adopted the provisions of FIN No. 46(R) in its fourth fiscal quarter of 2004. The Company does not provide more than half of the equity subordinated debt or other subordinated financial support to any franchise entity. The Company has further concluded that the fran- chise entities were not designed such that substantially all of their activities either involve or are conducted on behalf of Nathan’s. As such, the Company has not consolidated any franchised entity in the financial statements. If, at some future date, Nathan’s does provide more than half of the subordinated financial support to a franchise entity, consolidation would not be automatic. The franchise entity would then be subject to further testing under the guidelines of FIN No. 46(R).  The revisions of FIN No. 46(R) (a) clarified some requirements of the original FIN No. 46, which had been issued in January 2003, (b) simplified some of the implementation problems, and (c) added new scope exceptions. FIN No. 46(R) delayed the effective date of  the FIN No. 46(R) for public companies, to the end of the first reporting period ending after March 15, 2004, except that all public companies must at a minimum apply the unmodified provisions of FIN No. 46(R) to entities that were previously considered “special- purpose entities” in practice and under the FASB literature prior to the issuance of FIN No. 46(R) by the end of the first reporting period ending after December 15, 2003. FIN No. 46(R) added several new scope exceptions, including one which states that companies are not required to apply the provi- sions to an entity that meets the criteria to be considered a “business” as defined in FIN No. 46(R) unless one or more of four named  conditions exist.  In December 2003, the SEC issued Staff Accounting Bulletin No. 104, “Revenue Recognition” (“SAB No. 104”), which codifies, revises and rescinds certain sections of SAB No. 101, “Revenue Recognition in Financial Statements,” in order to make this interpre- tative guidance consistent with current authoritative accounting and auditing guidance and SEC rules and regulations. The changes noted in SAB No. 104 did not have a material impact on the Company’s financial position or results of operations. The Company has no equity ownership interests in its fran- chisees, and has not consolidated any of these entities in the Company’s financial statements. The Company will continue to monitor devel- opments regarding the Interpretation as they occur. The Company  Basic income (loss) per common share is calculated by dividing income (loss) by the weighted-average number of common shares out- standing and excludes any dilutive effects of stock options or warrants. Diluted income (loss) per common share gives effect to all potentially dilutive common shares that were outstanding during the period. Dilutive common shares used in the computation of diluted income (loss) per common share result from the assumed exercise of stock options and warrants, using the treasury stock method.  The following chart provides a reconciliation of information used in calculating the per share amounts for the fiscal years ended March 28, 2004, March 30, 2003 and March 31, 2002, respectively: Options and warrants to purchase 1,374,981 shares of the Company’s common stock for the year ended March 30, 2003 were excluded from the calculation of diluted loss per share as the impact of their inclusion would have been anti-dilutive. Options and warrants to purchase 811,918 and 862,838 shares of common stock for the years ended March 28, 2004 and March 31, 2002, respectively, were not included in the computa- tion of diluted earnings per share because the exercise prices exceeded the average market price of common shares during the respective periods.  2004 Annual Report  Nathan’s Famous, Inc. & Subsidiaries page twenty-four Note C—Income (Loss) Per Share Income (Loss) Income (Loss) Per Share from Continuing Operations Shares from Continuing Operations 2004 2003 2002 2004 2003 2002 2004 2003 2002  Basic EPS Basic calculation $1,894 $(1,506) $1,392 5,306,000 5,976,000 7,048,000 $ .36 $(.25) $.20 Effect of dilutive employee stock  options and warrants — — — 372,000 — 35,000 (.03) — — Diluted EPS Diluted calculation $1,894 $(1,506) $1,392 5,678,000 5,976,000 7,083,000 $ .33 $(.25) $.20