Dear Shareholders,

     The long term strategy that Boston Restaurant Associates initiated in 1994
is right on track. Fiscal 1998 was a very rewarding year.

     We have tightened our focus on developing the Pizzeria Regina brand,
selling our last Bel Canto restaurant and closing all non-performing units. In
August 1997 our first out of state store opened at the Paramus Park Mall in
Paramus, New Jersey, followed by one in Richmond, Virginia and Oviedo, Florida.
New packaging and distribution methods developed for shipping pizza dough are in
place and successful. This will allow us to support company-owned and franchise
stores consistently at greater distances than first thought.

     A Pizzeria Regina franchise program has been developed and was finalized in
January 1998. This opens the doors to faster growth in a larger geographic area.
In that regard, Boston Restaurant Associates signed an agreement to develop
franchises in Europe, the Middle East and the Pacific Rim nations with an
experienced food service development company based in Brussels, Belgium. This
has already produced significant inquiries from seasoned overseas food service
companies. We hope to capitalize on the growth opportunities in fiscal 1999.

     Our restaurant portfolio performed well this year. Overall same-store sales
grew 7.3% while costs declined 2% for food and beverage, 1% for payroll and 1%
for other operating expenses.

     The balance sheet improved as well, as a result of a profitable year and
the raising of $2M in a rights offering that was 33% oversubscribed. These great
results helped to raise our stock price by 24% in fiscal 1998.

     With all that has happened this year, our opportunities for fiscal 1999
have broadened. Two leases have already been signed for stores to be built in
1999. The future looks promising. I would like to thank our loyal and
experienced cadre for making this possible and our stockholders for your faith
and support in our plan.


                                                Sincerely,



                                                George R. Chapdelaine
                                                President and Chief
                                                Executive Officer


<PAGE>






                     U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549
                                   FORM 10-KSB

(Mark One)
[X]  Annual report under Section 13 or 15(d) of the Securities Exchange Act
     of 1934. For the fiscal year ended April 26, 1998.

[ ]  Transition report under Section 13 or 15(d) of the Securities Exchange
     Act of 1934

     For the transition period from ________ to ________.

                             Commission File Number
                                     0-18369

                       BOSTON RESTAURANT ASSOCIATES, INC.
           -----------------------------------------------------------
           (Name of Small Business Issuer as Specified in its Charter)

              Delaware                                          61-1162263
   -------------------------------                           ----------------
   (State or Other Jurisdiction of                           (I.R.S. Employer
    Incorporation or Organization)                           Identification No.)

        999 Broadway, Suite 400                                      01906
         Saugus, Massachusetts                                    ----------
----------------------------------------                          (Zip Code)
(Address of Principal Executive Offices)


                                  (781)231-7575
                 -----------------------------------------------
                 (Issuer's Telephone Number Including Area Code)


Securities registered pursuant to Section 12(b) of the Securities Exchange Act
of 1934:

                                                     Name of Each Exchange
           Title of Each Class                        on Which Registered
           -------------------                        -------------------

  Common stock, $.01 par value per share             Boston Stock Exchange
Redeemable Common Stock Purchase Warrants

      Securities registered under Section 12(g) of the Securities Exchange
                                  Act of 1934:

                     Common Stock, $.01 par value per share
                     --------------------------------------
                                (Title of Class)

                             Redeemable Common Stock
                                Purchase Warrants
                             -----------------------
                                (Title of Class)

         Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 [X]     No [ ]
<PAGE>

         Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendments to this Form 10-KSB. [ ]


         The issuer's revenues for its most recent fiscal year were $11,255,049.

         The aggregate market value of registrant's Common Stock, $.01 par value
per share, held by non-affiliates of the registrant as of July 14, 1998 was
$1-11/16 based upon the average closing bid and asked prices of such stock on
that date as reported on the NASDAQ SmallCap Market on that date. As of July
14, 1998 there were 7,024,170 shares of the registrant's Common Stock, $.01 par
value per share outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the registrant's Proxy Statement involving the election of
directors, which is expected to be filed within 120 days after the end of the
registrant's fiscal year, are incorporated by reference in Part III of this
Report.


                                      -5-
<PAGE>

                                     PART I

ITEM 1.  BUSINESS

General

         Boston Restaurant Associates, Inc. (the "Company") operates a chain of
11 restaurants -- ten fast service, high volume pizzerias under the Pizzeria
Regina(R) name and one full service family-style Italian/American restaurant
under the Polcari's North End(TM) name. Of the ten Pizzeria Regina restaurants,
eight are food court kiosks (self-service, take-out style emphasizing pizza
slices with common area seating), and two are wait-service restaurants
(full-service style emphasizing whole pizzas with in-restaurant seating). A
majority of the restaurants are located in the Boston, Massachusetts
metropolitan area.

         The Pizzeria Regina restaurants feature the Company's signature
product, its premium Neapolitan style, thin crust pizza, prepared in gas-fired
brick ovens. The original Pizzeria Regina, located in Boston's historic North
End, has served the Company's premium brick oven pizza since 1926. The Company
believes that the Pizzeria Regina pizza and the brand name are local symbols of
superior and distinctive pizza. See "Pizzeria Regina Restaurants."

         The Polcari's North End restaurant is a full service Italian/American,
family-style restaurant that captures the community spirit of the 1940's and
1950's in Boston's Italian North End neighborhood. It highlights exposed
gas-fired brick ovens in open view of diners, memorabilia and photographs
depicting 1940 and 1950 scenes in Boston's North End, and large tables to
encourage family style dining. See "Polcari's North End Restaurant."

         The Company plans to expand its operations by opening additional
Company-operated Pizzeria Regina food court kiosks in high volume retail malls
as the opportunities present themselves and by beginning to franchise its
Pizzeria Regina concept. Whether or not the Company seeks to expand the
Polcari's North End concept by opening additional restaurants will depend upon
market opportunities and the Company's overall financial and management
resources. The rate at which the Company actually is able to open new
Company-operated restaurants will be determined by many factors, including the
Company's success in obtaining adequate financing, identifying satisfactory
sites, negotiating satisfactory leases, securing requisite governmental permits
and approvals, and training management personnel. The rate at which franchised
restaurants are opened also will be determined by many factors, including site
availability and qualified franchisees. There can be no assurance that the
Company will have the resources to expand, that expansion will not be more
costly than anticipated, that current and future sites will operate profitably,
or that franchising efforts will be successful.

                                     - 6 -
<PAGE>

         The Company's principal offices are located at 999 Broadway, Saugus,
Massachusetts 01906 and its telephone number is (781) 231-7575. As used in this
Report, unless otherwise indicated, the term "Company" refers to Boston
Restaurant Associates, Inc. and its subsidiaries.

Pizzeria Regina Restaurants

         The Company currently operates ten Pizzeria Regina restaurants -- fast
service, high volume pizzerias that feature premium brick oven pizza and cater
primarily to the lunchtime diner (with the exception of the original North End
location, which serves both the lunch and dinner markets). Of these ten
restaurants, eight are food court kiosks (self-service, take-out style
emphasizing pizza slices with common area seating), and two are wait-service
restaurants (full-service style emphasizing whole pizzas with in-restaurant
seating).

         The Pizzeria Regina restaurants feature the Company's signature
product, its premium Neapolitan style, thin crust, brick oven pizza. This pizza
features a proprietary dough and pizza sauce which the Company believes combine
to produce a distinct flavor and superior pizza. These pizzas are offered with a
wide variety of fresh vegetable and cured meat toppings. The Company believes
that the quality of its pizza resulting from its proprietary ingredients and
baking process should enable it to appeal to both the lunch and dinner markets.
The original Pizzeria Regina, located in Boston's historic North End, has served
the Company's premium brick oven pizza since 1926.

         The Company's eight food court kiosks primarily serve pizza by the
slice with multiple topping choices and operate side-by-side with other fast
food vendors. Menu items are presented in a self-service, take-out style
designed to allow customers to order, pay for and consume their food in a very
short period of time. Customers who desire to sit down after purchasing their
food may join customers of other food court vendors in one or more designated
common areas within the mall. The focused menu, self-service, take-out style and
common seating provide food court customers with a fast dining, low cost
alternative relative to more traditional full service restaurants.

         The Company intends to open additional Pizzeria Regina food court
kiosks, primarily in retail malls. Based on the Company's own experience and
articles from trade journals, the Company believes there is a trend at retail
malls to retrofit and upgrade food courts to emphasize fast food as a focal
point of malls. The Company further believes that lunchtime diners who visit
retail shopping malls seek high quality, quick service meals in a food court
setting, and that the premium quality of its brick oven pizza should position it
to compete effectively in food court locations.

         During fiscal year 1998 the Company opened a total of three food court
kiosk operations: Paramus Park, Paramus, New Jersey; Regency Square Mall,
Richmond, Virginia; and Oviedo Marketplace, Oviedo, Florida. In addition a food
court kiosk was opened at the Auburn Mall, Auburn, Massachusetts in May of 1998.
The Company has


                                     - 7 -
<PAGE>

preliminarily identified other potential site locations that it believes will
become available during the next 24 months. Management estimates that the cost
of opening a typical food court kiosk currently is approximately $350,000 to
$400,000. There can be no assurance that the Company will be able to obtain
financing necessary to construct additional food courts kiosks, that the Company
will be able to complete the construction of new kiosks on a timely basis and
within budget, if at all, or that the Company will be able to operate these
kiosks successfully.

         Two of the Company's Pizzeria Regina restaurants (a food court kiosk
and a wait-service restaurant) are located in the Quincy Market/Faneuil Hall
Marketplace in Boston, Massachusetts. The Company entered into a new five-year
lease for the food court kiosk, the more successful of the two restaurants, on
January 1, 1996. The Company anticipates closing the wait-service restaurant,
the lease of which has expired, on or before December 31, 1998. At that time it
will seek to enter into a lease for additional space for a full service
restaurant in the Quincy Market/Faneuil Hall Marketplace. The Company believes,
based upon communications with the landlord, that it will be able to
successfully negotiate a new lease for a wait service restaurant in that
location, although there can be no assurance that it will be able to do so.

Polcari's North End Restaurant

         In March 1995, the Company opened its first Polcari's North End
restaurant in Saugus, Massachusetts, replacing a similar restaurant the Company
had operated from 1954-1989 in Boston's North End. The Polcari's North End
restaurant concept is designed to create an Italian/American, family-style,
casual dining ambiance that captures the community spirit of the 1940's and
1950's in Boston's Italian North End neighborhood. The restaurant highlights
exposed gas-fired brick ovens in open view of diners. In addition, memorabilia
and photographs depicting 1940 and 1950 scenes in Boston's North End are used to
create a neighborhood atmosphere rich with history. The restaurant also features
large tables of six or more seats to encourage family style dining and a
value-oriented menu that includes branded Pizzeria Regina pizza, large
Italian/American pasta dishes and fresh baked breads.

          The Company may in the future review opportunities to open additional
Polcari's North End restaurants. Such expansion will be dependent upon market
opportunities and the Company's overall financial and management resources.

Restaurant Operations

         The Company invests substantial time and effort in its training
programs, which focus on all aspects of restaurant operations, including
kitchen, bar and dining room operations, food quality and preparation, alcoholic
beverage service, liquor liability avoidance, customer service and employee
relations. The Company holds regular meetings of its managers which cover new
products, continuing training and other aspects


                                     - 8 -
<PAGE>

of business management. Managers also attend seminars, which are periodically
conducted by Company personnel and outside experts, on a broad range of topics.

         New employees are trained by experienced employees who have
demonstrated their ability to implement the Company's commitment to provide high
quality food and attentive service. The Company has developed manuals regarding
its policies and procedures for restaurant operations. Senior management
regularly visits Company restaurants and meets with the respective management
teams to ensure compliance with the Company's strategies and standards of
quality in all respects of restaurant operations and personnel development.

         The Company seeks to attract and retain high caliber restaurant
managers by providing them with an appropriate balance of autonomy and
direction. Annual performance objectives and budgets for each restaurant are
jointly determined by restaurant managers and senior management. To provide
incentives, the Company has a cash bonus program tied to achievement of
specified objectives.

         The staff for a typical Pizzeria Regina kiosk restaurant consists of
one general manager, two managers and approximately 12 to 15 hourly employees.
The staff of a typical sit-down Pizzeria Regina consists of a general manager,
two managers, and approximately 15 to 25 hourly employees. The staff for a
Polcari's North End restaurant consists of one general manager, two managers,
one kitchen manager and approximately 40 to 60 hourly employees. Most of the
Company's hourly employees are part-time personnel. The general manager of each
restaurant is primarily responsible for the day-to-day operations of the entire
restaurant and maintaining standards of quality and performance established by
the Company.

         The Company believes centralized financial and management controls are
fundamental to improving operating margins. These controls are maintained
through the use of an automated data processing system and prescribed reporting
procedures. Each restaurant has a point-of-sale system that captures restaurant
operating information. The restaurants forward daily sales reports, vendor
invoices, payroll information and other data to the Company's corporate
headquarters. Company management utilizes this data to centrally monitor costs
and sales mix and to prepare periodic financial management reports. This system
is also used for budget analysis, planning and determination of menu
composition. Restaurant managers perform daily inventories of key supplies. All
other supplies are inventoried weekly at the Pizzeria Regina restaurants and are
inventoried biweekly at the Polcari's North End. Cash is controlled through
deposits of sale proceeds in local operating accounts following each restaurant
shift with respect to the Pizzeria Regina locations and following each business
day with respect to Polcari's North End location. The balances in those accounts
are wire transferred daily to the Company's principal operating account.


                                     - 9 -
<PAGE>

Site Selection

         The Company considers the specific location of a restaurant to be
critical to the restaurant's long term success. It devotes significant time and
resources to the investigation and evaluation of each prospective site,
including consideration of local market demographics, population density,
average household income levels and site characteristics such as visibility,
accessibility and traffic.

         The Company seeks sites for the Pizzeria Regina kiosk restaurants
within high-traffic food courts or retail shopping malls located in metropolitan
areas. It seeks sites for Pizzeria Regina wait-service restaurants in densely
populated areas. Factors which will favor a Polcari's North End restaurant site
are its proximity to high-volume, middle market traffic centers, such as retail
and residential areas with populations of at least 100,000 persons within a five
mile radius. For all types of restaurants, the Company also considers existing
local competition and, to the extent such information is available, the sales of
other comparably priced restaurants operating in the area.

Purchasing and Commissary Operations

         The Company maintains a commissary where food products such as pizza
dough are produced for the Company's restaurants. These products require a high
degree of consistency that would be more difficult to maintain at the individual
restaurant locations. The Company believes that close, centralized monitoring of
the dough preparation ensures a more consistent premium product. All other food
preparation is performed on site at the restaurant level.

         The Company negotiates directly with wholesale suppliers of high volume
food ingredients such as cheese, tomato sauce, and flour to ensure consistent
quality and freshness of products across its restaurants and to obtain
competitive pricing. These ingredients are then purchased by the Company's
distributor at the negotiated price and redistributed to the Company's
restaurants. All other food ingredients and beverage products are purchased
directly by the general manager of each restaurant in accordance with corporate
guidelines. The Company believes that all essential food and beverage products
are available from many qualified wholesale suppliers.

Franchising

         In 1997, the Company formed Boston Restaurant Associates International,
Inc. ("BRAII"), a wholly owned subsidiary, for the purpose of offering Pizzeria
Regina franchise opportunities both domestically and internationally. BRAII has
filed a Uniform Franchise Offering Circular in Connecticut, Florida, Georgia,
Kentucky, New Hampshire, Pennsylvania and Texas and is actively seeking
franchisees with operational experience.

         In addition, in January 1998, the Company entered into an International
Development Agreement with Regina International, Ltd. ("Regina International"),

                                     - 10 -
<PAGE>

controlled by Terrance Smith, a Company director with experience in
international franchising, to pursue and develop franchise territories outside
the Americas, anticipated to be principally in Europe, the Far East and the
Pacific Rim.

         Franchising operations present numerous risks, and the Company faces
vigorous competition from other similar type restaurant chains in attracting and
retaining suitable franchisees. The Company is subject to regulation by the
Federal Trade Commission and must comply with certain state laws that govern the
offering, sale, and termination of franchises and the refusal to renew
franchises. The Company has limited experience in franchising restaurants.
Franchisees' failure to maintain the Company's high standards could adversely
affect customer attitudes towards the Company's restaurants. Granting exclusive
territory agreements may also limit future expansion opportunities for
Company-owned restaurants. Franchise developers or franchisees may leave the
franchise system at the end of the term of their development or franchise
agreements or may attempt to terminate their agreements before the end of their
terms, thereby reducing royalty revenues. Further, while franchising permits the
Company to increase the geographic coverage of its restaurant system without
substantial investments of capital, it also means that the Company may not have
direct operational control over the Company's franchised restaurants.

Seasonality

         The Company's restaurants are subject to seasonal fluctuations in sales
volume. Sales at the Pizzeria Regina restaurants are typically higher in June
through August and in November and December due to increased volume in shopping
malls during the holiday and tourist seasons and school vacations.

Employees

         As of July 15, 1998, the Company had approximately 275 employees, of
whom 10 were corporate and administrative personnel, 33 were field supervision
or restaurant managers or management trainees, and the remainder were hourly
restaurant personnel. Many of the Company's hourly employees work part-time. The
Company believes that its relationship with its employees is good. None of the
Company's employees are covered by a collective bargaining agreement.

Advertising and Marketing

         The Company's target market for the Pizzeria Regina restaurants is very
broad, consisting of individuals and families who seek fast service and high
value-to-price meals during the lunch period. The target markets for the
Polcari's North End restaurant are adults and families who seek moderately
priced Italian dinner entrees, in a comfortable environment. The Company
believes that its focus on premium quality, service and value is the most
effective approach to attracting customers.

                                     - 11 -
<PAGE>

         The Company anticipates that it will obtain greater name recognition
from increased distribution channels for its premium Pizzeria Regina brick oven
pizza and the development of additional Pizzeria Regina food court kiosks. In
addition, management believes that the concentration of most of its
Company-owned restaurants within Eastern Massachusetts will enable the Polcari's
North End restaurant to benefit from the recognition of the Pizzeria Regina and
Polcari names. The Company plans to rely upon local advertising, high-volume
traffic flow at retail malls, and word of mouth exposure.

Competition

         The restaurant business is highly competitive. Price, restaurant
location, food quality, service and attractiveness of facilities are important
aspects of competition, and the competitive environment is often affected by
factors beyond the Company's or a particular restaurant's control, including
changes in the public's tastes and eating and drinking habits, population and
traffic patterns and local economic conditions. The Company's restaurants
compete with a wide variety of restaurants ranging from national and regional
restaurant chains (some of which have substantially greater financial resources
than the Company) to locally-owned restaurants. There is also active competition
for liquor licenses in certain markets and for advantageous commercial real
estate sites suitable for restaurants. The Pizzeria Regina restaurants compete
with other fast-service, high volume food providers on the basis of price,
value, location, and speed of service. The Polcari's North End restaurant
competes with other casual, full service restaurants primarily on the basis of
menu selection, quality, price, service, ambiance and location.

Trademarks

         The Company regards its service marks as having significant value and
as being an important factor in the marketing of its products. Its most
significant marks are "Pizzeria Regina," "Regina," the Regina crown design logo,
and "Polcari's." These marks, which appear in its advertisements, menus and
elsewhere, are widely recognized. "Pizzeria Regina" and the crown design logo
are registered trademarks of the Company. The Company has applied to register
the "Polcari's" logo, "Polcari's North End" and the Regina service marks with
the United States Patent and Trademark Office.

Government Regulation

         The Company is subject to a variety of federal, state and local laws
and regulations. Each of the Company's restaurants is subject to licensing and
regulation by a number of government authorities, including alcoholic beverage
control, health, safety, sanitation, building and fire agencies in the state or
municipality in which the restaurant is located. Difficulties in obtaining or
failure to obtain required licenses or approvals could delay or prevent the
development of a new restaurant in a particular area.

                                     - 12 -
<PAGE>

         The selection of new restaurant sites is affected by federal, state and
local laws and regulations regarding environmental matters, zoning and land use
and the sale of alcoholic beverages. Varied requirements (particularly at the
local level) may result in increases in the cost and time required for opening
new restaurants, as well as increases in the cost of operating restaurants.
Difficulties in obtaining necessary licenses or permits could cause delays in or
cancellations of new restaurant openings.

         A significant portion of the Company's revenues at the Polcari's North
End restaurant and the original Pizzeria Regina location in the North End is
attributable to the sale of alcoholic beverages. Alcoholic beverage control
regulations require each of the Company's restaurants which serve alcohol to
apply to both a state authority and municipal authorities for a license or
permit to sell alcoholic beverages on the premises. Typically, licenses must be
renewed annually and may be revoked or suspended for cause at any time.
Alcoholic beverage control regulations affect numerous aspects of restaurant
operations, including minimum age of patrons and employees, hours of operation,
advertising, wholesale purchasing, inventory control and handling, storage and
dispensing of alcoholic beverages. The failure of the Company to obtain or
retain liquor or food service licenses could have a material adverse affect on
the particular restaurant's operations and the business of the Company
generally.

         The Company is subject to "dram shop" statutes, which generally provide
a person injured by an intoxicated person the right to recover damages from an
establishment that wrongfully served alcoholic beverages to the intoxicated
person. The Company presently carries $1,000,000 of liquor liability coverage
for its restaurants, as well as excess liability coverage of $10,000,000 per
occurrence, with a $10,000 deductible. The Company has never been named as a
defendant in a lawsuit involving "dram shop" liability. There can be no
assurance that dram shop insurance will continue to be available to the Company
at commercially reasonable prices, if at all, or that such insurance, if
maintained, will be sufficient to cover any claims against the Company for dram
shop liability for which it may be held liable.

         The Company's restaurant operations are all subject to federal and
state laws governing such matters as the proposed government mandated health
insurance, over which the Company has no control. A significant number of the
Company's personnel are paid at rates related to the federal minimum wage, and
increases in the minimum wage could increase the Company's labor costs.

Risk Factors

         An investment in the Company involves a degree of risk. Accordingly, in
addition to the risks discussed elsewhere in this Form 10-KSB, investors should
consider carefully the following risk factors in evaluating an investment in the
Company.


                                     - 13 -
<PAGE>

Risks Related to Planned Expansion

         The Company intends to open additional Pizzeria Regina food court
kiosks and to grant franchises to others. However, the Company's ability to open
additional Company restaurants and acquire franchises will depend upon a number
of factors, such as identifying satisfactory sites, negotiating satisfactory
leases, securing requisite governmental permits and approvals, adequate
supervision of construction, and recruiting and training management personnel,
some of which are beyond the control of the Company. There can be no assurance
that the Company will be able to open any of its planned new restaurants within
budget or on a timely basis, if at all, or that any of the new restaurants will
operate profitably. If the Company is unable to expand as planned, it may reduce
the Company's ability to increase profitability.

Possible Need of Additional Funding

         The Company believes that its anticipated cash flow from operations,
together with existing resources, will be sufficient to fund its working capital
needs and expansion plans for at least the next 12 months. However, there can be
no assurance that this will be the case. Changes in the Company's business or
its business plan could affect its capital requirements. Moreover, there can be
no assurance that the Company will have sufficient revenues after the end of
that 12 month period to continue to fund its expansion plans and other operating
requirements. In the event the Company requires additional financing, there can
be no assurance that the Company would be able to obtain financing on favorable
terms, if at all, and failure to do so could have a material adverse effect on
the Company's business. See "Item 6. Management's Discussion and Analysis or
Plan of Operation-- Liquidity and Capital Resources."

Risks of Restaurant Industry

         The Company's future performance will be subject to a number of factors
that affect the restaurant industry generally, including (i) the highly
competitive nature of the restaurant industry, (ii) general and local economic
conditions, (iii) changes in tastes and eating and drinking habits, (iv) changes
in tax laws that affect the deductibility of business related meals, (v) changes
in food costs due to shortages, inflation or other causes, (vi) population and
traffic patterns, (vii) demographic trends, (viii) general employment and wage
and benefit levels in the restaurant industry, which may be affected by changes
in federal and local minimum wage requirements or by federally or locally
mandated health insurance, and (ix) the number of people willing to work at or
near the minimum wage. See "Item 1. Business - Competition."

Dependence on Key Executive Officers

         The future success of the Company will depend in large part on the
continued services of its President, George R. Chapdelaine, as well as on the
Company's ability to attract and retain other qualified senior management
personnel. The Company has


                                     - 14 -
<PAGE>

retained the services of Mr. Chapdelaine through April 1999 pursuant to an
employment agreement. The Company also has and intends to maintain key man life
insurance in the amount of $2,000,000 on the life of Mr. Chapdelaine.

Control by Management

         The Company's executive officers, directors and their affiliates and
members of their immediate families control the vote of approximately 49.2% of
the outstanding shares of the Common Stock. George R. Chapdelaine and John P.
Polcari, Jr., as the Voting Trustees under an Amended and Restated Voting Trust
Agreement dated April 28, 1994 (the "Voting Trust Agreement") had joint
dispositive and voting power over certain shares beneficially owned by the
Company's executive officers, directors or their affiliates or members of their
immediate families and were able to control or exert substantial influence over
actions requiring stockholder approval. On July 13, 1998, the Voting Trust was
terminated and the assets of the Voting Trust were distributed to its
beneficiaries.

Geographic Concentration

         A total of eight of the Company's eleven existing restaurants are
located in Eastern Massachusetts. As a result, the Company's results of
operations may be materially affected by changes in the Massachusetts economy.
See "Item 1. Business - General."

Volatility of Stock Price

         The Company's Common Stock is traded on the Nasdaq SmallCap Market and,
compared to many other publicly traded companies, the Company is relatively
small and has a relatively small average trading volume. Quarterly operating
results of the Company or other restaurant companies, changes in general
conditions in the economy, the restaurant industry, or the financial markets, or
other developments affecting the Company, its competitors or the financial
markets, could cause the market price of the Common Stock to fluctuate
significantly. In addition, the stock market has recently experienced marked
price and volume fluctuations. These broad market fluctuations may adversely
affect the market price of the Common Stock. See "Item 5. Market for Common
Equity and Related Stockholder Matters."


                                     - 15 -


<PAGE>


ITEM 2.  DESCRIPTION OF PROPERTY

         All of the Company's existing restaurants are located in leased space,
except for the North End Pizzeria Regina location which is owned by the Company.
All of the Company's leases provide for a minimum annual rent, and most call for
additional rent based on sales volume at the particular location over a
specified minimum level. Generally, these leases are net leases which require
the Company to pay the cost of insurance, taxes and a portion of the lessor's
operating costs. Certain mall locations also require the Company to participate
in upkeep of common areas and promotional activities.

         The following table sets forth certain information with respect to the
Company's restaurant properties:

<TABLE>
<CAPTION>
                                    Approx.         Seating            Lease
           Location                 Sq. Ft.        Capacity(1)     Expiration Date         Name/Type

<S>                                 <C>                <C>             <C>             <C>
Auburn Mall                           924              N/A              1/31/08        Pizzeria Regina
Auburn, MA                                                                             (food court)

North End                            4,300              67              N/A(2)         Pizzeria Regina
Boston, MA                                                                             (wait-service)

Faneuil Hall Marketplace              750              N/A             12/31/00        Pizzeria Regina
Boston, MA                                                                             (food court)
(Upstairs)

Faneuil Hall Marketplace(3)          2,000              75             12/31/98        Pizzeria Regina
Boston, MA                                                                             (wait service)
(Downstairs)

Burlington Mall                      1,018             N/A             11/30/05        Pizzeria Regina
Burlington, MA                                                                         (food court)

South Shore Plaza                     700              N/A              2/28/06        Pizzeria Regina
Braintree, MA                                                                          (food court)

Solomon Pond Mall                    1,085             N/A              1/30/07        Pizzeria Regina
Marlborough, MA                                                                        (food court)

Oviedo Market Place                   714              N/A              4/01/08        Pizzeria Regina
Oviedo, FL                                                                             (food court)
</TABLE>

                                     - 16 -
<PAGE>

<TABLE>

<S>                                 <C>                <C>             <C>             <C>
Paramus Park                          696              N/A              7/31/09        Pizzeria Regina
Paramus, NJ                                                                            (food court)

Regency Square                        605              N/A             11/03/04        Pizzeria Regina
Richmond, VA                                                                           (food court)

Saugus, MA                          11,000             400             11/30/12        Polcari's
                                                                                       North End
</TABLE>

 (1) Food court locations have no independent seating capacity. Seating is
     centralized in the common areas of the food courts.

 (2) Company-owned. This property is subject to a mortgage in favor of Haymarket
     Co-Operative Bank. See "Item 6. Management's Discussion And Analysis Or
     Plan Of Operation -- Liquidity and Capital Resources." Includes
     approximately 1,000 square feet located in two adjacent condominiums owned
     by the Company which have not been built-out as of the date of this Report.

(3)  The Company is currently in negotiations for a new wait service location
     within the marketplace.

         The Company occupies approximately 3,200 square feet of executive
office space at 999 Broadway, Saugus, Massachusetts 01906. The Company also
leases approximately 5,000 square feet of warehouse space located in Somerville,
Massachusetts under a lease expiring on July 31,2001 (including all extension
options that may be exercised by the Company in its discretion) and
approximately 2,741 square feet for its commissary located in Charlestown,
Massachusetts under a lease expiring on August 14, 1999.

ITEM 3.  LEGAL PROCEEDINGS

         The Company is involved in various legal matters in the ordinary course
of its business. Each of these matters is subject to various uncertainties and
some of these matters may be resolved unfavorably to the Company. Management
believes that any liability that may ultimately result from these matters will
not have a material adverse effect on the Company's financial position.

ITEM 4.  SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

         During the fourth quarter of the fiscal year covered by this report, no
matters were submitted to a vote of security holders of the Company.


                                     - 17 -
<PAGE>

                                     PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         The Company's Common Stock (NASDAQ symbol: "BRAI") is traded publicly
on the NASDAQ SmallCap Market and the Boston Stock Exchange (BSE symbol:"BNR").
As of July 15, 1998, there were approximately 1,130 holders of record of the
Company's Common Stock. On July 14,1998, the last bid and asked price of the
Company's Common Stock as reported on the Nasdaq Small-Cap Market were $1-9/16
and $1-11/16 per share, respectively.

         The table below represents the quarterly high and low bid and asked
prices for the Company's Common Stock for the Company's last two fiscal years.
The prices listed in this table reflect quotations without adjustment for retail
mark-up, markdown or commission, and may not represent actual transactions.

<TABLE>
<CAPTION>
                                                   High Bid        Low Bid         High Asked     Low Asked
                                                   --------        -------         ----------     ---------
Fiscal Year Ended April 27, 1997

<S>                                                 <C>             <C>             <C>            <C>
     First Quarter........................          $1.06           $0.56           $1.08          $1.00
     Second Quarter.......................           1.00             .60            1.04            .62
     Third Quarter........................           1.12            1.00            1.31           1.02
     Fourth Quarter.......................           1.08            1.04            1.22           1.08

Fiscal Year Ended April 26, 1998

     First Quarter........................          $1.31           $1.06           $1.43          $1.18
     Second Quarter.......................           2.18            1.18            2.31           1.28
     Third Quarter........................           1.62            1.25            1.87           1.37
     Fourth Quarter.......................           1.75            1.25            1.81           1.31
</TABLE>

         The Company has never paid cash dividends on its capital stock and does
not anticipate paying any cash dividends in the foreseeable future. Rather, the
Company intends to retain all of its future earnings to finance future growth.


                                     - 18 -
<PAGE>

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

         The following table sets forth for the fiscal periods indicated the
percentage of total revenues, unless otherwise indicated, represented by certain
items reflected in the Company's consolidated statements of operations:


<TABLE>
<CAPTION>
                                                                         Fiscal Year Ended
                                                                         -----------------
                                                             April 26, 1998             April 27, 1997
                                                             --------------             --------------
<S>                                                               <C>                        <C>
Income Statement Data:
Net Sales                                                         100%                       100.0%

Costs and expenses:
Cost of food and beverages                                         20.2                       22.2
Other operating expenses                                           60.5                       62.4
General and administrative                                         12.2                        8.9
Depreciation and amortization                                       4.2                        5.1
Loss from valuation of assets impaired, assets to be                 --                         --
disposed of and restaurant closures
Total costs and expenses                                           97.1                       98.6

Operating Income/(Loss)                                             2.9                        1.4
Interest expense, Net                                               2.4                        1.3
Other (income) expense, net                                          --                         --
Net Income/(Loss)                                                    .5                         .1
</TABLE>

Results of Operations

Results of Operations for the Years Ended April 26, 1998 and April 27, 1997


         Net sales in fiscal 1998 were $11,255,000, compared to net sales of
$11,411,000 in fiscal 1997. The decrease in net sales was attributable to the
closure of the self-service in-line Pizzeria Regina at the Burlington Mall in
October of 1997, the closure of the two Brookline Pizzeria Regina restaurants in
May and October of 1997 at the completion of their leases due to the inability
to renegotiate a market value lease at those locations and the closure of the
Lexington Bel Canto Restaurant. This was partially offset by the opening of the
new Paramus, NJ Pizzeria Regina food court kiosk in August of 1997, the opening
of the new Richmond, VA Pizzeria Regina food court kiosk in November of 1997,
and the opening of the new Oviedo, FL Pizzeria Regina food court kiosk in March

                                     - 19 -
<PAGE>

of 1998. Comparable sales for the restaurants open throughout both fiscal 1998
and 1997 increased by approximately 7.3%.

         Net sales at the Company's Pizzeria Regina restaurants increased to
$7,952,000 in fiscal 1998 from $7,890,000 in fiscal 1997, principally due to the
addition of sales from the new Pizzeria Regina food court kiosks and an increase
in aggregate same store sales for existing Pizzeria Regina restaurants.

         Net sales at the Company's full service casual dining restaurants
decreased to $3,286,000 in fiscal 1998 from $3,479,000 in fiscal 1997. The
decrease was primarily attributable to closure of the Lexington Bel Canto
Restaurant in December 1997, which was partially offset by increased sales at
the Polcari's North End Restaurant.

Costs and Expenses

Cost of Food and Beverages

         Cost of food and beverages as a percentage of net sales for all
restaurants was 20% in fiscal 1998, compared to 22% in fiscal 1997.

         The cost of food and beverages as a percentage of net sales at the
Pizzeria Regina restaurants was 16% in fiscal 1998, compared to 18% in fiscal
1997. The decrease as a percentage of net sales was principally due to lower
food costs and the addition of food court restaurants, which generally have
lower food and beverage costs than wait service restaurants.

         The cost of food and beverages as a percentage of net sales at the
Company's full service casual dining restaurants decreased to 29% in fiscal 1998
from 31% in fiscal 1997. This decrease as a percentage of net sales was due to a
change in menu mix and minimal menu price increases at the Company's Polcari's
North End Restaurant.

Other Operating Expenses

         Payroll Expenses. Payroll expenses were $3,380,000 (30% of net sales)
in fiscal 1998, compared to of $3,496,000 (31% of net sales) in fiscal 1997. The
decrease in payroll expenses is primarily attributable to the closure of the
Lexington Bel Canto restaurant in December of 1997.

         Payroll expenses at the Pizzeria Regina restaurants decreased to
$2,167,000 (27% of net sales) in fiscal 1998 from $2,242,000 (28% of net sales)
in fiscal 1997. The decrease in payroll expenses at the Pizzeria Regina
restaurants was primarily attributable to the closure of the Company's two
Brookline Pizzeria Regina restaurants and the self-service in-line Pizzeria
Regina at the Burlington Mall, which was partially offset by an increase in
payroll expenses associated with the new Paramus Park Mall food court


                                     - 20 -
<PAGE>

location in August of 1997, the new Regency Square Mall food court location in
November of 1997 and the new Oviedo Mall food court location in March of 1998.

         Payroll expenses at the Company's full service casual dining
restaurants decreased to $1,056,000 (32% of net sales) in fiscal 1998 from
$1,139,000 (33% net sales) in fiscal 1997. The decrease in payroll expenses is
primarily attributable to the closure of the Lexington Bel Canto restaurant in
December of 1997. Commissary payroll expenses were $157,000 in fiscal 1998 as
compared to $115,000 in fiscal 1997.

Other Operating Expenses, Exclusive of Payroll.

         Other operating expenses, exclusive of payroll were $3,435,000 (31% of
net sales) in fiscal 1998, compared to $3,623,000 (32% of net sales) in fiscal
1997.

         Other operating expenses exclusive of payroll from the Pizzeria Regina
restaurants decreased to $2,376,000 in fiscal 1998 from $2,415,000 in fiscal
1997. This decrease in other operating expenses was attributable to the closure
of the Company's two Brookline Pizzeria Regina restaurants and the
self-service-in-line Pizzeria Regina at this Burlington Mall. The decrease in
operating expenses was partially offset by the three new food court locations--
Pizzeria Regina in Paramus Park Mall, Pizzeria Regina in Regency Square Mall, 
and Pizzeria Regina in the Oviedo Mall--and the Company's policy to expense
pre-opening costs associated with new food court locations.

         Other operating expenses exclusive of payroll from the Company's full
service casual dining restaurants decreased to $972,000 in fiscal 1998 from
$1,130,000 in fiscal 1997. Other operating expenses also include commissary
expenses, which were $57,000 in fiscal 1998 and $78,000 in fiscal 1997,
respectively. In addition the Company realized pre-opening expenses of $30,000
in the current fiscal year.

General and Administrative Expenses

         General and administrative expenses were $1,377,000 (12% of net sales)
in fiscal 1998, compared to $1,021,000 (9% of net sales) in fiscal 1997. The
increase in general and administrative expenses in fiscal 1998 compared to
fiscal 1997 was due principally to the opening of new locations and future
development costs expensed by the Company.

Depreciation and Amortization Expenses

         Depreciation and amortization expense was $470,000 (4% of net sales) in
fiscal 1998, as compared to $579,000 (5% of net sales) in fiscal 1997. The
decrease in depreciation and amortization expense in fiscal 1998 compared to
fiscal 1997 was attributable to the closure of the Company's two Brookline
Pizzeria Regina restaurants and the self-service in-line Pizzeria Regina at the
Burlington Mall.

Interest Expense and Interest Income

                                     - 21 -
<PAGE>

         Interest expense increased to $305,000 in fiscal 1998, compared to
$157,000 in fiscal 1997. The increase in interest expense was associated with
borrowings under the Company's new credit facility and the issuance of
convertible subordinated debentures.

         Interest income increased to $25,000 in fiscal 1998 as compared to
interest income in fiscal 1997 of $5,000. The increase in interest income was
attributable to the proceeds from the issuance of convertible subordinated
debentures and the proceeds from the March 1998 rights offering.

Liquidity and Capital Resources

         At April 26, 1998 the Company had net working capital of $1,013,000 and
cash equivalents of $1,788,000.

         During fiscal 1998 the Company had a net increase in cash of $1,062,000
reflecting net cash provided by operating activities of $257,000, net cash used
for investing activities of $1,064,000 and net cash provided by financing
activities of $1,869,000.

         Net cash provided by operating activities include a decrease in
accounts receivable of $23,000 and an increase in deferred rent of $19,000,
partially offset by an increase in prepaid expenses of $23,000, a decrease in
accounts payable of $68,000, and a decrease in a accrued liabilities of
$138,000. Approximately $1,020,000 of the net cash used in investing activities
were costs associated with the opening of the new Pizzeria Regina food court
locations in Paramus, NJ, Richmond, VA, Oviedo, FL and Auburn, MA. Net cash
provided by financing activities reflects the receipt of $381,000 of proceeds
from the convertible subordinated debentures private placement and $1,756,000 of
net proceeds from the March 1998 rights offering, partially offset by the use of
$241,000 to repay long term debt, lease obligations and stockholder loans, and
the use of $27,000 for debt issuance costs.

         The Company opened Pizzeria Regina food court kiosks at the Paramus
Park Mall, Paramus, NJ on August 7, 1997, at the Regency Square Mall, Richmond,
VA on November 30, 1997 and at the Oviedo Mall, Oviedo, FL on March 11, 1998.
The Company also opened a Pizzeria Regina food court kiosk in the Auburn Mall,
Auburn, MA on May 7, 1998.

         The Company believes that its existing resources, cash flow from
operations, borrowings under its credit facility and the net proceeds from the
March 1998 rights offering will be sufficient to allow it to meet its
obligations over the next twelve months. The Company intends to fund its current
obligations and operating expenses through cash generated from operations. The
net proceeds of the March 1998 rights offering will be used for repayment of
indebtedness, to finance its expansion plans and for other working capital
requirements. There can be no assurance that cash flows will improve in an

                                     - 22 -
<PAGE>

amount sufficient to allow the Company to fund its current obligations and
operating expenses, or that the Company will be able to obtain additional
financing upon favorable terms, if at all. Failure of the Company to do so could
result in the Company's failure to be able to meet its cash flow requirements.

Year 2000 Systems

         The Company has undertaken a review concerning the ability of its
internal information systems, including its internal accounting systems, to
handle date information and to function appropriately from and after January 1,
2000, and does not believe that the total cost to address any changes required
as a result of the so-called "Year 2000 Problem" will be material. The Company
believes it is unlikely that any Year 2000 Problems encountered by any of its
suppliers or customers will have a material impact on the Company.

New Accounting Standards

         In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS
130") and Statement of Financial Accounting Standards No. 131, Disclosures about
Segments of an Enterprise and Related Information ("SFAS 131").

         SFAS 130 establishes standards for reporting and display of
comprehensive income, its components and accumulated balances. Comprehensive
income is defined to include all changes in equity, except those resulting from
investments by owners and distribution to owners. Among other disclosures, SFAS
130 requires that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported in a
financial statement that is displayed with the same prominence as other
financial statements.

         SFAS 131, which supersedes SFAS 14, Financial Reporting for Segments of
a Business Enterprise, establishes standards for the way that public companies
report information about operating segments in annual financial statements and
requires reporting of selected information about operating segments in interim
financial statements issued to the public. It also establishes standards for
disclosures regarding products and services, geographic areas and major
customers. SFAS 131 defines operating segments as components of a company about
which separate financial information is available that is evaluated regularly by
the chief operating decision maker in deciding how to allocate resources and in
assessing performance.

         SFAS 130 and 131 are effective for financial statements for periods
beginning after December 15, 1997 and require comparative information for
earlier years to be restated. Management does not expect implementation of these
standards to materially affect future financial statements and disclosures.

                                     - 23 -
<PAGE>

"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of
1995

         Forward-looking statements in this report, including without
limitation, statements relating to the adequacy of the Company's resources, and
the timing of the Company's expansion are made pursuant to the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Investors
are cautioned that such forward-looking statements involve risks and
uncertainties, including without limitations: potential quarterly fluctuations
in the Company's operating results; seasonality of sales; competition; risks
associated with expansion; the Company's reliance on key employees; risks
generally associated with the restaurant industry; risks associated with
geographic concentration of the Company's restaurants; risks associated with
serving alcoholic beverages; and other risks and uncertainties indicated from
time to time in the Company's filings with the Securities and Exchange
Commission. See also "Item 1. Business - Risk Factors"

ITEM 7.  FINANCIAL STATEMENTS

BOSTON RESTAURANT ASSOCIATES, INC. AND SUBSIDIARIES

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                    Page
                                                                    ----
         <S>                                                       <C>
         Boston Restaurant Associates, Inc. and Subsidiaries
         Index to Financial Statements.......................      F-1
         Report of Independent Certified Public Accountants..      F-2
         Consolidated Financial Statements
               Balance Sheets................................      F-3 - F-4
               Statements of operations......................      F-5
               Statements of stockholders' equity............      F-6
               Statements of cash flows......................      F-7
               Summary of accounting policies................      F-8 - F-11
               Notes to consolidated financial statements....      F-12 - F-29
</TABLE>

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

None.


                                     - 24 -
<PAGE>

PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; 
         COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT

         The information required by this Item 9 is hereby incorporated by
reference to the Company's definitive proxy statement to be filed by the Company
within 120 days after the close of its 1998 fiscal year.

ITEM 10. EXECUTIVE COMPENSATION

         The information required by this Item 10 is hereby incorporated by
reference to the Company's definitive proxy statement to be filed by the Company
within 120 days after the close of its 1998 fiscal year.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The information required by this Item 11 is hereby incorporated by
reference to the Company's definitive proxy statement to be filed by the Company
within 120 days after the close if its 1998 fiscal year.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         The information required by this Item 12 is hereby incorporated by
reference to the Company's definitive proxy statement to be filed by the Company
within 120 days after the close of its 1998 fiscal year.

ITEM 13. EXHIBITS, LISTS AND REPORTS ON FORM 8-K

<TABLE>
<CAPTION>
Exhibit                                                                Reference
Number                                                                 Number
<S>         <C>                                                        <C>
3.01        Amended Certificate of Incorporation of the Registrant     A-3(a)*

3.02        Amended By-Laws of the Registrant                          A-3(b)*

4.01        Description of Common Stock (contained in the Amended      A-4(a)*
            Certificate of Incorporation of the Registrant, filed as
            Exhibit 3(a).

4.02        Form of Certificate evidencing shares of Common Stock      F-4(b)*
</TABLE>

                                     - 25 -
<PAGE>

<TABLE>
<S>         <C>                                                        <C>
4.03        Stock Purchase Warrant issued to Corning Partners IV,      A-10(z)*
            L.P. on April 29, 1994

4.04        Loan and Security Agreement dated December 28, 1995        H-10.03*
            between Boston Restaurant Associates, Inc. and Haymarket
            Co-Operative Bank

4.05        $500,000 Note, dated December 28, 1995, issued by Boston   H-10.01*
            Restaurant Associates, Inc. in favor of Haymarket
            Co-Operative Bank

4.06        Condominium Mortgage-Security Agreement, dated December    H-10.02*
            28, 1995, issued by George R. Chapdelaine, Trustee of
            BRA Nominee Trust, in favor of Haymarket Co-Operative
            Bank

4.07        Guaranty of Ocean Inc., Polcari Enterprises, Inc.,         H-10.04*
            Pizzeria Regina, Inc., Polcari's, Inc. and Fantail
            Restaurant, Inc. dated December 28, 1995, in favor of
            Haymarket Co-Operative bank

4.08        Guaranty of George R. Chapdeline, individually and as      H-10.05*
            trustee of the BRA Nominee Trust, dated December 28,
            1995, in favor of Haymarket Co-Operative Bank

4.09        Guaranty of John P. Polcari, Jr., dated December 28,       H-10.06*
            1995, in favor of Haymarket Co-Operative Bank

4.10        $350,000 Note, dated April 19, 1996 issued by Boston       I-10.09*
            Restaurant Associates, Inc. in favor of Haymarket
            Co-Operative Bank

4.11        $500,000 Note, dated July 26, 1996, issued by Boston       I-10.10*
            Restaurant Associates, Inc. in favor of Haymarket
            Co-Operative Bank

4.12        Form of option granted to Mr. Chapdeline and Mr. Polcari   H-10.07*
            in consideration of their guaranties of Boston
            Restaurant Associates, Inc. obligations under its
            credit facility
</TABLE>


                                     - 26 -
<PAGE>

<TABLE>
<S>         <C>                                                        <C>
4.13        Guaranty of Lease of George R. Chapdelaine and John        Filed Herewith
            P. Polcari, Jr. dated March 17, 1998 in favor of H.C.B.
            Corporation.

4.14        Guaranty of Lease of George R. Chapdelaine and John        Filed Herewith
            P. Polcari, Jr. dated March 17, 1998 in favor of H.C.B.
            Corporation.

4.15        Guaranty of Lease of George R. Chapdelaine and John        Filed Herewith
            P. Polcari, Jr. dated March 17, 1998 in favor of H.C.B.
            Corporation.

4.16        Form of Option granted to Mr. Chapdelaine and Mr. Polcari  Filed Herewith
            in consideration of their guaranties of Boston Restaurant
            Associates, Inc. obligations under the H.C.B. Corporation
            leases.

10.02       Lease dated August 19, 1992 between Polcari's Inc. and     A-10(k)*
            the Yen H. Tow Realty Trust regarding a location in
            Saugus, Massachusetts

10.03       Lease dated August 1, 1993 between Polcari Enterprises,    A-10(n)*
            Inc. and the E.J.H. Realty Trust regarding Registrant's
            warehouse located in Somerville, Massachusetts

10.04       Lease dated October 14, 1986 between Polcari Enterprises,  A-10(o)*
            Inc., and Costa Fruit & Produce Co., Inc. regarding the
            Registrant's commissary located in Charlestown,
            Massachusetts

10.05       Lease dated June 30, 1995 between Berlin Properties        G-10(p)*
            Limited Partnership and Ocean, Inc. regarding a Pizzeria
            Regina location in the Solomon Pond Mall, Berlin and
            Marlborough, Massachusetts

10.06       Lease dated May 10, 1994 between Bellwether Properties     G-10(q)*
            of Massachusetts, L.P. and Ocean, Inc. regarding a
            Pizzeria Regina in the Burlington Mall, Burlington,
            Massachusetts

10.07       Employment Agreement between the Registrant and George     A-10(p)***
            R. Chapdelaine

10.08       Form of 1994 Non-employee Director Stock Option Plan       A-10(q)***
</TABLE>


                                - 27 -
<PAGE>

<TABLE>
<S>         <C>                                                        <C>
10.09       Form of 1994 Combination Stock Option Plan                 A-10(r)***

10.10       Form of Indemnification Agreement with each of the         A-10(bb)***
            directors and certain officers of the Registrant

10.11       Incentive Stock Option Plan                                B-(10)h***

10.12       Non-employee Director Stock Option Plan                    C-10(h)***

10.13       Amendment to Employment Agreement between the Registrant   A-(hh)***
            and George R. Chapdelaine

10.14       Lease dated July 24, 1996 between Faneuil Hall             I-10.08*
            Marketplace, Inc. and Fantail Restaurant, Inc.
            regarding  a Pizzeria Regina location in the Faneuil
            Hall Marketplace Area, Boston, Massachusetts

10.15       Equipment Lease dated July 26, 1996 between HCB            I-10.11*
            Corporation and Ocean, Inc. regarding certain equipment
            at a Pizzeria Regina location in the Solomon Pond Mall,
            Berlin and Marlborough, Massachusetts

10.16       Lease dated June 30, 1995 between Berlin Properties        J-10.01
            Limited Partnership and Ocean, Inc. regarding a Pizzeria
            Regina Location in Solomon Pond Mall, Berlin and
            Marlborough, Massachusetts

10.17       Lease dated July 7, 1997 between One Federal Street Joint  K-10.01
            Venture and Pizzeria Regina of Virginia, Inc. regarding a
            Pizzeria Regina located in Regency Square Mall, Richmond,
            Virginia

10.18       Lease dated December 10, 1997 between Rouse-Orlando,       L-10.01*
            Inc. and Pizzeria Regina of Florida, Inc. regarding a
            Pizzeria Regina location in the Oviedo Marketplace,
            Oviedo, Florida
</TABLE>

                                - 28 -
<PAGE>

<TABLE>
<S>         <C>                                                        <C>
10.19       International Development Agreement dated as of January    M-10.01
            1, 1998 between Boston Restaurant Associates, Inc. and
            Regina International, Ltd.

10.20       Equipment Lease dated March 17, 1998 between H.C.B.        N-10.01
            Corporation and Pizzeria Regina of Virginia, Inc.
            regarding certain equipment located in the Regency
            Square Mall, Richmond  Virginia

10.21       Equipment Lease dated March 17, 1998 between H.C.B.        Filed Herewith
            Corporation and Pizzeria Regina of Florida, Inc. regarding
            certain equipment located in the Oviedo Marketplace,
            Oviedo, Florida.

10.22       Equipment Lease dated March 17, 1998 between H.C.B.        Filed Herewith
            Corporation and Ocean, Inc. regarding certain equipment
            at a Pizzeria Regina location in the Auburn Mall,
            Auburn, Massachusetts.

21          Subsidiaries of the Registrant                             A-21*

23          Consent of BDO Seidman, LLP                                Filed Herewith

27          Financial Schedule                                         Filed Herewith
</TABLE>


                                - 29 -
<PAGE>

<TABLE>
<S>         <C>
*           In accordance with Rule 12b-32 under the Securities Exchange Act of
            1934, as amended, reference is made to the documents previously
            filed with the Securities and Exchange Commission, which documents
            are hereby incorporated by reference

**          Management Contract or Compensatory Plan or Arrangement

A           Incorporated by reference to the Company's Registration Statement on
            Form SB-2 (Registration No. 33-81068). The number set forth herein
            is the number of the Exhibit in said registration statement

B           Incorporated by reference to the Company's registration statement on
            Form S-1 (File No. 33-31748). The number set forth herein is the
            number of the Exhibit in said registration statement

C           Incorporated by reference to the Company's annual report on Form
            10-K for the year ended April 30, 1991. The number set forth herein
            is the number of the Exhibit in said annual report

D           Incorporated by reference to the Company's transition report on Form
            10K for the seven months ended April 30, 1990. The number set forth
            herein is the number of the Exhibit in said transition report

E           Incorporated by reference to the Company's annual report on Form
            10-K for the year ended April 30, 1993. The number set forth herein
            is the number of the Exhibit in said annual report.

F           Incorporated by reference to the Company's annual report on Form
            10-K for the year ended April 30, 1994. The number set forth herein
            is the number of the Exhibit in said annual report.

G           Incorporated by reference to the Company's annual report on Form
            10-K for the year ended April 30, 1995. The number set forth herein
            is the number of the Exhibit in said annual report.

H           Incorporated by reference to the Company's quarterly report on Form
            10-QSB for the period ended January 28, 1996. The number set forth
            herein is the number of the Exhibit in said quarterly report

I           Incorporated by reference to the Company's annual report on Form
            10-KSB for the year ended April 28, 1996. The number set forth
            herein is the number of the Exhibit in said annual report.
</TABLE>

                                     - 30 -
<PAGE>

<TABLE>
<S>         <C>
J           Incorporated by reference to the Company's annual report on Form
            10-KSB for the year ended April 27, 1997. The number set forth
            herein is the number of the Exhibit in said annual report.

K           Incorporated by reference to the Company's quarterly report on Form
            10-QSB for the period ended July 26, 1997. The number set forth
            herein is the number of the Exhibit in said quarterly report.

L           Incorporated by reference to the Company's quarterly report on Form
            10-QSB for the period ended October 26, 1997. The number set forth
            herein is the number of the Exhibit in said quarterly report.

M           Incorporated by reference to the Company's S-2 Registration
            Statement dated February 26, 1998. The number set forth herein is
            the number of the Exhibit in said Registration Statement.

N           Incorporated by reference to the Company's quarterly report on Form
            10-QSB for the period ended January 25, 1998. The number set forth
            herein is the number of the Exhibit in said quarterly report.

O           Incorporated by reference to the Company's annual report on Form
            10-KSB for the year ended April 26, 1998. The number set forth
            herein is the number of the Exhibit in said annual report.


(a)         REPORTS ON FORM 8-K


1.          Boston Restaurant Associates, Inc. filed a report on Form 8-K dated
            February 26, 1998 reporting the filing of a S-2 Registration with
            respect to an offering of Rights to purchase Common Stock.

2.          Boston Restaurant Associates, Inc. filed a report on Form 8-K dated
            March 25, 1998 reporting the closing and results of the S-2
            Registration with respect to an offering of Rights to purchase
            Common Stock.

3.          Boston Restaurant Associates, Inc. filed a report on Form 8-K dated
            12 June 1998 reporting the net tangible worth of the Company as of
            April 26, 1998 for purposes of the Nasdaq SmallCap Market listing
            requirements.
</TABLE>

                                     - 31 -
<PAGE>

Signatures
----------

         In accordance with section 13 or 15 (d) of the Securities Exchange Act
of 1934, the registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                       BOSTON RESTAURANT ASSOCIATES, INC.

Date:    20 July, 1998                 By: /s/ George R. Chapdelaine
                                           -------------------------
                                           George R. Chapdelaine, President

         In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.

SIGNATURES                                                      DATE
----------                                                      ----

/s/ George R. Chapdelaine                                   20 July, 1998
------------------------------------------------
George R. Chapdelaine, Chief
Executive Officer, President and
Director (principal executive officer)

/s/ Fran V. Ross                                            20 July, 1998
------------------------------------------------
Fran V. Ross, Chief Financial Officer
(principal financial and accounting officer)

/s/ Joseph J. Caruso                                        20 July, 1998
------------------------------------------------
Joseph J. Caruso, Director

/s/ Roger Lipton                                            20 July, 1998
------------------------------------------------
Roger Lipton, Director

/s/ John P. Polcari, Jr.                                    20 July, 1998
------------------------------------------------
John P. Polcari, Jr., Director

/s/ Richard J. Reeves                                       20 July, 1998
-------------------------------------------------
Richard J. Reeves, Director

Lucille Salhany                                             20 July, 1998
-------------------------------------------------
Lucille Salhany, Director

/s/ Terrance A. Smith                                       20 July, 1998
-------------------------------------------------
Terrance A. Smith, Director

                                     - 32 -


<PAGE>


<TABLE>
<CAPTION>
Corporate Officers                       Directors
------------------                       ---------
<S>                                      <C>
George R. Chapdelaine                    George R. Chapdelaine
President, Chief Executive Officer       President, Chief Executive Officer

Anthony V. Buccieri                      Joseph J. Caruso(2)
Vice President of Operations             President
                                         Bantam Group, Inc.

Fran V. Ross                             Roger Lipton(1)
Chief Financial Officer                  Managing Director
                                         Axiom Capital Management, Inc.

Gordon R. Penman                         John P. Polcari, Jr.
Secretary                                One of the Founders of Pizzeria Regina, Inc.
Member, Brown, Rudnick, Freed & Gesmer
                                         Richard J. Reeves(1)(2)
                                         Engaged in restaurant development as a
                                         franchisee of various restaurants
General Counsel
---------------
Brown, Rudnick, Freed & Gesmer           Lucille Salhany
                                         President, Chief Executive Officer
Independent Auditors                     United Paramount Network
--------------------
BDO Seidman, LLP

Transfer Agent and Registrar             Terrance A. Smith(1)
----------------------------             President
American Stock Transfer & Trust Company  Chi-Chi's International Operations, Inc.
                                         Master franchisee of Chi-Chi's Mexican
                                         Restaurants outside of the United States and Canada

                                         (1) Audit Committee
                                         (2) Compensation Committee Member
</TABLE>

Annual Meeting

The Annual Meeting of Boston Restaurant Associates, Inc. will be held at 10:00
a.m. on Monday, September 14, 1998 at the offices of Brown, Rudnick, Freed &
Gesmer, One Financial Center, Boston, MA 02111.

Corporate Address

Boston Restaurant Associates, Inc. 999 Broadway, Suite 400, Saugus,
Massachusetts 01906. Telephone: (781) 231-7575; Fax: (781) 231-5225.

Listing

Boston Restaurant Associates, Inc.'s stock is traded on the Nasdaq SmallCap
Market under the symbol BRAI and on the Boston Stock Exchange under the symbol
BNR.

General

This annual report and the financial statements that it contains are submitted
for the general information of the stockholders of Boston Restaurant Associates,
Inc. and are not intended to introduce or to be used in connection with any
sales or purchases of securities.


                                     - 33 -


<PAGE>


                                             Boston Restaurant
                                              Associates, Inc.
                                              and Subsidiaries

================================================================================

                             Consolidated Financial Statements
                 Years Ended April 26, 1998 and April 27, 1997

<PAGE>


                                          Boston Restaurant Associates, Inc.
                                                            and Subsidiaries


                                               Index to Financial Statements

================================================================================

<TABLE>
    <S>                                                         <C>
    Report of Independent Certified Public Accountants                   F-2

    Consolidated Financial Statements:

        Balance sheets                                            F-3 to F-4

        Statements of operations                                         F-5

        Statements of stockholders' equity                               F-6

        Statements of cash flows                                         F-7

        Summary of accounting policies                           F-8 to F-11

        Notes to consolidated financial statements              F-12 to F-29
</TABLE>


                                      F-1
<PAGE>


Report of Independent Certified Public Accountants


To the Board of Directors and Stockholders of
Boston Restaurant Associates, Inc.

We have audited the accompanying consolidated balance sheets of Boston
Restaurant Associates, Inc. and subsidiaries as of April 26, 1998 and April 27,
1997, and the related consolidated statements of operations, stockholders'
equity and cash flows for the years then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Boston Restaurant
Associates, Inc. and subsidiaries at April 26, 1998 and April 27, 1997, and the
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.

                                                                BDO Seidman, LLP

Boston, Massachusetts
June 17, 1998


                                      F-2
<PAGE>



                           Boston Restaurant Associates, Inc.
                                             and Subsidiaries


                                  Consolidated Balance Sheets

================================================================================
<TABLE>
<CAPTION>
                                                          April 26,                 April 27,
                                                            1998                      1997
=============================================================================================

Assets (Note 4)

<S>                                                      <C>                     <C>
Current:
    Cash and cash equivalents                            $ 1,788,361             $   726,054
    Accounts receivable                                       46,958                  69,729
    Inventories (Note 1)                                     212,071                 209,295
    Prepaid expenses and other                                49,152                  27,532
---------------------------------------------------------------------------------------------

       Total current assets                                2,096,542               1,032,610
---------------------------------------------------------------------------------------------

Property and equipment (Note 8):
    Building                                                 512,500                 512,500
    Leasehold improvements                                 2,977,315               2,591,941
    Equipment, furniture and fixtures                      1,974,473               1,799,061
---------------------------------------------------------------------------------------------

                                                           5,464,288               4,903,502

    Less accumulated depreciation and amortization         2,119,015               2,247,174
---------------------------------------------------------------------------------------------

       Net property and equipment                          3,345,273               2,656,328
---------------------------------------------------------------------------------------------

Other assets (Note 2)                                      1,323,160                 944,180
---------------------------------------------------------------------------------------------

                                                         $ 6,764,975             $ 4,633,118
=============================================================================================

                    See accompanying summary of accounting policies and notes to consolidated
                                                                        financial statements.
</TABLE>


                                      F-3
<PAGE>

                           Boston Restaurant Associates, Inc.
                                             and Subsidiaries


                                  Consolidated Balance Sheets
                                                  (Continued)

================================================================================
<TABLE>
<CAPTION>
                                                                      April 26,                 April 27,
                                                                        1998                      1997
=========================================================================================================

Liabilities and Stockholders' Equity

<S>                                                                  <C>                    <C>
Current liabilities:
    Accounts payable                                                 $   314,124            $   382,294
    Accrued expenses (Note 3)                                            490,525                628,277
    Current maturities (Notes 4, 5 and 8):
       Long-term debt                                                    200,000                200,000
       Notes payable - stockholder                                         4,495                  4,261
       Obligations under capital leases                                   74,206                 30,850
--------------------------------------------------------------------------------------------------------

          Total current liabilities                                    1,083,350              1,245,682

Long-term obligations:
    Long-term debt, less current maturities (Note 4)                     425,000                625,000
    Notes payable - stockholder, less current
     maturities (Note 5)                                                 121,336                125,810
    Obligations under capital leases, less
     current maturities (Note 8)                                         361,548                138,850
    Deferred rent (Note 8)                                                85,662                 67,024
    Subordinated debentures (Note 6)                                   1,500,000              1,118,750
--------------------------------------------------------------------------------------------------------

          Total liabilities                                            3,576,896              3,321,116
--------------------------------------------------------------------------------------------------------

Commitments and contingencies (Notes 4, 8 and 9)

Stockholders' equity (Notes 4, 6, 9, 10 and 12):
    Common stock, $.01 par value, 25,000,000
     shares authorized; shares issued 7,021,970
     and 5,015,693                                                        70,220                 50,157
    Additional paid-in capital                                        10,846,333              9,043,199
    Accumulated deficit                                               (7,728,474)            (7,781,354)
--------------------------------------------------------------------------------------------------------

          Total stockholders' equity                                   3,188,079              1,312,002
--------------------------------------------------------------------------------------------------------

                                                                     $ 6,764,975            $ 4,633,118
========================================================================================================

                               See accompanying summary of accounting policies and notes to consolidated
                                                                                   financial statements.
</TABLE>


                                      F-4
<PAGE>


                           Boston Restaurant Associates, Inc.
                                             and Subsidiaries


                        Consolidated Statements of Operations

================================================================================
<TABLE>
<CAPTION>
                                                                      April 26,             April 27,
Years ended                                                             1998                  1997
=========================================================================================================
<S>                                                                   <C>                     <C>
Net sales                                                             $11,255,049             $11,410,886
---------------------------------------------------------------------------------------------------------

Costs and expenses:
    Cost of food, beverages and liquor                                  2,267,331               2,532,050
    Other operating expenses                                            6,814,565               7,119,142
    General and administrative                                          1,377,464               1,020,796
    Depreciation and amortization                                         469,559                 579,071
---------------------------------------------------------------------------------------------------------

       Total costs and expenses                                        10,928,919              11,251,059
---------------------------------------------------------------------------------------------------------

Operating income                                                          326,130                 159,827

Interest expense, net of interest income of $25,215 and
 $4,983 in 1998 and 1997, respectively                                    279,645                 151,941

Other income, net                                                          (6,395)                 (4,377)
---------------------------------------------------------------------------------------------------------

Net income                                                            $    52,880             $    12,263
=========================================================================================================

Net income per share of common stock (Note 11):
    Basic                                                             $      0.01             $      0.00
    Diluted                                                           $      0.01             $      0.00
=========================================================================================================

                                See accompanying summary of accounting policies and notes to consolidated
                                                                                    financial statements.
</TABLE>


                                      F-5
<PAGE>

                            Boston Restaurant Associates, Inc.
                                              and Subsidiaries


                                    Consolidated Statements of
                                          Stockholders' Equity

================================================================================
<TABLE>
<CAPTION>
                                                  Common Stock
                                                 $.01 Par Value              Additional                         Total
Years ended April 26, 1998, and             --------------------------        Paid-In      Accumulated      Stockholders'
April 27, 1997                                  Shares        Amount          Capital        Deficit           Equity
========================================================================================================================

<S>                                          <C>            <C>           <C>             <C>               <C>
Balance, April 28, 1996                      5,015,293      $  50,153     $  8,953,785    $(7,793,617)      $1,210,321

   Exercise of stock options (Note 9)              400              4              384              -              388

   Issuance of options and warrants in
    exchange for services (Note 10)                  -              -           89,030              -           89,030

   Net income for the year                           -              -                -         12,263           12,263
------------------------------------------------------------------------------------------------------------------------

Balance, April 27, 1997                      5,015,693         50,157        9,043,199     (7,781,354)       1,312,002

   Proceeds from sale of common stock,
    net of expenses of $250,240 (Note 12)    2,006,277         20,063        1,735,974              -        1,756,037

   Issuance of options and warrants in
    exchange for services (Note 10)                  -              -           67,160              -           67,160

   Net income for the year                           -              -                          52,880           52,880
------------------------------------------------------------------------------------------------------------------------

Balance, April 26, 1998                      7,021,970      $  70,220     $ 10,846,333    $(7,728,474)      $3,188,079
========================================================================================================================

                                               See accompanying summary of accounting policies and notes to consolidated
                                                                                                   financial statements.
</TABLE>


                                      F-6
<PAGE>

                           Boston Restaurant Associates, Inc.
                                             and Subsidiaries


                        Consolidated Statements of Cash Flows
                                                    (Note 10)

================================================================================
<TABLE>
<CAPTION>
                                                                                    April 26,                 April 27,
Years ended                                                                           1998                      1997
========================================================================================================================

<S>                                                                                <C>                      <C>
Cash flows from operating activities:
    Net income                                                                     $    52,880              $   12,263
    Adjustments to reconcile net income to net cash provided
     by (used for) operating activities:
       Depreciation and amortization                                                   469,559                 579,071
       Options granted in exchange for services                                         37,704                  20,300
       Changes in operating assets and liabilities:
          Accounts receivable                                                           22,771                  (4,650)
          Inventories                                                                   (2,776)                 23,132
          Prepaid expenses and other                                                   (21,620)                 39,077
          Other assets                                                                (113,787)               (142,570)
          Accounts payable                                                             (68,170)               (503,497)
          Accrued expenses                                                            (137,752)               (393,364)
          Deferred rent                                                                 18,638                   6,153
------------------------------------------------------------------------------------------------------------------------

              Net cash provided by (used for) operating activities                     257,447                (364,085)
------------------------------------------------------------------------------------------------------------------------

Cash flows from investing activities:
    Capital expenditures                                                              (796,716)               (331,430)
    Purchase of lease acquisition rights                                              (290,700)                      -
    Proceeds from sales of fixed assets                                                 22,908                  99,811
------------------------------------------------------------------------------------------------------------------------

              Net cash used for investing activities                                (1,064,508)               (231,619)
------------------------------------------------------------------------------------------------------------------------

Cash flows from financing activities:
    Net proceeds from sale of common stock                                           1,756,037                       -
    Proceeds from issuance of long-term debt                                                 -                 380,750
    Repayments of long-term debt                                                      (200,000)               (175,000)
    Repayments of capital lease obligations                                            (36,711)                (20,300)
    Repayments of stockholder loans                                                     (4,240)                 (4,039)
    Repayments of subordinated debentures                                                    -                 (84,000)
    Proceeds from issuance of subordinate debentures                                   381,250               1,118,750
    Proceeds from exercise of stock options                                                  -                     388
    Debt issuance costs                                                                (26,968)                (54,355)
------------------------------------------------------------------------------------------------------------------------

              Net cash provided by financing activities                              1,869,368               1,162,194
------------------------------------------------------------------------------------------------------------------------

Net increase in cash and cash equivalents                                            1,062,307                 566,490

Cash and cash equivalents, beginning of year                                           726,054                 159,564
------------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents, end of year                                             $ 1,788,361              $  726,054
========================================================================================================================

                                               See accompanying summary of accounting policies and notes to consolidated
                                                                                                   financial statements.
</TABLE>
                                      F-7
<PAGE>

                           Boston Restaurant Associates, Inc.
                                             and Subsidiaries

                               Summary of Accounting Policies

================================================================================

<TABLE>
<S>                    <C>
Nature of Business     The Company is engaged in the restaurant business. As of
And Basis of           April 26, 1998, the Company operated nine pizza and one
Presentation           casual Italian dining restaurants. As of April 27, 1997,
                       the Company operated nine pizza and two casual Italian
                       dining restaurants, including one held for sale. A
                       Company restaurant location has been closed since June
                       1995 and was sold in April 1997. In May 1997, the lease
                       for a pizza restaurant location expired and was not
                       renewed.

                       The consolidated financial statements include the
                       accounts of the Company and its wholly-owned
                       subsidiaries. All significant intercompany balances and
                       transactions have been eliminated.

Fiscal Year            The Company's fiscal year ends on the last Sunday in
                       April. Fiscal years 1998 and 1997 both included 52 weeks.

Use of Estimates       The preparation of financial statements in conformity
                       with generally accepted accounting principles requires
                       management to make estimates and assumptions that affect
                       the reported amounts of assets and liabilities and
                       disclosure of contingent assets and liabilities at the
                       date of the financial statements and reported amounts of
                       revenues and expenses during the reporting period. Actual
                       results could differ from those estimates.

Cash Equivalents       For purposes of the statements of cash flows, the Company
                       considers all highly liquid debt instruments purchased 
                       with a maturity of three months or less to be cash
                       equivalents. Cash equivalents were approximately
                       $1,646,000 and $656,000 at April 26, 1998 and April 27,
                       1997, respectively.

Inventories            Inventories are valued at the lower of cost (first-in,
                       first-out) or market.
</TABLE>


                                      F-8
<PAGE>

                           Boston Restaurant Associates, Inc.
                                             and Subsidiaries

                               Summary of Accounting Policies

================================================================================

<TABLE>
<S>                    <C>
Property and           Property and equipment are stated at cost. Depreciation
Equipment              is computed using accelerated and straight-line methods
                       over the estimated useful lives of the assets. Leasehold
                       improvements are amortized over the estimated useful
                       lives of the improvements or the length of the lease,
                       including anticipated renewal periods, whichever is
                       shorter.

Other Assets

   Goodwill            Goodwill resulting from the excess of cost over fair
                       value of net assets acquired is being amortized on a
                       straight-line basis over 20 years.

   Deferred Financing  Costs incurred in connection with obtaining financing are
   Costs               amortized over the terms of the related debt.

   Lease Acquisition   Costs incurred in connection with the purchase of a lease
   Rights              are being amortized over the term of the lease.

Revenue Recognition    Substantially all revenues are recognized at the point 
                       of sale and represent retail sales to the general 
                       public through Company-owned restaurants.

Advertising Costs      Advertising costs are expensed when incurred. Advertising
                       expense was approximately $118,000 in 1998 and $107,000
                       in 1997.

Pre-Opening Costs      All nonrecurring costs, such as recruiting, training and
                       other initial direct administrative expenses associated 
                       with the opening of new restaurant locations are expensed
                       as incurred.
</TABLE>


                                      F-9
<PAGE>

                           Boston Restaurant Associates, Inc.
                                             and Subsidiaries

                               Summary of Accounting Policies

================================================================================

<TABLE>
<S>                    <C>
Taxes on Income        The Company accounts for income taxes under the asset and
                       liability method pursuant to Statement of Financial
                       Accounting Standards No. 109 ("SFAS No. 109"),
                       "Accounting for Income Taxes." Under SFAS No. 109,
                       deferred income taxes are recognized for the future tax
                       consequences attributable to differences between the
                       financial statement carrying amounts of existing assets
                       and liabilities and their respective tax basis. Deferred
                       tax assets and liabilities are measured using enacted tax
                       rates expected to apply to taxable income in the years in
                       which those temporary differences are expected to be
                       recovered or settled. Under SFAS No. 109, the effect on
                       deferred taxes of a change in tax rates is recognized in
                       income in the period that includes the enactment date.

Stock Options          Effective April 29, 1996, the Company adopted the
                       provisions of Statement of Accounting Standards No. 123,
                       Accounting for Stock-Based Compensation. The Company has
                       elected to continue to account for stock options at their
                       intrinsic value with disclosure of the effects of fair
                       value accounting on net earnings and earnings per share
                       on a pro forma basis.


Net Income Per Share   In fiscal 1998, the Company adopted Statement of
of Common Stock        Financial Accounting Standards No. 128, ("SFAS No. 128")
                       Earnings Per Share. SFAS No. 128 requires the
                       presentation of both basic and diluted earnings per share
                       and replaces previously required standards for computing
                       and presenting earnings per share. Earnings per share
                       amounts for all periods have been presented and, where
                       appropriate, restated to conform to the new requirements
                       of SFAS No. 128.

Long-Lived Assets      The Company evaluates long-lived assets under the
                       provisions of Statement of Financial Accounting Standards
                       No. 121 ("SFAS No. 121"), "Accounting for the Impairment
                       of Long-Lived Assets and for Long-Lived Assets to be
                       Disposed of". SFAS No. 121 establishes accounting
                       standards for the impairment of long-lived assets and
                       certain identifiable intangibles to be held and used and
                       for long-lived assets and certain identifiable
                       intangibles to be disposed of.
</TABLE>

                                      F-10
<PAGE>

                           Boston Restaurant Associates, Inc.
                                             and Subsidiaries

                               Summary of Accounting Policies

================================================================================

<TABLE>
<S>                    <C>
Long-Lived Assets      The Company reviews the carrying values of its long-lived
(Continued)            and identifiable intangible assets for possible
                       impairment whenever events or changes in circumstances
                       indicate that the carrying amount of the assets may not
                       be recoverable.

New Accounting         In June 1997, the Financial Accounting Standards Board
Standards              issued two new disclosure standards.

                       Statement of Financial Accounting Standards No. 130
                       ("SFAS No. 130"), "Reporting Comprehensive Income",
                       establishes standards for reporting and display of
                       comprehensive income, its components, and accumulated
                       balances. Comprehensive income is defined to include all
                       changes in equity except those resulting from investments
                       by owners and distributions to owners. Among other
                       disclosures, SFAS No. 130 requires that all items that
                       are required to be recognized under current accounting
                       standards as components of comprehensive income be
                       reported in a financial statement that is displayed with
                       the same prominence as other financial statements.

                       SFAS No. 131, "Disclosure about Segments of an Enterprise
                       and Related Information", which supersedes SFAS No. 14,
                       "Financial Reporting for Segments of a Business
                       Enterprise", establishes standards for the way that
                       public enterprises report information about operating
                       segments in annual financial statements and requires
                       reporting of selected information about operating
                       segments in interim financial statements issued to the
                       public. It also establishes standards for disclosures
                       regarding products and services, geographic areas, and
                       major customers. SFAS No. 131 defines operating segments
                       as components of an enterprise about which separate
                       financial information is available that is evaluated
                       regularly by the chief operating decision maker in
                       deciding how to allocate resources and in assessing
                       performance.

                       Both of these new standards are effective for financial
                       statements for periods beginning after December 15, 1997
                       and require comparative information for earlier years to
                       be restated. Management does not expect implementation of
                       these standards to materially affect future financial
                       statements and disclosures.
</TABLE>


                                      F-11
<PAGE>

                           Boston Restaurant Associates, Inc.
                                             and Subsidiaries


                   Notes to Consolidated Financial Statements

================================================================================

1. Inventories        Inventories consist of the following:

<TABLE>
<CAPTION>
                                                                  April 26,      April 27,
                                                                    1998           1997
                      ======================================================================

                      <S>                                        <C>              <C>
                      Food, beverages and liquor                 $102,943         $110,732
                      Paper goods and supplies                    109,128           98,563
                      ----------------------------------------------------------------------

                      Total                                      $212,071         $209,295
                      ======================================================================
</TABLE>

2. Other Assets       Other assets consist of the following:

<TABLE>
<CAPTION>
                                                                  April 26,      April 27,
                                                                    1998           1997
                      ======================================================================

                      <S>                                      <C>              <C>
                      Goodwill                                 $  765,133       $  765,133
                      Lease acquisition rights                    290,700                -
                      Deferred financing costs                    268,524          212,100
                      Deposits and other                          213,646           99,859
                      Favorable lease                                   -           41,590
                      ----------------------------------------------------------------------

                                                                1,538,003        1,118,682

                      Less accumulated amortization               214,843          174,502
                      ----------------------------------------------------------------------

                      Other assets, net                        $1,323,160       $  944,180
                      ======================================================================
</TABLE>


                                      F-12
<PAGE>

                           Boston Restaurant Associates, Inc.
                                             and Subsidiaries


                   Notes to Consolidated Financial Statements

================================================================================

3. Accrued Expenses   Accrued expenses consist of the following:

<TABLE>
<CAPTION>
                                                                  April 26,      April 27,
                                                                    1998           1997
                      ======================================================================

                      <S>                                         <C>            <C>
                      Compensation                                $160,315       $230,117
                      Interest                                     127,412         35,315
                      Taxes other than income taxes                 71,073         88,786
                      Professional fees                             64,000         50,000
                      Gift certificates                             36,465         37,365
                      Accrued rent                                  22,209         89,455
                      Reserves for store closures                        -         46,325
                      Insurance                                          -         10,873
                      Other                                          9,051         40,041
                      ----------------------------------------------------------------------

                      Total                                       $490,525       $628,277
                      ======================================================================
</TABLE>

4. Long-Term Debt     Long-term debt consists of the following:

<TABLE>
<CAPTION>
                                                                  April 26,      April 27,
                                                                    1998           1997
                      ======================================================================

                      <S>                                         <C>            <C>

                      Note payable to a bank, interest at
                       prime plus 2% (10.5% at April 26,
                       1998), payable in monthly
                       installments of $8,333 plus interest,
                       due April, 2001.                           $300,000       $400,000

                      Note payable to a bank, interest at
                       12.0%, payable in monthly
                       installments of $8,333 plus interest,
                       due July, 2001.                             325,000        425,000
                      ----------------------------------------------------------------------

                      Total                                        625,000        825,000

                      Less current maturities                      200,000        200,000
                      ----------------------------------------------------------------------

                      Long-term debt                              $425,000       $625,000
                      ======================================================================
</TABLE>

                                      F-13
<PAGE>


                           Boston Restaurant Associates, Inc.
                                             and Subsidiaries


                   Notes to Consolidated Financial Statements

================================================================================

4. Long-Term Debt     The notes payable to a bank are collateralized by
   (Continued)        substantially all of the Company's assets, excluding real
                      estate, and are personally guaranteed by both the
                      Company's President and Treasurer.

                      In consideration for their guarantees of the notes
                      payable, the Company issued options to purchase an
                      aggregate of 115,500 shares of the Company's common stock
                      in fiscal 1997 to the Company's President and Treasurer.
                      The Company also issued warrants to purchase a total of
                      50,000 shares of the Company's common stock to the bank in
                      connection with the issuance of the notes payable (see
                      Note 9). The value of these options and warrants was not
                      material as of their issuance dates. A member of the
                      Company's Board of Directors also serves as a member of
                      the bank's Board of Directors.

                      Maturities of the long-term debt are as follows:

<TABLE>
<CAPTION>
                      Fiscal year ending                                 Amount
                      ==========================================================

                      <S>                                               <C>
                      1999                                              $200,000
                      2000                                               200,000
                      2001                                               200,000
                      2002                                                25,000
                      ----------------------------------------------------------

                      Total                                             $625,000
                      ==========================================================
</TABLE>

                                      F-14
<PAGE>

                           Boston Restaurant Associates, Inc.
                                             and Subsidiaries


                   Notes to Consolidated Financial Statements

================================================================================

5. Notes Payable -    Notes payable - stockholder consists of two notes, with
   Stockholder        interest at 7.18% and 8%, payable in aggregate monthly
                      installments of principal and interest of $810, maturing
                      January, 2017.

<TABLE>
<CAPTION>
                      Fiscal year ending                                Amount
                      ----------------------------------------------------------
                      <S>                                             <C>
                      1999                                            $  4,495
                      2000                                               4,738
                      2001                                               4,996
                      2002                                               5,274
                      2003                                               5,567
                      Thereafter                                       100,761
                      ----------------------------------------------------------

                      Total                                            125,831

                      Less current maturities                            4,495
                      ----------------------------------------------------------

                      Long-term portion                               $121,336
                      ----------------------------------------------------------
</TABLE>

6. Subordinated       Subordinated debentures outstanding at April 26, 1998 and
   Debentures         April 27, 1997 consist of convertible debentures bearing
                      interest at variable rates of 8% through December 31,
                      1997, 10% through December 31, 1998, 12% through December
                      31, 1999 and 14% through December 31, 2011, payable
                      semi-annually and convertible into the Company's common
                      stock at a conversion rate of $1.25 per share. The Company
                      has recorded interest costs related to these debentures at
                      a straight-lined rate of 13.2%. The convertible debentures
                      are convertible at the option of the holder, at any time,
                      and automatically convert into shares of common stock at
                      the conversion rate if the average bid price of the
                      Company's common stock for any sixty consecutive trading
                      days has been equal to or greater than $3.00. The
                      debentures are due December 31, 2011. The Company issued
                      $381,250 of subordinated debentures during the year ended
                      April 26, 1998.

                                      F-15
<PAGE>

                           Boston Restaurant Associates, Inc.
                                             and Subsidiaries


                   Notes to Consolidated Financial Statements

================================================================================

7. Taxes on Income    At April 26, 1998, the Company has the following net
                      operating loss carryforwards, subject to review by the
                      Internal Revenue Service, available to offset future
                      taxable income for Federal income tax purposes as
                      indicated:


<TABLE>
<CAPTION>
                                                                                     Expiration
                                                                     Amount             Dates
                      ============================================================================

                      <S>                                          <C>                <C>
                      Net operating losses purchased in a 1994
                       acquisition, whose use is limited.          $2,908,000         2004-2009

                      Net operating losses incurred before and
                       after acquisition and available for
                       immediate offset against taxable income.    $5,122,000         1998-2013
</TABLE>

                      Deferred tax assets are comprised of the following:

<TABLE>
<CAPTION>
                                                                   April 26,          April 27,
                      Years ended                                    1998               1997
                      ============================================================================

                      <S>                                         <C>              <C>
                      Deferred tax assets:
                          Net operating loss carryforwards        $ 3,212,000       $ 2,960,000
                          Depreciation                                452,000           333,000
                          Losses on store closures and
                           write-downs not yet deductible
                           for tax purposes                                 -           163,000
                          Valuation allowance                      (3,664,000)       (3,456,000)
                      -------------------------------------------------------------------------

                             Net deferred tax assets              $         -       $         -
                      ============================================================================
</TABLE>


                                      F-16
<PAGE>

                           Boston Restaurant Associates, Inc.
                                             and Subsidiaries


                   Notes to Consolidated Financial Statements

================================================================================

7. Taxes on Income    A reconciliation of the statutory federal income tax rate
   (Continued)        (benefit) and the effective  tax rate as a percentage of
                      income (loss) before taxes on income is as follows:

<TABLE>
<CAPTION>
                                                                       April 26,          April 27,
                      Years ended                                        1998               1997
                      =============================================================================

                      <S>                                               <C>               <C>  
                      Statutory rate (benefit)                           34.0%             34.0%
                      Operating income offset by current tax
                       loss generating no current or deferred
                       tax effect.                                      (34.0)            (34.0)
                      -----------------------------------------------------------------------------

                      Effective tax rate                                    -%                -%
                      =============================================================================
</TABLE>

8. Commitments and
   Contingencies

   Leases             The Company is obligated under noncancellable operating
                      leases for its leased restaurant locations, office,
                      commissary and warehouse space. Lease terms range from
                      five to twenty years and in certain instances provide
                      options to extend the original term. Generally, the
                      Company is required to pay its proportionate share of real
                      estate taxes, insurance, common area and other operating
                      costs in addition to annual base rent. Substantially all
                      restaurant leases provide for contingent rentals based on
                      sales in excess of specified amounts. The Company also
                      leases equipment under capital leases.


                                      F-17
<PAGE>


                           Boston Restaurant Associates, Inc.
                                             and Subsidiaries


                   Notes to Consolidated Financial Statements

================================================================================

8. Commitments and
   Contingencies
   (Continued)

   Leases             The following is an analysis of leased property under
 (Continued)          capital leases, included in property and equipment:

<TABLE>
<CAPTION>
                                                                          April 26,          April 27,
                      Years ended                                           1998               1997
                      =================================================================================
<S>                                                                        <C>               <C>
                      Equipment                                            $492,765          $190,000

                      Less: accumulated amortization                         65,868            19,724
                      ---------------------------------------------------------------------------------

                      Net leased property under capital leases             $426,897          $170,276
                      =================================================================================
</TABLE>

                      Aggregate minimum rental requirements under capital
                      leases and operating leases as of April 26, 1998, are
                      approximately as follows:

<TABLE>
<CAPTION>
                                                                           Capital       Operating
                      Fiscal year ending                                   Leases          Leases
                      =================================================================================

                      <S>                                                <C>            <C>
                      1999                                               $127,886       $ 1,763,000
                      2000                                                127,886         1,702,000
                      2001                                                127,886         1,596,000
                      2002                                                106,205         1,572,000
                      2003                                                 87,167         1,487,000
                      Thereafter                                                -         5,578,000
                      =================================================================================

                      Total minimum lease payments                        577,030       $13,698,000
                                                                                        ===========
                      Amount representing interest                        141,276
                      -----------------------------------------------------------

                      Present value of net minimum
                       lease payments                                     435,754

                      Less current maturities                              74,206
                      -----------------------------------------------------------

                      Long-term portion                                  $361,548
                      ===========================================================
</TABLE>

                                      F-18
<PAGE>


                           Boston Restaurant Associates, Inc.
                                             and Subsidiaries


                   Notes to Consolidated Financial Statements

================================================================================

8. Commitments and
   Contingencies
   (Continued)

   Leases             Deferred rent liabilities of $85,662 and $67,024 as of
   (Continued)        April 26, 1998 and April 27, 1997, respectively, were
                      recorded in order to recognize lease escalation provisions
                      on a straight-line basis for certain operating leases.

                      Rent expense under all operating leases was approximately
                      $1,499,000 and $1,481,000 which included contingent
                      rentals of approximately $17,400 and $13,500 in 1998 and
                      1997, respectively.

   Lease Guarantees   In connection with the sale of a restaurant to a
                      non-affiliated third-party, the Company is a guarantor of
                      the lease payments under the lease assumed by the buyer
                      expiring in fiscal 2001. At April 26, 1998, the Company is
                      contingently liable for approximately $510,000 under the
                      guaranty. The Company is of the opinion that the buyer
                      of the location will be able to perform under the terms of
                      the lease and that no payments will be required or losses
                      will be incurred by the Company under the guaranty.

   Employment         The Company has an employment agreement with its
   Agreement and      President, which expires April 29, 1999. In addition to a
   Guaranty           base salary, adjusted annually for cost-of-living changes
                      and an annual bonus, the agreement provides for a
                      performance bonus, as defined. The commitment for future
                      compensation, excluding the performance bonus, amounts to
                      $200,000 per year. The employment agreement further
                      provides that upon the termination of the President, for
                      defined reasons, the President will agree not to compete
                      with the Company for a three year period and the Company
                      will continue to pay the President's then current base
                      salary and annual bonus for three years effective at the
                      date of such termination.

                                      F-19
<PAGE>

                           Boston Restaurant Associates, Inc.
                                             and Subsidiaries


                   Notes to Consolidated Financial Statements

================================================================================

8. Commitments and
   Contingencies
   (Continued)

   Litigation         The Company is involved in various legal matters in the
                      ordinary course of its business. Each of these matters is
                      subject to various uncertainties, and some of these
                      matters may be resolved unfavorably to the Company.
                      Management believes that any liability that may ultimately
                      result from the resolution of these matters will not have
                      a material adverse effect on the financial position of the
                      Company.

   Franchising        In December 1997, the Company formed Boston Restaurant
                      Associates International, Inc. ("BRAII"), a wholly owned
                      subsidiary, for the purpose of offering Pizzeria Regina
                      franchise opportunities both domestically and
                      internationally. BRAII has filed a Uniform Franchise
                      Offering Circular in Connecticut, Florida, Georgia,
                      Kentucky, New Hampshire, Pennsylvania and Texas and is
                      actively seeking franchisees with operational experience.

                      In addition, in January 1998, the Company entered into an
                      International Development Agreement ("Development
                      Agreement") with Regina International, Ltd ("Regina
                      International"), a corporation controlled by a Company
                      director, to pursue and develop franchise territories
                      outside the Americas, anticipated to be principally in
                      Europe, the Far East and the Pacific Rim.

                      The Development Agreement, which is for an initial term of
                      five and a half years, requires the Company to pay a
                      monthly development fee of $7,000 beginning the month
                      after the first territory fee has been received and
                      continuing for sixty months, provided the Development
                      Agreement has not been earlier terminated. The Development
                      Agreement provides that either party may re-negotiate the
                      agreement pursuant to a written notice prior to the end of
                      the initial term. If the parties are unable to
                      re-negotiate this agreement on mutually satisfactory
                      terms, the Company and Regina International have the right
                      to cause the Company to pay Regina International a
                      one-time buy-out fee equal to the aggregate gross

                                      F-20
<PAGE>


                           Boston Restaurant Associates, Inc.
                                             and Subsidiaries


                   Notes to Consolidated Financial Statements

================================================================================

8. Commitments and
   Contingencies
   (Continued)

   Franchising        revenues of BRAII for the 5 years immediately preceding
   (Continued)        the buy-out or such shorter period, if 5 years have not
                      elapsed less certain international expenses, as defined.

                      The Company is also required to pay Regina International
                      during the term of the agreement a royalty equal to 40% of
                      the gross revenues of BRAII less international expenses.
                      The royalty payment is subject to reduction, if certain
                      levels of international expenses in relation to revenues
                      are not achieved by BRAII. At April 26, 1998, no
                      territories have been established and no development fees
                      or royalties have been earned.

9. Stock Options      At April 26, 1998, outstanding options consist of the
   and Warrants       following:

                      In July 1994, the Company's stockholders approved the 1994
                      Combination Stock Option Plan (the "1994 Combination
                      Plan") and the 1994 Non-Employee Director Stock Option
                      Plan (the "1994 Director Plan").

                      The 1994 Combination Plan provides for the granting of
                      incentive stock options intended to qualify under the
                      requirements of the Internal Revenue Code and options not
                      qualified as incentive stock options. Incentive stock
                      options may only be granted to employees of the Company.
                      Non-employees contributing to the success of the Company
                      are eligible to receive non-qualified stock options. The
                      1994 Combination Plan is to be administered by a Committee
                      designated by the Board of Directors. Options under the
                      1994 Combination Plan may not be granted after July 2004
                      and the exercise price shall be at least equal to the fair
                      market value of the common stock at the grant date.


                                      F-21
<PAGE>

                           Boston Restaurant Associates, Inc.
                                             and Subsidiaries


                   Notes to Consolidated Financial Statements

================================================================================

9. Stock Options      Incentive stock options may be granted to holders of more
   and Warrants       than 10% of the Company's common stock at an exercise
   (Continued)        price of at least 110% of the fair market value of the
                      Company's common stock at the grant date. The terms of the
                      options granted are to be determined by the Committee, but
                      in no event shall the term of any incentive stock option
                      extend beyond three months after the time a participant
                      ceases to be an employee of the Company. No options may be
                      exercised more than five years after the date of the grant
                      for 10% stockholders, or ten years after the date of grant
                      for all other participants. A total of 500,000 shares of
                      common stock have been reserved for issuance under the
                      1994 Combination Plan.

                      The 1994 Director Plan, as amended, provides for the
                      granting to each eligible non-employee director of the
                      Company options to purchase shares of the Company's common
                      stock. Options granted under the 1994 Director Plan become
                      exercisable over a five year period at an exercise price
                      equal to the fair market value of the Company's common
                      stock at the grant date and expire ten years from the
                      grant date. A total of 500,000 shares have been reserved
                      for issuance under the 1994 Director Plan.

                      During fiscal 1998, the Company issued options to the
                      Company's President and Treasurer to purchase an aggregate
                      of 108,346 shares of the Company's common stock in
                      connection with their guarantees of certain equipment
                      leases. The options are exercisable at $1.27 per share and
                      expire March 17, 2003.

                      During fiscal 1997, the Company issued options to the
                      Company's President and Treasurer to purchase an aggregate
                      of 115,500 shares of the Company's common stock in
                      connection with guarantees of certain notes payable (see
                      Note 4) and a new lease facility. Options for an aggregate
                      of 75,600 shares are exercisable at $0.94 per share and
                      expire July 26, 2001. The remaining options for an
                      aggregate of 39,900 shares are exercisable at $1.00 per
                      share and expire October 18, 2001.


                                      F-22
<PAGE>

                           Boston Restaurant Associates, Inc.
                                             and Subsidiaries


                   Notes to Consolidated Financial Statements

================================================================================

9. Stock Options      Changes in options outstanding under the 1994 Plans,
   and Warrants       options issued in connection with the guarantee of certain
   (Continued)        debt by the Company's President and Treasurer and prior
                      plans, which have expired, are summarized as follows:

<TABLE>
<CAPTION>
                                                                           Weighted-
                                                                            Average
                                                                           Exercise
                                                                Shares       Price
                      ===============================================================
                      <S>                                      <C>            <C>  
                      Balance, April 28, 1996                  426,980        $1.00
                      Granted                                  328,500         1.04
                      Exercised                                   (400)        0.96
                      Cancelled or expired                      (1,480)        7.00
                      ---------------------------------------------------------------

                      Balance, April 27, 1997                  753,600         1.01
                      Granted                                  237,846         1.34
                      Exercised                                      -            -
                      Cancelled or expired                      (3,500)        4.38
                      ---------------------------------------------------------------

                      Balance, April 26, 1998                  987,946        $1.08
                      ===============================================================
</TABLE>

                      As of April 26, 1998, options for 660,800 shares were
                      exercisable at prices ranging from $0.88 to $2.38. As of
                      April 27, 1997, options for 544,200 shares were
                      exercisable at prices ranging from $0.88 to $4.38.


                                      F-23
<PAGE>

                           Boston Restaurant Associates, Inc.
                                             and Subsidiaries


                   Notes to Consolidated Financial Statements

================================================================================

9. Stock Options      The following table summarizes information about stock
   and Warrants       options outstanding at April 26, 1998:
   (Continued)

<TABLE>
<CAPTION>
                                                           Options Outstanding
                                           --------------------------------------------------
                                                                   Weighted-
                                               Number               Average        Weighted-
                         Range of          Outstanding at          Remaining        Average
                         Exercise             April 26,           Contractual      Exercise
                          Prices                1998             Life (years)        Price
                      =======================================================================

                      <S>                    <C>                <C>                 <C>
                      $       2.38             5,000            2.3                 $2.38
                              1.88            42,000            8.0                  1.88
                       1.24 - 1.56           148,346            5.8                  1.28
                       0.88 - 1.17           792,600            4.0                  0.98
                      -----------------------------------------------------------------------

                      $0.88 - 2.38           987,946            4.5                 $1.08
                      =======================================================================
</TABLE>

<TABLE>
<CAPTION>
                                                             Options Exercisable
                                                 --------------------------------------------
                                                                                 Weighted-
                        Range of                     Number                       Average
                        Exercise                 Exercisable at                  Exercise
                         Prices                  April 26, 1998                    Price
                      =======================================================================

                      <S>                              <C>                          <C>
                      $       2.38                       3,000                      $2.38
                              1.88                      32,400                       1.88
                       1.24 - 1.56                       6,000                       1.56
                       0.88 - 1.17                     619,400                       0.96
                      -----------------------------------------------------------------------

                      $0.88 - 2.38                     660,800                      $1.01
                      =======================================================================
</TABLE>

                                      F-24
<PAGE>

                           Boston Restaurant Associates, Inc.
                                             and Subsidiaries


                   Notes to Consolidated Financial Statements

================================================================================

9. Stock Options      At April 26, 1998, warrants and units outstanding, all of
   and Warrants       which are exercisable, consist of the following:
   (Continued)
                      (a)  Warrant for the purchase of 210,000 shares of common
                           stock, at an exercise price of $2.00 per share
                           expiring April 29, 1999.

                      (b)  Warrants to purchase 1,708,000 shares of common stock
                           at a purchase price of $3.20 per share from March 8,
                           1997 through September 7, 1999, issued in connection
                           with the Company's September 7, 1994 public offering.

                      (c)  Warrants to purchase 75,000 units (375,000 shares) at
                           a purchase price of $3.20 per share, expiring
                           September 7, 1999, issued in connection with the
                           Company's September 7, 1994 public offering.

                      (d)  Warrants to purchase 25,000 shares of common stock at
                           a purchase price of $2.00 per share through June 28,
                           1998 or at a purchase price of $2.80 per share from
                           June 29, 1998 through December 28, 2000 and warrants
                           to purchase 25,000 shares of common stock at a
                           purchase price of $2.00 per share through October 19,
                           1998 or at a purchase price of $2.80 per share from
                           October 20, 1998 through April 19, 2001, issued to
                           the bank in connection with the issuance of the notes
                           payable (see Note 4).

                      (e)  Warrants to purchase 350,000 and 150,000 shares of
                           common stock at an exercise price of $3 per share,
                           expiring December 31, 2006 and January 25, 2008,
                           respectively, issued in consideration for brokerage
                           services connected with the issuance of the
                           convertible subordinated debentures (see Notes 6 and
                           10).

                      The convertible subordinated debentures with an
                      outstanding balance of $1,500,000 as of April 26, 1998 are
                      convertible into common shares at a conversion price of
                      $1.25 per share. Accordingly, 1,200,000 shares have been
                      reserved for conversion of the subordinated debentures.

                                      F-25
<PAGE>

                           Boston Restaurant Associates, Inc.
                                             and Subsidiaries


                   Notes to Consolidated Financial Statements

================================================================================

9. Stock Options      There were 5,623,846 shares reserved with respect to the
   and Warrants       above options, warrants and convertible debentures at
   (Continued)        April 26, 1998.

                      During fiscal 1998 and 1997, the following units, warrants
                      and options expired:

                      (a)  Options to purchase 3,500 shares of common stock at
                           $4.38 per share

                      (b)  Options to purchase 1,480 shares of common stock at
                           $7.00 per share.

                      At April 26, 1998, the Company has two stock-based
                      compensation plans, which are described above. The Company
                      accounts for its stock-based compensation plans using the
                      intrinsic value method. Accordingly, no compensation cost
                      has been recognized for its stock option plans. Had
                      compensation cost for the Company's two stock option plans
                      and options issued in connection with the guarantee of
                      certain debt been determined based on the fair value at
                      the grant dates for awards under those plans consistent
                      with the method of FASB Statement 123, Accounting for
                      Stock-Based Compensation, the Company's net income (loss)
                      and earnings (loss) per share would have been adjusted to
                      the pro forma amounts indicated below:


                                      F-26
<PAGE>
                           Boston Restaurant Associates, Inc.
                                             and Subsidiaries


                   Notes to Consolidated Financial Statements

================================================================================

<TABLE>
<CAPTION>
9. Stock Options
   and Warrants                                                       April 26,      April 27,
   (Continued)        Years ended                                       1998           1997
                      =========================================================================

                      <S>                          <C>                <C>           <C>
                      Net income (loss)            As reported        $ 52,880      $ 12,263
                                                   Pro forma          $(20,182)     $(55,769)

                      Basic income (loss)          As reported            0.01          0.00
                       per share                   Pro forma             (0.00)        (0.01)

                      Diluted income (loss)        As reported            0.01          0.00
                       per share                   Pro forma             (0.00)        (0.01)
</TABLE>

                      In determining the pro forma amounts above, the Company
                      estimated the fair value of each option granted using the
                      Black-Scholes option pricing model with the following
                      weighted-average assumptions used for grants in 1998 and
                      1997, respectively: dividend yield of 0% for both years,
                      expected volatility of 46% and 35% for 1998 and 1997,
                      respectively, risk free rates ranging from 5.1% to 6.6%
                      for 1998, and 6.3% to 6.6% for 1997, and expected lives
                      ranging from 5 to 10 years for both 1998 and 1997. The
                      weighted average per share fair value of options granted
                      in fiscal 1998 and 1997 was $0.58 and $0.35, respectively.

<TABLE>
<CAPTION>
10. Supplemental      Cash paid for interest and income taxes are as follows:
    Cash Flow
    Information                                                       April 26,       April 27,
                      Years ended                                       1998            1997
                      =========================================================================

                      <S>                                             <C>              <C>
                      Interest                                        $212,763         $127,185
                      Income taxes                                    $      -         $      -
</TABLE>

                                      F-27
<PAGE>


                           Boston Restaurant Associates, Inc.
                                             and Subsidiaries


                   Notes to Consolidated Financial Statements

================================================================================

10. Supplemental      Supplemental schedule of noncash operating and financing
    Cash Flow         activities are as follows:
    Information
    (Continued)
<TABLE>
<CAPTION>
                                                              April 26,       April 27,
                      Years ended                               1998            1997
                      ===================================================================
                      <S>                                     <C>              <C>
                      Stock options and warrants issued
                       in exchange for services               $ 29,456         $ 68,730

                      Capital leases entered into during
                       the year                               $302,765         $190,000
</TABLE>

11. Net Income        The Company follows Statement of Financial Accounting
    Per Share of      Standards No. 128 ("SFAS No. 128"), Earnings per Share,
    Common Stock      issued by the Financial Accounting Standards Board.

                      The following is a reconciliation of the denominator
                      (number of shares used in the computation of earnings per
                      share). The numerator (net income) is the same for the
                      basic and diluted computations.

<TABLE>
<CAPTION>
                                                              April 26,      April 27,
                      Years ended                               1998           1997
                      ===================================================================

                      <S>                                     <C>              <C>
                      Basic shares                            5,175,096       5,015,306

                      Effect of dilutive securities:
                         Options                                278,059          68,067
                      -------------------------------------------------------------------

                      Diluted shares                          5,453,155       5,083,373
                      ===================================================================
</TABLE>

                                      F-28
<PAGE>


                           Boston Restaurant Associates, Inc.
                                             and Subsidiaries


                   Notes to Consolidated Financial Statements

================================================================================

11.    Net Income     The following table summarizes securities that were
       Per Share of   outstanding as of April 26, 1998 and April 27, 1997, but
       Common Stock   not included in the calculations of net income per share
       (Continued)    because such securities are antidilutive:

<TABLE>
<CAPTION>
                                                         April 26,          April 27,
                      Years ended                          1998               1997
                      =================================================================

                      <S>                               <C>                 <C>
                      Options                              57,000             108,500
                      Warrants                          2,843,000           2,693,000
                      Convertible debentures            1,200,000             895,000
</TABLE>

12. Rights Offering   During fiscal 1998, the Company completed a rights
                      offering registration under the Securities Act of 1933.
                      Pursuant to the offering, 2,006,277 shares of common stock
                      were issued and sold by the Company at a price of $1.00
                      per share. The Company received net proceeds after
                      expenses of approximately $1,756,000.


                                      F-29