-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IHf0am+CfG1P0IDnx4nTb8SF4aOAcQGBIDPEf5pS1jbvtqFIQbWJXhQQc1QdzjZG ANgW88rRJaGavBEuPccEOQ== 0000950117-98-000999.txt : 19980617 0000950117-98-000999.hdr.sgml : 19980617 ACCESSION NUMBER: 0000950117-98-000999 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980328 FILED AS OF DATE: 19980512 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARK RESTAURANTS CORP CENTRAL INDEX KEY: 0000779544 STANDARD INDUSTRIAL CLASSIFICATION: 5812 IRS NUMBER: 133156768 STATE OF INCORPORATION: NY FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-09453 FILM NUMBER: 98616186 BUSINESS ADDRESS: STREET 1: 85 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10003-3019 BUSINESS PHONE: 2122068800 MAIL ADDRESS: STREET 2: 85 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10003-3019 10-Q 1 ARK RESTAURANTS CORP. 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark one) [ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 28, 1998 [ ] 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 0-14030 ARK RESTAURANTS CORP. - - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) New York 13-3156768 - - ---------------------------------------- ------------------------ (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 85 Fifth Avenue, New York, New York 10003 - - ---------------------------------------- ------------------------ (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 206-8800 ------------------------ 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 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 X No _____ _____ Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding shares at May 11, 1998 - - ----------------------------- ---------------------------------- (Common stock, $.01 par value) 3,842,499 ARK RESTAURANTS CORP. AND SUBSIDIARIES - - -------------------------------------------------------------------------------- INDEX - - --------------------------------------------------------------------------------
PAGE ---- PART I - FINANCIAL INFORMATION: Item 1. Consolidated Financial Statements: Consolidated Condensed Balance Sheets - March 28, 1998 (Unaudited) and September 27, 1997 (Unaudited) 1 Consolidated Condensed Statements of Operations and Retained Earnings - 13-week periods ended March 28, 1998 (Unaudited) and March 29, 1997 (Unaudited) and 26-week periods ended March 28, 1998 (Unaudited) and March 29, 1997 (Unaudited) 2 Consolidated Condensed Statements of Cash Flows - 26-week periods ended March 28, 1998 (Unaudited) and March 29, 1997 (Unaudited) 3 Notes to Consolidated Condensed Financial Statements (Unaudited) 4-6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-10 PART II - OTHER INFORMATION: Item 1. Legal Proceedings 11 Item 4. Submission of Matters to a Vote of Security Holders 11 Item 6. Exhibits and Reports on Form 8-K 11
PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS - - ------------------------------ ARK RESTAURANTS CORP. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (Dollars in Thousands) - - --------------------------------------------------------------------------------
March 28, September 27, 1998 1997 ------- ------- ASSETS CURRENT ASSETS: Cash and cash equivalents $ 695 $ 722 Accounts receivable 2,487 1,975 Inventories 2,042 2,045 Current portion of long-term receivables 320 278 Prepaid expenses and other current assets 570 433 Refundable and prepaid income taxes 218 - Deferred income taxes 915 915 ------- ------- Total current assets 7,247 6,368 LONG-TERM RECEIVABLES 1,294 971 ASSETS HELD FOR SALE 1,270 1,893 FIXED ASSETS - At Cost: Leasehold improvements 22,771 22,526 Furniture, fixtures and equipment 18,875 18,387 Leasehold improvements in progress 183 50 ------- ------- 41,829 40,963 Less accumulated depreciation and amortization 15,623 14,037 ------- ------- 26,206 26,926 INTANGIBLE ASSETS - Less accumulated amortization of $2,576 and $2,386 5,452 3,346 DEFERRED INCOME TAXES 1,081 1,081 OTHER ASSETS 604 683 ------- ------- TOTAL ASSETS $43,154 $41,268 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable - trade $ 3,461 $ 3,560 Accrued expenses and other current liabilities 2,728 3,099 Current maturities of long-term debt 580 1,424 Current maturities of capital lease obligations 276 245 Accrued income taxes - 414 ------- ------- Total current liabilities 7,045 8,742 LONG-TERM DEBT - net of current maturities 7,912 4,703 OBLIGATIONS UNDER CAPITAL LEASES - net of current maturities 242 406 OPERATING LEASE DEFERRED CREDIT 1,528 1,528 SHAREHOLDERS' EQUITY: Common stock, par value $.01 per share - authorized, 10,000,000 shares; issued, 5,187,836 and 5,177,836 shares 52 52 Additional paid-in capital 14,196 14,131 Retained earnings 13,426 12,953 ------- ------- 27,674 27,136 Less treasury stock, 1,345,337 shares 1,247 1,247 ------- ------- Total shareholders' equity 26,427 25,889 ------- ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $43,154 $41,268 ======= =======
See notes to consolidated condensed financial statements ARK RESTAURANTS CORP. AND SUBSIDIARIES - - --------------------------------------
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS (Unaudited) (In Thousands, Except per share amounts) - - --------------------------------------------------------------------------------- 13 Weeks Ended 26 Weeks Ended -------------------- ------------------------- March 28, March 29, March 28, March 29, 1998 1997 1998 1997 ------- ------- ------- ------- NET SALES $25,198 $24,887 $52,138 $43,054 COST OF SALES 6,853 7,112 14,101 12,210 ------- ------- ------- ------- GROSS RESTAURANT PROFIT 18,345 17,775 38,037 30,844 MANAGEMENT FEE INCOME 440 453 637 651 ------- ------- ------- ------- 18,785 18,228 38,674 31,495 ------- ------- ------- ------- OPERATING EXPENSES Payroll and payroll benefits 9,616 10,244 19,372 17,602 Occupancy 3,354 3,365 6,530 5,797 Depreciation and amortization 948 858 1,894 1,446 Other 3,535 4,005 7,025 6,555 ------- ------- ------- ------- 17,453 18,472 34,821 31,400 GENERAL AND ADMINISTRATIVE EXPENSES 1,734 1,587 3,126 3,009 ------- ------- ------- ------- 19,187 20,059 37,947 34,409 ------- ------- ------- ------- OPERATING INCOME (LOSS) (402) (1,831) 727 (2,914) ------- ------- ------- ------- OTHER EXPENSE (INCOME): Interest expense, net 168 219 253 238 Other income (147) (203) (314) (384) ------- ------- ------- ------- 21 16 (61) (146) ------- ------- ------- ------- INCOME (LOSS) before provision (benefit) for income taxes (423) (1,847) 788 (2,768) PROVISION (BENEFIT) for income taxes (169) ( 739) 315 (1,107) ------- ------- ------- ------- NET INCOME (LOSS) (254) (1,108) 473 (1,661) RETAINED EARNINGS, Beginning of period 13,680 10,663 12,953 11,216 ------- ------ ------- ------- RETAINED EARNINGS, End of period $13,426 $9,555 $13,426 $9,555 ======= ======= ======= ======= NET INCOME (LOSS) PER SHARE - BASIC & DILUTED $(.07) $(.29) $.12 $(.46) ====== ====== ==== ===== WEIGHTED AVERAGE NUMBER OF SHARES-BASIC 3,842 3,821 3,839 3,596 ======= ======= ======= ======= WEIGHTED AVERAGE NUMBER OF SHARES-DILUTED 3,842 3,821 3,863 3,596 ======= ======= ======= =======
See notes to consolidated condensed financial statements 2 ARK RESTAURANTS CORP. AND SUBSIDIARIES - - -------------------------------------- CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in Thousands) - - --------------------------------------------------------------------------------
26 Weeks Ended ------------------------------ March 28, March 29, 1998 1997 CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 473 $(1,661) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization of fixed assets 1,680 1,365 Amortization of intangibles 214 206 Loss (Gain) on sale of restaurants (185) (188) Deferred income taxes - (175) Changes in assets and liabilities: Decrease (Increase) in accounts receivable (512) (907) Decrease (Increase) in inventories (24) (869) Decrease (Increase) in prepaid expenses and other current assets (137) (28) Decrease (Increase) in refundable and prepaid income taxes (218) (1,287) Decrease (Increase) in other assets 69 21 Increase (Decrease) in accounts payable - trade (99) 1,260 Increase (Decrease) in accrued expenses and other current liabilities (371) 353 Increase (Decrease) in accrued income taxes (414) (324) ------ ------ Net cash provided by (used) in operating activities 476 (2,234) ------ ------ CASH FLOWS FROM INVESTING ACTIVITIES: Additions to fixed assets (365) (9,539) Additions to intangible assets (61) (7) Payments received on long-term receivables 161 21 Restaurant acquisition (2,735) Restaurant sales 200 267 ------ ------ Net cash used in investing activities (2,800) (9,258) ------ ------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds of long-term debt 4,100 9,750 Principal payment on long-term debt (1,734) (4,686) Principal payment on capital lease obligations (134) (123) Proceeds from common stock private placement, net - 6,029 Exercise of stock options 65 66 ------ ------- Net cash provided by financing activities 2,297 11,036 ------ ------- NET DECREASE IN CASH AND CASH EQUIVALENTS (27) (456) CASH AND CASH EQUIVALENTS, beginning of period 722 907 ------ ------- CASH AND CASH EQUIVALENTS, end of period $ 695 $ 451 ====== ======= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during year for: Interest $ 327 $ 629 ====== ======= Income taxes $ 945 693 ====== =======
See notes to consolidated condensed financial statements. 3 ARK RESTAURANTS CORP. AND SUBSIDIARIES - - -------------------------------------- NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (Unaudited) - - ---------------------------------------------------- 1. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS The consolidated condensed financial statements have been prepared by Ark Restaurants Corp. (the "Company"), without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position at March 28, 1998 and results of operations and changes in cash flows for the periods ended March 28, 1998 and March 29, 1997 have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. It is suggested that these condensed financial statements be read in conjunction with the consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the year ended September 27, 1997. The results of operations for the periods ended March 28, 1998 are not necessarily indicative of the operating results for the full year. Certain reclassifications have been made to the fiscal 1997 financial statements to conform to the fiscal 1998 presentation. 2. RESTAURANT SALES In the first quarter of fiscal 1998 the Company sold a restaurant located in the borough of Manhattan in New York City. The selling price for the restaurant was $1,750,000, of which $200,000 was paid in cash and the balance of $1,550,000 is due in monthly installments of $18,569, inclusive of interest at 7.5%, from May 1998 through April 2000 and monthly installments of $14,500, inclusive of interest at 7.5%, from May 2000 through December 2008. At December 2008 the remaining outstanding balance of $519,260 matures. The Company recognized on this sale a gain of approximately $185,000 in the first quarter of fiscal 1998. Additional deferred gains totaling approximately $1,000,000 could be recognized in future periods as the notes are collected. The Company deferred recognition of the gain on the sale due to the uncertainty as to the ultimate collectibility of the outstanding notes. 3. CONTINGENCIES A lawsuit was commenced against the Company in October 1997 in the District Court for the Southern District of New York by 44 present and former employees alleging various violations of Federal wage and hour laws. The complaint seeks an injunction against further violations of the labor laws and payment of unpaid minimum wages, overtime and other allegedly required amounts, liquidated damages, penalties and attorneys fees. The Company believes that most of the claims asserted in this litigation, including those with respect to minimum wages, are insubstantial. The Company believes that there were certain 4 violations of overtime requirements, which have today been largely corrected, for which the Company will have liability. While the Company does not believe that the liability to any single employee for overtime violations will be consequential to it, the Company's aggregate liability will depend in large part on the number of persons who "opt-in" to the lawsuit asserting similar violations. This uncertainty prevents the Company from making any reasonable estimate of its ultimate liability. However, based upon information available to the Company at this time, the Company does not believe that the amount of liability which may be sustained in this action will have a materially adverse effect on the Company's business or financial condition. An action was commenced against the Company and certain of its subsidiaries in April 1998 in New York State Supreme Court by Larry Forgione, the executive chef and manager of three of the Company's restaurants. The action seeks to enjoin the Company from taking control of the restaurant The Grill Room or from selling either of the restaurants An American Place or Beekman 1766 Tavern and also seeks unspecified damages. The Company believes that the allegations in the complaint are without merit. An action was commenced in May 1998 in Superior Court of the District of Columbia against the Company and its Washington, DC subsidiaries by 6 present and former employees of the restaurants owned by such subsidiaries alleging violations of the District of Columbia Wage & Hours Act relating to minimum wages and overtime compensation. While the action is in its early stages, the Company does not believe that its liability, if any, from an adverse result in this matter would have a material adverse effect upon its business or financial condition. 4. LONG-TERM DEBT In March 1998 the Company and its main bank (Bank Leumi USA) reached an agreement in principle to extend the Revolving Credit and Term Loan Facility for an additional two years until April 2000 and allow the Company to borrow up to $10,000,000. Loans under this amended facility are expected to bear interest at a rate of prime plus 1/2% per annum. The Agreement is expected to be finalized in the June 1998 quarter. 5. INCOME PER SHARE OF COMMON STOCK The Company adopted in the first quarter of fiscal 1998, The Financial Accounting Standards Board Statement No. 128 "Earnings per Share" which established new standards for computing and presenting earnings per share. The Company now discloses "Basic Earnings per Share", which is based upon the weighted average number of shares of common stock outstanding during each period and "Diluted Earnings per Share" which requires the Company to include common stock equivalents consisting of dilutive stock options and warrants. For the periods ended March 28, 1998 and March 29, 1997, Basic Earnings per share and Fully Diluted Earnings per Share were the same. The Company also applied the new standard to the periods ended March 29, 1997 and there were no change in the previously reported earnings per share for such periods. 5 A reconciliation of the numerators and denominators of the basic and diluted per share computations follow: 13 Weeks Ended March 28, 1998:
Income(loss) Shares Per-Share (Numerator) (Denominator) Amount BASIC EPS ($254,000) 3,842,000 ($.07) Stock Options -- -- -- Warrants -- -- -- DILUTED EPS ($254,000) 3,842,000 ($.07)
26 Weeks Ended March 28, 1998:
Income(loss) Shares Per-Share (Numerator) (Denominator) Amount BASIC EPS $473,000 3,839,000 $.12 Stock Options -- 24,000 -- Warrants -- -- -- DILUTED EPS $473,000 3,863,000 $.12
Options to purchase 132,500 shares of common stock at $12 per share and warrants to purchase 35,000 shares of common stock at $11.625 were not included in the computation of diluted earnings per share for the 26 weeks ended March 28, 1998 because the exercise prices were greater than the average market price of the common shares. Options to purchase 317,500 shares of common stock at a price range of $8.00 to $12.000 are not included in the computation of diluted earnings for the 13-weeks ended March 28, 1998 for the Company had a net loss for the quarter. Accordingly stock options were antidulutive for such period. Options to purchase 223,125 shares of common stock at a price range of $4.38 to $12.00 are not included in diluted earnings per share for the 26-weeks period ended March 29, 1997 for the Company had a loss for such period. 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Management's Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements. NET SALES Net sales at restaurants owned by the Company increased 1.2% in the 13-week period ended March 28, 1998 from the comparable period ended March 29, 1997 and increased 21.1% in the 26-week period ended March 28, 1998 from the comparable period last year. The increase in sales for the 26-week period ended March 28, 1998 was primarily due to sales from the food and beverage operations in the New York New York Hotel & Casino resort in Las Vegas ("the Las Vegas facilities") which opened in January 1997. At the Las Vegas facilities the Company operates a 450 seat, twenty four hour a day restaurant (America); a 160 seat steak house (Gallagher's); a 200 seat Mexican restaurant (Gonzalez y Gonzalez); and the resort's room service, banquet facilities and an employee dining facility. The Company also operates a complex of nine smaller eateries (Village Eateries) in the resort which simulate the experience of walking through New York's Little Italy and Greenwich Village. Same store sales in the 13-week period ended March 28, 1998 decreased by 2.5%. The components of the decrease consisted of a 12.7% decrease at the Las Vegas facilities from the second quarter last year during with the hotel first opened, offset by a 2.4% increase at the Company's other operations. Same store sales in the 26-week period increased by 3.3% principally due to increased customer counts. COSTS AND EXPENSES The Company's cost of sales consists of food and beverage costs at restaurants owned by the Company. For the 13-week period ended March 28, 1998 cost of sales as a percentage of net sales was 27.2% as compared to 28.6% last year and cost of sales as a percentage of net sales for the 26-week period was 27.0% as compared to 28.4% last year. The decrease in cost of sales as a percentage of food and beverage sales was principally due to lower food and beverage costs achieved at the Company's Las Vegas facilities. The Company opened the Las Vegas facilities in the comparable 13-week period ended March 29, 1997. During that opening period, the Company experienced inefficient cost of sales which are typically encountered with new facilities. The Company believes that its cost of sales as a percentage of net sales will continue to improve in the upcoming fiscal 1998 quarters in comparison to the comparable periods last year. Operating expenses of the Company, consisting of restaurant payroll, occupancy and other expenses at restaurants owned by the Company, as a percentage of net sales, were 69.3% for the 13-week period ended March 28, 1998 as compared to 74.2% last year and for the 26-week period ended March 28, 1998 7 were 66.8% as compared to 72.9% last year . The decrease in operating expenses as a percentage of net sales in the 13-week and 26-week periods ended March 28, 1998 was principally due operating efficiencies achieved at the Company's Las Vegas facilities. The Company's payroll expenses as a percentage of net sales for the 13-week period ended March 28, 1998 decreased to 38.2% of net sales as compared to 41.2% last year and such expenses for the 26-week period ended March 28, 1998 decreased to 37.2% as compared to 40.9% last year. A significant portion of this decrease was achieved at the Company's Las Vegas facilities. General and administrative expenses, as a percentage of net sales, were 6.9% for the 13-week period ended March 28, 1998 as compared to 6.4% last year and for the 26-week period ended March 28, 1998 were 6.0% as compared to 7.0% last year. If net sales at managed restaurants and bars were included in consolidated net sales, general and administrative expenses as a percentage of net sales would have been 6.3% for the 13-week period ended March 28, 1998 as compared to 5.7% last year and would have been 5.4% for the 26-week period ended March 28, 1998 as compared to 6.1% last year. The increase in general and administrative expenses as a percentage of net sales for the 13-week period ended March 28, 1998 was principally due to increases in payroll and marketing costs in connection with the implementation of a customer loyalty program. The Company had a net loss of $254,000 for the 13-week period ended March 28, 1998 as compared to a net loss of $1,108,000 last year and had a net income of $473,000 for the 26-week period ended March 28, 1998 as compared to a net loss of $1,661,000 last year. The results for the 13-week period ended March 29, 1997, were impacted by approximately $700,000 ($420,000 after tax) in pre-opening expenses and early operating losses at the Company's Las Vegas restaurant facilities and results for the 26-week period ended March 29, 1997 were impacted by approximately $2,000,000 ($1,200,000 after tax) in pre-opening and early operating losses at the Company's Las Vegas restaurant facilities. The Las Vegas restaurant facilities have been profitable since February 1997. During the 13-week period ended March 29, 1997 the Company managed six restaurants and a corporate dining facility owned by third parties. Net sales of the managed locations were $2,361,000 during the 13-week period ended March 28, 1998 as compared to $2,862,000 last year and net sales for the 26-week period ended March 28, 1998 were $5,827,000 as compared to $6,133,000 last year. These decreases in the 13-week and 26-week periods ended March 28, 1998 as compared to last year was principally due to the termination of a management agreement in January 1998 at a corporate dining facility. Net sales of these operations are not included in consolidated net sales. INCOME TAXES The provision (benefit) for income taxes reflects Federal income taxes calculated on a consolidated basis and state and local income taxes calculated by each subsidiary on a non consolidated basis. Most of the restaurants owned or managed by the Company are owned or managed by a separate subsidiary. For state and local income tax purposes, the losses incurred by a subsidiary may only be used to offset that subsidiary's income, with the exception of the restaurants which operate in the District of Columbia. Accordingly, the 8 Company's overall effective income tax rate has varied depending on the level of the losses incurred at individual subsidiaries. The Company's overall effective tax rate in the future will be affected by factors such as the level of losses incurred at the Company's New York facilities (which cannot be consolidated for state and local tax purposes), the amount of pre-tax income earned outside of New York City (Nevada has no state income tax and other states in which the Company operate have income tax rates substantially lower in comparison to New York) and the utilization of state and local net operating loss carry forwards. In order to more effectively utilize tax loss carry forwards at restaurants that were unprofitable, the Company has merged certain profitable subsidiaries with certain loss subsidiaries. As a result of the enactment of the Revenue Reconciliation Act of 1993, the Company is entitled, to a tax credit based on the amount of FICA taxes paid by the Company with respect to the tip income of restaurant service personnel. The Company estimates that this credit will be in excess of $400,000 for the current year. The Internal Revenue Service is currently examining the Company's Federal Income Tax returns for the fiscal years ended September 28, 1991 through October 1, 1994, and has proposed certain adjustments, all of which are being contested by the Company. The adjustments primarily relate to (i) pre-opening, legal and accounting expenses incurred in connection with new or acquired restaurants that the Internal Revenue Service asserts should have been capitalized and amortized rather than currently expensed and (ii) travel and meal expenses for which the Internal Revenue Service asserts the Company did not comply with certain recordkeeping requirements of the Internal Revenue Code. The Company does not believe that any adjustments resulting from such examination will have a material effect on the Company's financial condition. LIQUIDITY AND SOURCES OF CAPITAL The Company's primary source of capital is cash provided by operations and funds available from the revolving credit agreement with its main bank, Bank Leumi USA. The Company from time to time also utilizes equipment financing in connection with the construction of a restaurant and seller financing in connection with the acquisition of a restaurant. The Company utilizes capital primarily to fund the cost of developing and opening new restaurants and acquiring existing restaurants. The Company and its main bank reached an agreement in principle in March 1998 on a $10,000,000 revolving credit facility for use in the construction and acquisition of new restaurants and for working capital at the Company's existing restaurants. The facility will allow the Company to borrow up to $10,000,000 until April 2000 at which time outstanding loans mature. The loans will bear interest at a rate of prime plus 1/2%. At March 28, 1998 the Company had borrowings of $5,750,000 outstanding under its existing facility. The Company also has a two year $1,000,000 letter of credit facility for use in lieu of lease security deposits. At March 28, 1998 the Company had delivered $679,000 in irrevocable letters of credit on this facility. 9 In January 1997, pursuant to a new equipment financing facility, the Company borrowed from its main bank $2,851,000 at an interest rate of 8.75% to refinance the purchase of various restaurant equipment at the Las Vegas restaurant facilities. The note, which is payable in 60 equal monthly installments through January 2002, is secured by such restaurant equipment. At March 28, 1998 the Company had $2,292,000 outstanding on this facility. At March 28, 1998, the Company had working capital of $202,000 as compared to a working capital deficit of $2,374,000 at September 27, 1997. The restaurant business does not require the maintenance of significant inventories or receivables, thus the Company is able to operate with minimal and even negative working capital. The amount of indebtedness that may be incurred by the Company is limited by the revolving credit agreement with its main bank. Certain provisions of the agreement may impair the Company's ability to borrow funds. However, the Company believes that the restrictions do not impair the Company's ability to conduct its business nor limit the Company's opportunities to expand its business. RESTAURANT EXPANSION In February 1998 the Company purchased an existing restaurant (the Stage Deli of Las Vegas) located in the Forum Shops at Caesar's Shopping Center in Las Vegas for $2,735,000 in cash. The restaurant which has seating for 200 is operated under a license agreement with the owner of the New York City restaurant of that name. The Company is currently constructing in the South Street Seaport in downtown New York City a 200 seat Southwestern style bar and restaurant. The site was formerly occupied by a restaurant and the Company is receiving a $500,000 landlord construction allowance. The Company expects to incur approximately $1,200,000 in capital expenditures and other pre-opening expenses to open this restaurant. The Company expects to open this restaurant in the September 1998 fiscal quarter. The Company previously announced that it entered into a joint venture agreement with Sony Theatres' Loeks Star Partners and Millennium Partners to develop and operate four restaurants containing a total of approximately 50,000 square feet at a large theater development in Southfield, Michigan. The Company anticipates that its share of the required capital contributions to meet the construction costs, initial inventories and pre-opening expenses will be $6,000,000. The project is currently in the design phase and the Company expects to open such restaurants in the first half of fiscal 1999. The Company is exploring additional opportunities for expansion of its business. However, the Company is not currently committed to any other projects. The Company expects to fund its existing projects through cash from operations and credit facilities. Additional expansion may require additional external financing. 10 PART II - OTHER INFORMATION ITEM 1.- LEGAL PROCEEDINGS Incorporated by reference to Note 3 of the Notes to the Consolidated Condensed Financial Statements. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Company held its annual meeting of stockholders on March 25, 1998. The following matters were submitted to a vote of the Company's stockholders: (i) The election of eight directors; and (ii) The ratification of the appointment of Deloitte & Touche LLP as independent auditors for the 1998 fiscal year. The Company's stockholders re-elected the entire Board of Directors consisting of Ernest Bogen, Michael Weinstein, Vincent Pascal, Robert Towers, Andrew Kuruc, Paul Gordon, Donald D.Shack, and Jay Galin. The Company's stockholders ratified the Board of Director's appointment of Deloitte & Touche LLP as the Company's independent auditors for the 1998 fiscal year by a vote of 3,467,316 for, 5 against and 820 abstentions. ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits - Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K - none 11 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Date: May 11, 1998 ARK RESTAURANTS CORP. By /S/ Michael Weinstein ______________________ Michael Weinstein, President By /S/ Andrew B. Kuruc ______________________ Andrew B. Kuruc Vice President, Controller and Principal Accounting Officer 12 EX-27 2 EXHIBIT 27
5 This schedule contains summary financial information extracted from the balance sheet and income statment for the 26 weeks of Ark Restaurants Corp. and is qualified in its entirety by reference to such financial statements 1,000 6-MOS OCT-3-1998 MAR-28-1998 695 0 2,487 0 2,042 7,247 41,829 15,623 43,154 7,045 9,010 0 0 52 26,375 43,154 52,138 52,138 14,101 14,101 37,947 0 253 788 315 315 0 0 0 473 .12 .12
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