETS HELD FOR SALE (Note 3)"1,767,782"1,892,639.'FIXED ASSETS - At cost (Notes 4 and 7):'Leasehold improvements"22,464,922"22,526,150('Furniture, fixtures and equipment"18,591,938"18,387,492)'Leasehold improvements in progress "18,906 "50,053"41,075,766"40,963,6955'Less accumulated depreciation and amortization"15,833,403"14,037,200"25,242,363"26,926,495'"'INTANGIBLE ASSETS - Net (Note 4)""5,514,932""3,346,176&$'DEFERRED INCOME TAXES (Note 12)$"1,030,908$"1,081,006&'OTHER ASSETS (Note 5)&"1,131,233&"682,601("$43,102,179("$41,268,098+*'LIABILITIES AND SHAREHOLDERS' EQUITY,'CURRENT LIABILITIES:-'Accounts payable - trade-"$ 3,563,068-"$ 3,560,250>.'Accrued expenses and other current liabilities (Note 6)."2,907,766."3,098,356?/'Current maturities of capital lease obligations (Note 8)/"229,944/"245,41240'Current maturities of long-term debt (Note 7)0"609,2830"1,424,129%1'Accrued income taxes (Note 12)1"705,1331"413,870 3'Total current liabilities3"8,015,1943"8,742,01706'OBLIGATIONS UNDER CAPITAL LEASES (Note 8)6"148,4946"406,533A8'LONG-TERM DEBT - Net of current maturities (Notes 4 and 7)8"4,405,3518"4,702,668/:'OPERATING LEASE DEFERRED CREDIT (Note 8):"1,471,000:"1,528,0004<'COMMITMENTS AND CONTINGENCIES (Notes 7 and 8)0>'SHAREHOLDERS' EQUITY (Notes 7, 9 and 10):;?'Common stock, par value $.01 per share - authorized,A@'10,000,000 shares; issued, 5,187,836 and 5,177,836 shares,A'respectively A"51,879 A"51,779!B'Additional paid-in capitalB"14,214,898B"14,131,383C'Retained earningsC"17,565,258C"12,953,117E"31,832,035E"27,136,279:G'Less treasury stock, 1,504,337 and 1,345,337 sharesG"2,769,895G"1,247,399I"29,062,140I"25,888,880K"$43,102,179K"$41,268,0986O'See notes to consolidated financial statements.-Q'ARK RESTAURANTS CORP. AND SUBSIDIARIES,R'CONSOLIDATED STATEMENTS OF OPERATIONSV^Year EndedW^October 3,W^September 27,W^September 28, X^1998 X^1997 X^1996Z'NET SALESZ"$117,398,453Z"$104,326,386Z"$ 76,795,940\'COST OF SALES\"31,265,702\"28,451,887\"20,861,465^'Gross restaurant profit^"86,132,751^"75,874,499^"55,934,475&`'MANAGEMENT FEE INCOME (Note 11)`"1,139,799`"1,153,264`"1,204,808b"87,272,550b"77,027,763b"57,139,283d'OPERATING EXPENSES:#e'Payroll and payroll benefitse"41,171,865e"38,520,986e"27,740,390f'Occupancyf"13,788,992f"13,031,811f"9,843,110g'Depreciationg"3,998,272g"3,320,739g"2,664,892 h'Otherh"14,671,521h"13,922,524h"11,918,198j"73,630,650j"68,796,060j"52,166,590*l'GENERAL AND ADMINISTRATIVE EXPENSESl"6,052,435l"5,445,990l"4,474,697n"79,683,085n"74,242,050n"56,641,287p'OPERATING INCOMEp"7,589,465p"2,785,713p"497,996s'OTHER EXPENSE (INCOME): t'Interest expense (Note 7)t"608,278t"755,383t"425,810u'Interest incomeu"(209,577)u"(71,652)u"(86,708)v'Other income (Note 13)v"(490,118)v"(780,281)v"(1,082,717)x"(91,417)x"(96,550)x"(743,615)/{'INCOME BEFORE PROVISION FOR INCOME TAXES{"7,680,882{"2,882,263{"1,241,611+}'PROVISION FOR INCOME TAXES (Note 12)}"3,068,741}"1,144,608}"452,849'NET INCOME"$ 4,612,141"$ 1,737,655"$ 788,762#'NET INCOME PER SHARE - BASIC"$ 1.21"$ .47"$ .24%'NET INCOME PER SHARE - DILUTED"$ 1.20"$ .46"$ .240'WEIGHTED AVERAGE NUMBER OF SHARES - BASIC"3,826,255"3,714,116"3,238,4192'WEIGHTED AVERAGE NUMBER OF SHARES - DILUTED"3,852,019"3,742,811"3,272,8576'See notes to consolidated financial statements.-'ARK RESTAURANTS CORP. AND SUBSIDIARIES6'CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY$'YEARS ENDED OCTOBER 3, 1998, 1'SEPTEMBER 27, 1997, AND SEPTEMBER 28, 1996^Common Stock^Common Stock^Additional ^Total^-------------^-------------^Paid-In^Retained^Treasury^Shareholders' ^Shares ^Amount^Capital^Earnings ^Stock ^Equity"'BALANCE, SEPTEMBER 30, 1995"4,536,382"$ 45,364"$ 7,481,636"$ 10,426,700"$ (1,247,399)"$ 16,706,301 'Exercise of stock options "72,500 "725"183,650 "-- "--"184,375)'Tax benefit on exercise of options "-- "--"124,956 "-- "--"124,956'Net income "-- "-- "--"788,762 "--"788,762"'BALANCE, SEPTEMBER 28, 1996"4,608,882 "46,089"7,790,242"11,215,462"(1,247,399)"17,804,394%'Common stock private placement"551,454 "5,515"6,023,111 "-- "--"6,028,626'Issuance of warrants "-- "--"175,000 "-- "--"175,000 'Exercise of stock options "17,500 "175 "85,450 "-- "-- "85,625)'Tax benefit on exercise of options "-- "-- "57,580 "-- "-- "57,580'Net income "-- "-- "--"1,737,655 "--"1,737,655"'BALANCE, SEPTEMBER 27, 1997"5,177,836 "51,779"14,131,383"12,953,117"(1,247,399)"25,888,880 'Exercise of stock options "10,000 "100 "64,900 "-- "-- "65,000!'Purchase of treasury stock "-- "-- "-- "--"(1,522,496)"(1,522,496))'Tax benefit on exercise of options "-- "-- "18,615 "-- "-- "18,615'Net income "-- "-- "--"4,612,141 "--"4,612,141'BALANCE, OCTOBER 3, 1998"$ 5,187,836"$ 51,879"$ 14,214,898"$ 17,565,258"$ (2,769,895)"$ 29,062,1406'See notes to consolidated financial statements.-'ARK RESTAURANTS CORP. AND SUBSIDIARIES,'CONSOLIDATED STATEMENTS OF CASH FLOWS^Year Ended^October 3,^September 27,^September 28, ^1998 ^1997 ^1996,'CASH FLOWS FROM OPERATING ACTIVITIES:'Net income"$ 4,612,141"$ 1,737,655"$ 788,762?'Adjustments to reconcile net income to net cash provided'by operating activities:4'Depreciation and amortization of fixed assets"3,432,104"3,047,422"2,324,304"'Amortization of intangibles"566,168"445,123"492,207)'Loss (gain) on sale of restaurants"(258,684)"(229,000)"297,0008'Provision for uncollectible long-term receivables "-- "-- "96,000&'Operating lease deferred credit"(57,000)"(19,000) "10,000'Deferred income taxes "57,164"(431,966)"(692,492))'Changes in assets and liabilities:&'Increase in accounts receivable"(531,873)"(512,935)"(184,672)'Increase in inventories"(17,020)"(890,567)"(65,597)G'Increase (decrease) in prepaid expenses and other current assets"(58,313)"112,961"603,675/'(Increase) decrease in other assets, net"(543,820) "60,008"(232,205)+'Increase in accounts payable - trade "2,818"1,194,311"330,167''Increase in accrued income taxes"291,263 "89,476 "59,025L'Increase (decrease) in accrued expenses and other current liabilities"(190,590) "13,672"181,3920'Net cash provided by operating activities"7,304,358"4,617,160"4,007,566,'CASH FLOWS FROM INVESTING ACTIVITIES: 'Additions to fixed assets"(1,713,847)"(11,006,116)"(6,833,018)%'Additions to intangible assets"(229,524)"(11,639)"(110,849)9'Issuance of demand notes and long-term receivables"(81,580) "--"(63,092)B'Payments received on demand notes and long-term receivables"315,908"264,370"171,651'Restaurant sales"265,000"308,000"250,000'Restaurant acquisitions"(2,735,000) "--"(108,000),'Net cash used in investing activities"(4,179,043)"(10,445,385)"(6,693,308),'CASH FLOWS FROM FINANCING ACTIVITIES:*'Principal payment on long-term debt"(8,012,164)"(10,277,900)"(1,857,045)!'Issuance of long-term debt"6,900,000"10,000,831"4,100,000 'Exercise of stock options "83,615"143,205"309,3315'Principal payment on capital lease obligations"(273,507)"(251,257)"(230,825)!'Purchase of treasury stock"(1,522,496) "-- "--3'Proceeds from common stock private placement "--"6,028,626 "--:'Net cash provided by (used in) financing activities"(2,824,552)"5,643,505"2,321,461,'DECREASE IN CASH AND CASH EQUIVALENTS"300,763"(184,720)"(364,281)3'CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR"722,283"907,003"1,271,284-'CASH AND CASH EQUIVALENTS, END OF YEAR"$ 1,023,046"$ 722,283"$ 907,003 'SUPPLEMENTAL INFORMATION:,'Cash payments for the following were:'Interest"$ 608,278"$ 931,383"$ 515,810'Income taxes"$ 2,699,651"$ 1,502,643"$ 966,4346'See notes to consolidated financial statements.