-----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, OB8lJV/NwzW/0bhkHftkg7nYM4HfPR4X2YlEYdwbA1LWdd+Pq1mVJ+Co649XgOkr hnTMioB+WL74BT/33z+iug== 0000950117-05-000633.txt : 20050215 0000950117-05-000633.hdr.sgml : 20050215 20050215172504 ACCESSION NUMBER: 0000950117-05-000633 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20050101 FILED AS OF DATE: 20050215 DATE AS OF CHANGE: 20050215 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARK RESTAURANTS CORP CENTRAL INDEX KEY: 0000779544 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 133156768 STATE OF INCORPORATION: NY FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09453 FILM NUMBER: 05618326 BUSINESS ADDRESS: STREET 1: 85 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10003-3019 BUSINESS PHONE: 2122068800 MAIL ADDRESS: STREET 1: 85 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10003-3019 10-Q 1 a39254.txt ARK RESTAURANTS CORP. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------- FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended January 1, 2005 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 by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes No X --- --- 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 February 3, 2004 (Common stock, $.01 par value) 3,415,199 Class Outstanding shares at February 3, 2004 - ------------------------------ -------------------------------------- (Common stock, $.01 par value) 3,415,199 PART I FINANCIAL INFORMATION Item 1. Financial Statements ARK RESTAURANTS CORP. AND SUBSIDIARIES - -------------------------------------- CONSOLIDATED CONDENSED BALANCE SHEETS (Dollars and shares in Thousands) - --------------------------------------
January 1, October 2, 2005 2004 ASSETS (unaudited) CURRENT ASSETS: Cash $ 1,375 $ 4,435 Accounts receivable 3,576 2,171 Employee receivables 227 330 Current portion of long-term receivables 182 208 Inventories 1,724 1,731 Prepaid expenses and other current assets 1,650 1,615 Assets held for sale 125 128 ------ ------- Total current assets 8,859 10,618 ------ ------- LONG-TERM RECEIVABLES 1,028 1,082 ------ ------- FIXED ASSETS Leasehold improvements 30,194 29,720 Furniture, fixtures and equipment 27,245 27,178 ------ ------- 57,439 56,898 Less accumulated depreciation and amortization 34,321 33,437 ------ ------- 23,118 23,461 INTANGIBLE ASSETS, NET 3,676 3,739 DEFERRED INCOME TAXES 5,413 5,221 OTHER ASSETS 751 773 ------ ------- TOTAL ASSETS $42,845 $44,894 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ CURRENT LIABILITIES: Accounts payable-trade $ 1,853 $ 2,230 Accrued expenses and other current liabilities 4,307 4,781 Accrued income taxes 733 2,093 Current maturities of long-term debt 220 251 ------ ------- Total current liabilities 7,113 9,355 OPERATING LEASE DEFERRED CREDIT 862 899 LIABILITIES HELD FOR DISPOSITION 418 440 ------ ------- TOTAL LIABILITIES 8,393 10,694 ------ ------- COMMITMENTS AND CONTINGENCIES SHAREHOLDERS' EQUITY: Common stock, per value $.01 per share - authorized, 10,000 shares issued, 5,476 and 5,462 shares 55 54 Additional paid-in capital 17,401 17,202 Treasury stock, 2,068 shares (8,386) (8,386) Receivables from employees from stock option exercises (309) (364) Retained earnings 25,691 25,694 ------ ------- Total shareholders' equity 34,452 34,200 ------ ------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $42,845 $44,894 ======= =======
See notes to consolidated condensed financial statements. -2- ARK RESTAURANTS CORP. AND SUBSIDIARIES - -------------------------------------- CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (Unaudited) (In Thousands, Except per share amounts) - -----------------------------------------------------------
13 Weeks Ended ------------------------- January 1, December 27, 2005 2003 ---- ---- TOTAL REVENUES $26,882 $24,672 ------- ------- COST AND EXPENSES: Food and beverage cost of sales 6,686 6,342 Payroll expenses 8,653 8,185 Occupancy expenses 4,117 3,972 Other operating costs and expenses 3,106 3,087 General and administrative expenses 1,820 1,473 Depreciation and amortization 947 996 ------- ------- Total costs and expenses 25,329 24,055 ------- ------- OPERATING INCOME 1,553 617 ------- ------- OTHER (INCOME) EXPENSE: Interest (income) expense, net (25) 58 Other income (69) (84) ------- ------- Total other (income) expense (94) (26) ------- ------- Income from continuing operations before income taxes 1,647 643 Provision for income taxes 478 225 ------- ------- Income from continuing operations 1,169 418 ------- ------- DISCONTINUED OPERATIONS: Income from operations of discontinued restaurants (including gain on disposal of $225,000 for the 13-weeks ended 21 213 12/27/2003) Provision for income taxes 6 75 ------- ------- Income from discontinued operations 15 138 ------- ------- NET INCOME $ 1,184 $ 556 ======= ======= PER SHARE INFORMATION - BASIC AND DILUTED Continuing operations basic $ .34 $ .13 Discontinued operations basic $ .01 $ .05 ------- ------- Basic $ .35 $ .18 ======= ======= Continuing operations diluted $ .33 $ .13 Discontinued operations diluted $ .01 $ .04 ------- ------- Diluted $ .34 $ .17 ======= ======= WEIGHTED AVERAGE NUMBER OF SHARES-BASIC 3,395 3,181 ======= ======= WEIGHTED AVERAGE NUMBER OF SHARES-DILUTED 3,533 3,322 ======= =======
See notes to consolidated condensed financial statements. -3- ARK RESTAURANTS CORP. AND SUBSIDIARIES - -------------------------------------- CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in Thousands) - -----------------------------------------------------------
13 Weeks Ended ------------------------- January 1, December 27, 2005 2003 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income from continuing operations $ 1,169 $ 418 Adjustments to reconcile net income from continuing operations to net cash used in operating activities: Deferred income taxes (79) 177 Depreciation and amortization 947 996 Operating lease deferred credit (37) (116) Changes in operating assets and liabilities: Receivables (1,405) (604) Employee receivables 103 3 Inventories 7 172 Prepaid expenses and other current assets (35) 3 Other assets 22 (5) Accounts payable - trade (377) 296 Accrued income taxes (1,360) (987) Accrued expenses and other current liabilities (474) (582) ------- ------- Net cash used in operating activities (1,519) (229) ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to fixed assets (542) (65) Additions to intangible assets (28) Payments received on long-term receivables 80 45 Advances to affiliates - (1,000) ------- ------- Net cash used in investing activities (462) (1,048) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of long-term debt - 801 Principal payments on long-term debt (31) (85) Dividends paid (1,187) - Exercise of stock options 88 - Proceeds from stock option receivables 55 4 ------- ------- Net cash provided by (used in) in financing activities (1,075) 720 ------- ------- NET CASH USED IN CONTINUING OPERATIONS (3,056) (557) NET CASH PROVIDED BY (USED IN) DISCONTINUED OPERATIONS (4) 500 ------- ------- NET DECREASE IN CASH (3,060) (57) CASH, Beginning of period 4,435 486 ------- ------- CASH, End of period $ 1,375 $ 429 ======= ======= SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest $ 3 $ 95 ======= ======= Income taxes $ 1,920 $ 1,105 ======= =======
See notes to consolidated condensed financial statements. -4- ARK RESTAURANTS CORP. AND SUBSIDIARIES - -------------------------------------- NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS January 1, 2005 (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 January 1, 2005, results of operations and cash flows for the 13-week periods ended January 1, 2005 and December 27, 2003, have been made. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. These consolidated condensed financial statements should 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 October 2, 2004. The results of operations for interim periods are not necessarily indicative of the operating results to be expected for the full year. Certain reclassifications have been made to the 2004 financial statements to conform to the 2005 presentation. 2. RECENT RESTAURANT DISPOSITIONS In fiscal 2003, the Company determined that its restaurant, Lutece, located in New York City, had been impaired by the events of September 11th and the continued weakness in the economy. Based upon the sum of the future undiscounted cash flows related to the Company's long-lived fixed assets at Lutece, the Company determined that impairment had occurred. To estimate the fair value of such long-lived fixed assets, for determining the impairment amount, the Company used the expected present value of the future cash flows. The Company projected continuing negative operating cash flow for the foreseeable future with no value for subletting or assigning the lease for the premises. As a result, the Company determined that there was no value to the long-lived fixed assets. The Company had an investment of $667,000 in leasehold improvements, furniture fixtures and equipment. The Company believed that these assets would have nominal value upon disposal and recorded an impairment charge of $667,000 during fiscal 2003. Due to continued weak sales, the Company closed Lutece during the second quarter of 2004. The Company recorded operating losses of $55,000 during the 13-week period ended January 1, 2005 and $74,000 in the comparable prior year period. These losses are included in income from discontinued operations. On December 1, 2003, the Company sold a restaurant, Lorelei, for approximately $850,000. The book value of inventory, fixed assets, intangible assets and goodwill related to this entity was approximately $625,000. The Company recorded a gain on the sale of approximately $225,000 during the first quarter of fiscal 2004 which is included in income from discontinued operations. The Company's restaurant Ernie's, located on the upper west side of Manhattan opened in 1982. As a result of a steady decline in sales, the Company felt that a new concept was needed at this location. The restaurant was closed June 16, 2003 and reopened in August 2003. Total conversion costs were approximately $350,000. Sales at the new restaurant, La Rambla, failed to reach the level sufficient to achieve the results the Company required. As a result, the Company sold this restaurant on January 1, 2004 and realized a gain on the sale of this restaurant of approximately $214,000 during the second quarter of fiscal 2004 which is included in income from discontinued operations. The Company's restaurant Jack Rose located on the west side of Manhattan has experienced weak sales for several years. In addition, this restaurant did not fit the Company's desired profile of being in a landmark destination location. As a result, the Company sold this restaurant on February 23, 2004. The Company realized a loss on the sale of this restaurant of $137,000 which was recorded during the second quarter of fiscal 2004. The Company's restaurant America, located in New York City, has experienced declining sales for several years. In March 2004, the Company entered into a new lease for this restaurant at a significantly increased rent. The Company entered into this lease with the belief that due to the location and the uniqueness of the space the lease had value. On January 19, 2005, the Company signed a definitive agreement for the sale of this restaurant and scheduled a closing of this sale in March 2005. The carrying amount of the fixed assets held for sale was approximately $125,000 as of January 1, 2005. Net income of $76,000 has been included in discontinued operations for the 13-week period ended January 1, 2005 and $155,000 in the comparable prior year quarter. The Company expects the sale of this restaurant to be completed during the second quarter of fiscal 2005. -5- 3. CREDIT FACILITY As of January 1, 2005, the Company's Revolving Credit and Term Loan Facility (the "Facility") with its main bank (Bank Leumi USA), included an $8,500,000 credit line to finance the development and construction of new restaurants and for working capital purposes at the Company's existing restaurants. The credit line matured on February 12, 2005. The Company had no borrowings outstanding on this facility at January 1, 2005. Borrowings on the Facility bore interest at 1/2% above the bank's prime rate. The Facility also included a $500,000 letter of credit facility for use in lieu of lease security deposits. The Company had delivered $354,000 in irrevocable letters of credit on this Facility. The Company is currently negotiating a new facility with its main bank which will only be a letter of credit facility. The Company generally has been required to pay commissions of 1 1/2% per annum on outstanding letters of credit. 4. RECEIVABLES FROM EMPLOYEES IN RESPECT OF STOCK OPTION EXERCISES Receivables from employees in respect of stock option exercises includes amounts due from officers and directors totaling $309,000 at January 1, 2005 and $364,000 at October 2, 2004. Such amounts, which are due from the exercise of stock options in accordance with the Company's Stock Option Plan, are payable on demand with interest at 1/2% above prime (5.25% at January 1, 2005). 5. INCOME PER SHARE OF COMMON STOCK Basic net income per share is computed in accordance with SFAS No. 128, Earnings Per Share, and is calculated on the basis of the weighted average number of common shares outstanding during each period. Diluted net income per share reflects the additional dilutive effect of potential common stock. Potential common stock is computed using the treasury stock method for dilutive stock options and warrants. For the 13-week period ended January 1, 2005 options to purchase 358,000 shares of common stock at a price range of $6.30 to $29.60 were included in diluted income per share. For the 13-week period ended December 27, 2003, options to purchase 393,000 shares of common stock at a price of $6.30 to $10.00 were included in diluted income per share. During the quarter ended January 1, 2005, employees exercised options to purchase 14,000 shares of common stock at a price of $6.30. The Company received $88,000 as a result of the exercise of these options. In accordance with the exercise of the stock options, the Company derived a tax benefit of $112,000 during the period ended January 1, 2005. Accordingly, the Company reduced its tax liability and increased additional paid-in capital for the same amount. 6. STOCK OPTIONS The Company uses the intrinsic value-based method for employee stock options. SFAS No. 123, Accounting for Stock-Based Compensation, requires the Company to disclose pro forma net income (loss) and pro forma earnings (loss) per share information for employee stock option grants to employees as if the fair-value method defined in SFAS No. 123 had been applied. The Company utilized the Black-Scholes option-pricing model to quantify the pro forma effects on net income and earnings per share of the options granted for the quarters ended January 1, 2005 and December 27, 2003. -6- On December 21, 2004, the Company granted options to employees to purchase 194,000 shares of common stock at $29.60 per share. These options will vest after two years and expire ten years after the date of grant. The assumptions used for the 13-week period ended January 1, 2005 for options granted on December 21, 2004 included a risk-free interest rate of 3.37%, volatility of 37%, a dividend yield of 3% and an expected life of three years. The pro forma impact is as follows: (in thousands, except per share amounts) ----------------------------------------
13 Weeks ended 13 Weeks ended January 1, 2005 December 27, 2003 Net income as reported $ 1,184 $ 556 Deduct stock based employee compensation expense computed under the fair value method $ (38) $ (19) ------- ----- Net income - pro forma $ 1,146 $ 537 ======= ====== Earnings per share as reported -basic $ 0.35 $ 0.18 Earnings per share as reported - diluted $ 0.34 $ 0.17 Earnings per share pro forma - basic $ 0.34 $ 0.17 Earnings per share pro forma - diluted $ 0.32 $ 0.16
As a result of amendments to SFAS 123, the Company will be required to expense the fair value of employee stock options beginning with its fiscal quarter ending September 30, 2005. 7. DIVIDENDS A quarterly cash dividend in the amount of $1,187,000, or $0.35 per share, was paid on November 1, 2004. In addition, another quarterly cash dividend in the amount of $0.35 per share was paid on February 1, 2005. 8. RELATED PARTY TRANSACTIONS Receivables due from officers and employees, excluding stock option receivables, totaled $227,000 at January 1, 2005 and $330,000 at October 2, 2004. Such loans bear interest at the minimum statutory rate, 2.75% at January 1, 2005. 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 contain forward-looking statements that involve risks and uncertainties. The Company's actual results could differ materially from those anticipated in these forward-looking statements. Certain of these risks and uncertainties are discussed under the heading "forward looking statements" in the Company's Annual Report on Form 10-K for the fiscal year ended October 2, 2004. In connection with the consummated sale of three of the Company's restaurants, the closure of one restaurant and the pending sale of another restaurant, the operations of these restaurants have been presented as discontinued operations for the 13-week period ended January 1, 2005, and the Company has reclassified its statements of operations and cash flow data for the prior periods presented below, in accordance with Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets" ("FAS 144") based on the fact that the Company has met the criteria under FAS 144. These dispositions are discussed below in "Recent Restaurant Dispositions." Revenues During the Company's first fiscal quarter of 2005, total revenues of $26,882,000 increased 9.0% compared to total revenues of $24,672,000 in the first fiscal quarter of 2004. Revenues for the first fiscal quarter of 2005 were reduced by $1,109,000 and revenues for the first fiscal quarter of 2004 were reduced by $3,430,000 as a result of the sale of three restaurants, the closure of one restaurant and the proposed sale of another restaurant and their reclassification to discontinued -7- operations. The Company had net income of $1,184,000 in the first fiscal quarter of 2005 compared to net income of $556,000 in the first fiscal quarter of 2004. Same store sales in Las Vegas increased by $973,000 or 6.6% in the first fiscal quarter of 2005 compared to the first fiscal quarter of 2004 as a result of continued strong business in Las Vegas. Same store sales in the Company's Las Vegas operations were negatively affected by the closure of the Company's "Venus" bar/nightclub facility for re-concepting during a portion of the first fiscal quarter of 2005. This bar/nightclub facility re-opened as "Vivid" on February 4, 2005. Same store sales in New York increased $796,000 or 10.5% during the first quarter. Same store sales in Washington D.C. increased by $355,000 or 10.7% during the first quarter. The increases in New York and Washington D.C. were principally due to the a general improvement in economic conditions, the public's willingness and inclination to resume vacation and convention travel and increases in the price of menu items offered to the Company's customers, in specific locations where the Company believed consumer demand has created some elasticity, instituted by the Company in 2004 to offset increased food costs during portions of 2004. Company-wide same store sales increased 8.3% for the first quarter. Costs and Expenses Food and beverage costs for the first quarter of 2005 as a percentage of total revenues were 24.9% compared to 25.7% in the first quarter of 2004. Increases in the price of menu items offered to the Company's customers, in specific locations where the Company believed consumer demand has created some elasticity, instituted by the Company in 2004 to offset increased food costs during portions of 2004 had a positive effect on this category of expenses. Payroll expenses as a percentage of total revenues were 32.2% for the first quarter of 2005 as compared to 33.2% in the first quarter of 2004. Occupancy expenses as a percentage of total revenues were 15.3% during the first fiscal quarter of 2005 compared to 16.1% in the first quarter of 2004. Other operating costs and expenses as a percentage of total revenues were 11.6% for the first quarter of 2005 as compared to 12.5% in the first quarter of 2004. General and administrative expenses as a percentage of total revenues were 6.8% in the first quarter of 2005 compared to 6.0% in last year's first quarter. The decrease in payroll, occupancy and other operating costs and expenses as a percentage of total revenues is primarily due to increases in total revenues during the 13-week period ended January 1, 2005. Interest expense was $3,000 for the first quarter of 2005 compared to $93,000 for the first quarter of 2004. The decrease is due to lower outstanding borrowings. As of January 1, 2005, the Company had no borrowings on its credit facility compared to $7,775,000 as of December 27, 2003. Income Taxes The provision for income taxes reflects Federal income taxes calculated on a consolidated basis and state and local income taxes calculated by each New York subsidiary on a non-consolidated basis. Most of the restaurants owned or managed by the Company are owned or managed by separate subsidiaries. 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 operating in the District of Columbia. Accordingly, the Company's overall effective tax rate has varied depending on the level of 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, pre-tax income earned outside of New York City, the utilization of state and local net operating loss carryforwards and the utilization of FICA tax credits. Nevada has no state income tax and other states in which the Company operates have income tax rates substantially lower in comparison to New York. In order to utilize more effectively tax loss carryforwards at restaurants that were unprofitable, the Company has merged certain profitable subsidiaries with certain loss subsidiaries. Liquidity and Capital Resources The Company's primary source of capital has been cash provided by operations and the exercise of stock options. 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, acquiring existing restaurants owned by others and remodeling existing restaurants owned by the Company. -8- The Company had a working capital surplus of $1,746,000 at January 1, 2005 as compared to a working capital surplus of $1,263,000 at October 2, 2004. The restaurant business does not require the maintenance of significant inventories or receivables and the Company will be able to operate with negative working capital. As of January 1, 2005, the Company's Revolving Credit and Term Loan Facility (the "Facility") with its main bank (Bank Leumi USA), included an $8,500,000 credit line to finance the development and construction of new restaurants and for working capital purposes at the Company's existing restaurants. The credit line matured on February 12, 2005. The Company had no borrowings on this Facility at January 1, 2005. Borrowings on the Facility bore interest at 1/2% above the bank's prime rate. The Facility also includes a $500,000 letter of credit facility for use in lieu of lease security deposits. As of January 1, 2005, the Company had delivered $354,000 in irrevocable letters of credit on this Facility. The Company is currently negotiating a new facility with its main bank which will only be a letter of credit facility. The Company generally has been required to pay commissions of 1 1/2% per annum on outstanding letters of credit. The Company's subsidiaries each guaranteed the obligations of the Company under the foregoing Facility and granted security interests in their respective assets as collateral for such guarantees. In addition, the Company pledged stock of such subsidiaries as collateral for obligations of the Company under such Facility. During the 13-week period ended January 1, 2005, the Company issued 14,000 shares of common stock to an officer upon his exercise of outstanding stock options. The Company realized proceeds of $88,000 from these issuances of common stock. Restaurant Expansion The Company recently entered into agreements to operate a Gallagher's Steakhouse restaurant and a separate bar, yet to be named, to be constructed in the Resorts Atlantic City Hotel and Casino in Atlantic City, New Jersey. Recent Restaurant Dispositions In fiscal 2003, the Company determined that its restaurant, Lutece, located in New York City, had been impaired by the events of September 11th and the continued weakness in the economy. Based upon the sum of the future undiscounted cash flows related to the Company's long-lived fixed assets at Lutece, the Company determined that impairment had occurred. To estimate the fair value of such long-lived fixed assets, for determining the impairment amount, the Company used the expected present value of the future cash flows. The Company projected continuing negative operating cash flow for the foreseeable future with no value for subletting or assigning the lease for the premises. As a result, the Company determined that there was no value to the long-lived fixed assets. The Company had an investment of $667,000 in leasehold improvements, furniture, fixtures and equipment. The Company believed that these assets would have nominal value upon disposal and recorded an impairment charge of $667,000 during fiscal 2003. Due to continued weak sales, the Company closed Lutece during the second quarter of 2004. The Company recorded operating losses of $55,000 during the 13-week period ended January 1, 2005 and $73,000 in the comparable prior year quarter. These losses are included in income from discontinued operations. On December 1, 2003, the Company sold a restaurant, Lorelei, for approximately $850,000. The book value of inventory, fixed assets, intangible assets and goodwill related to this entity was approximately $625,000. The Company recorded a gain on the sale of approximately $225,000 during the first quarter of fiscal 2004 which is included in income from discontinued operations. The Company's restaurant Ernie's, located on the upper west side of Manhattan opened in 1982. As a result of a steady decline in sales, the Company felt that a new concept was needed at this location. The restaurant was closed June 16, 2003 and reopened in August 2003. Total conversion costs were approximately $350,000. Sales at the new restaurant, La -9- Rambla, failed to reach the level sufficient to achieve the results the Company required. As a result, the Company sold this restaurant on January 1, 2004 and realized a gain on the sale of this restaurant of approximately $214,000 during the second quarter of fiscal 2004. The Company's restaurant Jack Rose located on the west side of Manhattan has experienced weak sales for several years. In addition, this restaurant did not fit the Company's desired profile of being in a landmark destination location. As a result, the Company sold this restaurant on February 23, 2004. The Company realized a loss on the sale of this restaurant of $137,000 which was recorded during the second quarter of fiscal 2004. The Company's restaurant America, located in New York City, has experienced declining sales for several years. In March 2004, the Company entered into a new lease for this restaurant at a significantly increased rent. The Company entered into this lease with the belief that due to the location and the uniqueness of the space the lease had value. During fiscal 2004 the Company identified a buyer for this restaurant and is currently completing negotiations for its sale. The carrying amount of the fixed assets held for sale was approximately $57,000 as of January 1, 2005 and $155,000 in the comparable prior year quarter. Net income of $76,000 has been included in discontinued operations. The Company expects the sale of this restaurant to be completed during the second quarter of fiscal 2005. Critical Accounting Policies The preparation of financial statements requires the application of certain accounting policies, which may require the Company to make estimates and assumptions of future events. In the process of preparing its consolidated financial statements, the Company estimates the appropriate carrying value of certain assets and liabilities, which are not readily apparent from other sources. The primary estimates underlying the Company's financial statements include allowances for potential bad debts on accounts and notes receivable, the useful lives and recoverability of its assets, such as property and intangibles, fair values of financial instruments, the realizable value of its tax assets and other matters. Management bases its estimates on certain assumptions, which they believe are reasonable in the circumstances, and actual results, could differ from those estimates. Although management does not believe that any change in those assumptions in the near term would have a material effect on the Company's consolidated financial position or the results of operation, differences in actual results could be material to the financial statements. The Company's critical accounting policies are described in the Company's Form 10-K for the year ended October 2, 2004. There have been no significant changes to such policies during fiscal 2004. Recent Accounting Developments The Financial Accounting Standards Board has recently issued the following accounting pronouncement: In December 2004, the Financial Accounting Standards Board issued SFAS No. 123 (R), "Accounting for Stock-Based Compensation." SFAS No. 123 (R) establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. SFAS No. 123 (R) focuses primarily on accounting for transactions in which an entity obtains employee services in share-based payment transactions. SFAS No. 123 (R) requires that the fair value of such equity instruments be recognized as expense in the historical financial statements as services are performed. Prior to SFAS No. 123 (R), only certain pro forma disclosures of fair value were required. SFAS No. 123 (R) shall be effective for public entities that do not file as small business issuers as of the beginning of the first interim or annual reporting period that begins after June 15, 2005. The Company has not determined if the adoption of this new accounting pronouncement is expected to have a material impact on the financial statements of the Company for fiscal 2006. Item 3. Quantitative and Qualitative Disclosures about Market Risk None. Item 4. Controls and Procedures Based on their evaluation, the Company's principal executive officer and principal financial officer have concluded that the Company's disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) are effective as of January 1, 2005 to ensure that information required to be disclosed by the Company in reports that the Company files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms. -10- There were no changes in the Company's internal control over financial reporting during the first quarter of fiscal year 2005 that materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting. -11- PART II OTHER INFORMATION Item 6. Exhibits (a) Exhibits 31.1 Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32 Certificate of Chief Executive and Chief Financial Officers -12- 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: February 15, 2005 ARK RESTAURANTS CORP. By: /s/ Michael Weinstein --------------------------- Michael Weinstein Chairman, President & Chief Executive Officer By: /s/ Robert J. Stewart --------------------------- Robert Stewart Chief Financial Officer -13- EX-31 2 ex31-1.txt EXHIBIT 31.1 EXHIBIT 31.1 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Michael Weinstein, President and Chief Executive Officer of Ark Restaurants Corp., certify that: 1. I have reviewed this quarterly report on Form 10-Q of Ark Restaurants Corp. 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this b report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's accountants and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over a financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated: February 15, 2005 /s/ MICHAEL WEINSTEIN - ---------------------------------- Michael Weinstein Chairman, President and Chief Executive Officer EX-31 3 ex31-2.txt EXHIBIT 31.2 EXHIBIT 31.2 CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Robert Stewart, Chief Financial Officer of Ark Restaurants Corp., certify that: 1. I have reviewed this quarterly report on Form 10-Q of Ark Restaurants Corp. 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report b our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's accountants and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over a financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Dated: February 15, 2005 /s/ Robert Stewart - ---------------------------- Robert Stewart Chief Financial Officer EX-32 4 ex32.txt EXHIBIT 32 Exhibit 32 Certificate of Chief Executive and Chief Financial Officers The following statement is being made to the Securities and Exchange Commission solely for purposes of Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. 1350), which carries with it certain criminal penalties in the event of a knowing or willful misrepresentation. Securities and Exchange Commission 450 Fifth Street, NW Washington, DC 20549 Re: Ark Restaurants Corp. Ladies and Gentlemen: In accordance with the requirements of Section 906 of the Sarbanes-Oxley Act of 2002 (18 USC 1350), each of the undersigned hereby certifies that: (i) this report on Form 10-Q fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and (ii) the information contained in this report fairly presents, in all material respects, the financial condition and results of operations of Ark Restaurants Corp. Dated as of this 15th day of February 2005. /s/ Michael Weinstein /s/ Robert Stewart - ------------------------------------ ----------------------- Michael Weinstein Robert Stewart Chairman, President and Chief Executive Officer Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----