-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WfPgbq3E6ZOv1XJq7X1IdlFPyuwNnY3g3sRy3thyy/hug3YcZVwxvvfjecdT8Jvk WcPaYn5eshzGJpJ7DqXftw== 0000939802-01-000144.txt : 20010402 0000939802-01-000144.hdr.sgml : 20010402 ACCESSION NUMBER: 0000939802-01-000144 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20001231 FILED AS OF DATE: 20010330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: EAT AT JOES LTD CENTRAL INDEX KEY: 0000829325 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING & DRINKING PLACES [5810] IRS NUMBER: 752636283 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 033-20111 FILM NUMBER: 1586185 BUSINESS ADDRESS: STREET 1: 1912 SANTIAGO DR CITY: NEWPORT BEACH STATE: CA ZIP: 92660 BUSINESS PHONE: 9147252700 MAIL ADDRESS: STREET 1: PO BOX 500 CITY: YONKERS STATE: NY ZIP: 10704 FORMER COMPANY: FORMER CONFORMED NAME: CONCEPTUALISTICS INC DATE OF NAME CHANGE: 19961122 10KSB 1 0001.txt U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-KSB (Mark One) [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Fiscal Year Ended: December 31, 2000 or [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from To Commission file number 33-20111 --------- Eat at Joe's Ltd. (Name of small business issuer in its charter) Delaware 75-2636283 - ------------------------------ -------------------- State or other jurisdiction of (I.R.S. Employer incorporation or organization Identification No.) 670 White Plains Road, Suite 120, Scarsdale, New York 10583 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Issuer's telephone number (914) 725-2700 --------------- Securities registered under Section 12(b) of the Act: NONE Securities registered under Section 12(g) of the Act: Common Stock Par Value $0.0001 ------------------------------ (Title of class) 1 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 Total pages: 18 ----- Exhibit Index Page: 16 ---- Check if there is no disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this form 10-KSB. [ ] State issuer's revenues for its most recent fiscal year. $1,912,990 ---------- As of December 31, 1999, there were 44,894,967 shares of the Registrant's common stock, par value $0.0001, issued and outstanding and 1,186,400 warrants and 61,350 options to purchase common stock at $0.50 to $1.79 per share. The aggregate market value of the Registrant's voting stock held by non-affiliates of the Registrant was approximately $2,770,090 computed at the average bid and asked price as of December 31, 2000. DOCUMENTS INCORPORATED BY REFERENCE If the following documents are incorporated by reference, briefly describe them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) any annual report to security holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"): NONE Transitional Small Business Disclosure Format (check one): Yes ; NO X ----- --- 2 TABLE OF CONTENTS Item Number and Caption Page - ----------------------- ----- PART I Item 1. Description of Business...........................................4 Item 2. Description of Property...........................................8 Item 3. Legal Proceedings.................................................8 Item 4. Submission of Matters to a Vote of Security Holders...............8 PART II Item 5. Market for Common Equity and Related Stockholder Matters..........9 Item 6. Management's Discussion and Analysis or Plan of Operations.......10 Item 7. Financial Statements.............................................12 Item 8. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure................................................12 PART III Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act...................12 Item 10. Executive Compensation..........................................14 Item 11. Security Ownership of Certain Beneficial Owners and Management..15 Item 12. Certain Relationships and Related Transactions..................15 Item 13. Exhibits and Reports on Form 8-K................................16 3 PART I ITEM 1 DESCRIPTION OF BUSINESS General The business of Eat at Joe's, Ltd. ( the "Company") is to develop, own and operate theme restaurants called "Eat at Joe's (R)." The theme for the restaurants is an "American Diner" atmosphere where families can eat wholesome, home-cooked food in a safe friendly atmosphere. Eat at Joe's, the classic American grill, is a restaurant concept that takes you back to eating in the era when favorite old rockers were playing on chrome-spangled jukeboxes and neon signs reflected on shiny tabletops of the 1950's. The Company presently owns and operates three theme restaurants: one restaurant located in Philadelphia, Pennsylvania; one in Etobicoke, Ontario, Canada: and one in Toronto, Canada. The Company is planning at least four acquisitions during 2001, subject to the availability of funding. All restaurants will be located in high traffic locations. The restaurants will be modest priced restaurants catering to the local working and residential population rather than as a tourist destination. In March of 1999, 1337855 Ontario, Inc. ("Ontario"), wholly owned subsidiary of the Company entered into a purchase agreement with Koo Koo Roo Canada Limited (Koo Koo Roo) to acquire certain assets and assume certain liabilities of that company. Koo Koo Roo is a California-based casual dining, quick service restaurant chain featuring skinless flame broiled chicken, roasted hand-carved turkey and made-to-order tossed salads and specialty sandwiches. Ontario acquired a 20 year exclusive license agreement in Canada with a 20 year renewal term to operate Koo Koo Roo restaurants. On July 1, 2000, the Company opened a new restaurant in Toronto, Ontario. The restaurant is called "Mediterraneo" and offers primarily Italian Cuisine. The Company's common stock is traded on the National Association of Security Dealers, Inc. (the "NASD's") OTC Bulletin Board Under the symbol "JOES." History The company was incorporated as Conceptualistics, Inc. on January 6, 1988 in Delaware as a wholly owned subsidiary of Halter Venture Corporation ("HVC"), a publicly-owned corporation (now known as Debbie Reynolds Hotel and Casino, Inc.) In 1988, HVC divested itself of approximately 14% of its holdings in the Company by distributing 1,777,000 shares of the issued and outstanding stock of the Company to its shareholders. The then majority shareholder of HVC became the majority shareholder of the Company. Its authorized capital stock is 50,000,000 shares 4 of common stock, par value $0.0001 per share and 10,000,000 shares of preferred stock, par value $0.0001 per share. During the period from September 30, 1988 to March 1, 1990, the company remained in the development stage while attempting to enter the mining industry. The Company acquired certain unpatented mining claims and related equipment necessary to mine, extract, process and otherwise explore for kaolin clay, silica, feldspar, precious metals, antimony and other commercial minerals from its majority stockholder and unrelated third parties. The Company was unsuccessful in these start up efforts and all activity ceased during 1992 as a result of foreclosure on various loans in default and/or abandonment of all assets. From March 1, 1990 to January 1 , 1997, the Company did not engage in any business activities. On January 1 , 1997, the Shareholders adopted a plan of reorganization and merger between the Company and E. A. J. Holding Corp. Inc. ("Hold") to be effective on or before January 31, 1997. Under the plan, the Company acquired all the issued and outstanding shares of "Hold", a Delaware corporation making "Hold" a wholly owned subsidiary of the Company for 5,505,000 common shares of the Company. In addition to its wholly owned subsidiary, Hold, the Company has eleven wholly owned subsidiaries: - E.A.J. PHL Airport, Inc. a Pennsylvania corporation, - E.A.J. Shoppes, Inc., a Nevada corporation, - E.A.J. Cherry Hill, Inc., a Nevada corporation, - E.A.J. Innerharbor, Inc., a Nevada corporation, - E.A.J. Neshaminy, Inc., a Nevada corporation, - E.A.J. PM, Inc., a Nevada corporation, - E.A.J. Echelon, Inc., a Nevada corporation, - E.A.J. Market East, Inc., a Nevada corporation, - E.A.J. MO, Inc., a Nevada corporation, - E.A.J. Syracuse, Inc., a Nevada corporation, - E.A.J. Walnut Street, Inc., a Nevada corporation, - E.A.J. Owings, Inc., a Nevada corporation. - 1337855 Ontario Inc., an Ontario corporation, - 1398926 Ontario Inc., an Ontario corporation. During the year ended December 31, 2000, the Company changed the domicile of each of the following subsidiaries to Nevada; E.A.J. Hold, Inc., E.A.J. Shoppes, Inc., E.A.J. Cherry Hill, Inc., E.A.J. Innerharbor, Inc., E.A.J. Neshaminy, Inc., E.A.J. PM, Inc., E.A.J. Echelon, Inc., E.A.J. Market East, Inc., E.A.J. MO, Inc., E.A.J. Syracuse, Inc., E.A.J. Walnut Street, Inc., and E.A.J. Owings, Inc. Each of the subsidiaries had operated a single restaurant. Two restaurants, E.A.J. Cherry Hill 5 and Eat At Joe's U. of P. were opened November and December 1997, two additional restaurants, E.A.J. Echelon Mall and E.A.J. PHL Airport were opened May 1998, Eat at Joe's U of P 40th Street opened July 1998, E.A.J. Gallery opened August 1998, Eat At Joe's Harborplace opened September 1998, E.A.J. Moorestown opened October 1998 and 1337855 Ontario acquired March 1999 with three existing restaurants in operation. During 1999, E.A.J. Cherry Hill, Inc., E.A.J. Gallery, Inc., Eat At Joe's Harborplace, Inc., E.A.J. Echelon Mall, Inc., and two of the 1337855 Ontario restaurants were closed and substantially all assets and leasehold improvements abandoned. During 2000, E.A.J. MO, Inc., E.A.J. Shoppes, Inc., E.A.J. Walnut Street, Inc., and the third 137855 Ontario restaurants were closed and substantially all assets and leasehold improvements abandoned. The principal executive offices of the Company are located at 670 White Plains Road, Suite 120, Scarsdale, NY 10583. The Company's wholly-owned subsidiary 1337855 Ontario shares office space of approximately 1,000 square feet in Ontario with an officer of the Company. OPERATING LOSSES The Company has incurred net losses of approximately $3,017,000 and $6,452,000 for the fiscal years ended December 31, 2000 and December 31, 1999, respectively. Such operating losses reflect developmental and other start-up activities for 2000 and 1999 and the loss on abandonment assets during 2000 and 1999. The Company expects to incur losses in the near future until profitability is achieved. The Company's operations are subject to numerous risks associated with establishing any new business, including unforeseen expenses, delays and complications. There can be no assurance that the Company will achieve or sustain profitable operations or that it will be able to remain in business. FUTURE CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FUNDING The Company was not in full operations during 2000 and 1999 and thus, the revenues generated are not representative of those that will be generated once all units are operating. Revenues are not yet sufficient to support the Company's operating expenses and are not expected to reach such levels until the first or second quarter of 2001. Since the Company's formation, it has funded its operations and capital expenditures primarily through private placements of debt and equity securities. See "Recent Sales of Unregistered Securities." The Company expects that it will be required to seek additional financing in the future. There can be no assurance that such financing will be available at all or available on terms acceptable to the Company. GOVERNMENT REGULATION The Company is subject to all pertinent Federal, State, and Local laws governing its business. 6 Each Eat at Joe's is subject to licensing and regulation by a number of authorities in its State or municipality. These may include health, safety, and fire regulations. The Company's operations are also subject to Federal and State minimum wage laws governing such matters as working conditions, overtime and tip credits. RISK OF LOW-PRICED STOCKS Rules 15g-1 through 15g-9 promulgated under the Securities Exchange Act of 1934 (the "Exchange Act") impose sales practice and disclosure requirements on certain brokers and dealers who engage in certain transactions involving "a penny stock." Currently, the Company's Common Stock is considered a penny stock for purposes of the Exchange Act. The additional sales practice and disclosure requirements imposed on certain brokers and dealers could impede the sale of the Company's Common Stock in the secondary market. In addition, the market liquidity for the Company's securities may be severely adversely affected, with concomitant adverse effects on the price of the Company's securities. Under the penny stock regulations, a broker or dealer selling penny stock to anyone other than an established customer or "accredited investor" (generally, an individual with net worth in excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000 together with his or her spouse) must make a special suitability determination for the purchaser and must receive the purchaser's written consent to the transaction prior to sale, unless the broker or dealer or the transaction is otherwise exempt. In addition, the penny stock regulations require the broker or dealer to deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the Securities and Exchange Commission (the "SEC") relating to the penny stock market, unless the broker or dealer or the transaction is otherwise exempt. A broker or dealer is also required to disclose commissions payable to the broker or dealer and the registered representative and current quotations for the Securities. In addition, a broker or dealer is required to send monthly statements disclosing recent price information with respect to the penny stock held in a customer's account and information with respect to the limited market in penny stocks. LACK OF TRADEMARK AND PATENT PROTECTION The Company relies on a combination of trade secret, copyright and trademark law, nondisclosure agreements and technical security measures to protect its products. Notwithstanding these safeguards, it is possible for competitors of the company to obtain its trade secrets and to imitate its products. Furthermore, others may independently develop products similar or superior to those developed or planned by the Company. COMPETITION The Company faces competition from a wide variety of food distributors, many of which have substantially greater financial, marketing and technological resources than the Company. EMPLOYEES 7 As of March 30, 2001, the Company had approximately 36 employees, none of whom is represented by a labor union. ITEM 2 DESCRIPTION OF PROPERTY Since 1997 all administrative activities of the Company have been conducted by corporate officers from either their home or business offices. Currently, there are no outstanding debts owed by the Company for the use of these facilities and there are no commitments for future use of the facilities. The Company's wholly-owned subsidiary E.A.J. PHL Airport, Inc. leases approximately 845 square feet in the Philadelphia Airport, Philadelphia, Pennsylvania pursuant to a lease dated April 30, 1997. E.A.J. PHL Airport pays $7,100 per month rent under the lease which expires April 2007. The Company's wholly-owned subsidiary 1398926 Ontario leases an approximately 5,200 square feet for the Mediterraneo Restaurant in the Humbertown Shopping Center located in Etobicoke, Ontario, Canada. 1337855 Ontario pays $14,500 Canadian Dollars per month rent under the lease which expires in the year 2015, with an additional five year option. ITEM 3 LEGAL PROCEEDINGS NONE ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were subject to a vote of security holders during the year 2000. 8 PART II ITEM 5 MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS MARKET INFORMATION The Company's Common Stock is traded on the NASD's OTC Bulletin Board under the symbol "JOES." The following table presents the high and low bid quotations for the Common Stock as reported by the NASD for each quarter during the last two years. Such prices reflect inter- dealer quotations without adjustments for retail markup, markdown or commission, and do not necessarily represent actual transactions. 1999: First Quarter $ 1.88 $ 0.50 Second Quarter $ 0.77 $ 0.38 Third Quarter $ 0.52 $ 0.13 Fourth Quarter $ 0.54 $ 0.10 2000: First Quarter $ 0.34 $ 0.18 Second Quarter $ 0.35 $ 0.13 Third Quarter $ 0.23 $ 0.13 Fourth Quarter $ 0.22 $ 0.06 DIVIDENDS The Company has never declared or paid any cash dividends. It is the present policy of the Company to retain earnings to finance the growth and development of the business and, therefore, the Company does not anticipate paying dividends on its Common Stock in the foreseeable future. The number of shareholders of record of the Company's Common Stock as of February 15, 2000 was approximately 3,342. RECENT SALES OF UNREGISTERED SECURITIES Holders of Convertible Preferred Stock received 1,086,957 shares of the Company's Common stock during 2000 in conversion of 2 shares of Series B Convertible Preferred Stock. As of December 31, 2000 there were no remaining shares of Convertible Preferred Stock outstanding. During 2000, holders of $162,500 of Convertible debentures received 800,000 shares of 9 Common Stock on conversion of debentures. During 2000, the Company issued 1,133,330 shares of its common stock in exchange for services valued at $161,247. ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS Plan of Operations - Eat at Joe's Ltd. Intends to open and operate theme restaurants styled in an "American Diner" atmosphere where families can eat wholesome, home cooked food in a safe friendly atmosphere. Eat at Joe's, the classic American grill, is a restaurant concept that takes you back to eating in the era when favorite old rockers were playing on chrome-spangled jukeboxes and neon signs reflected on shiny tabletops of the 1950's. Eat at Joe's fulfills the diner dream with homey ambiance that's affordable while providing food whose quality and variety is such you can eat there over and over, meal after meal. To build on the diner experience, a retail section in each Eat at Joe's would allow customers to take the good feelings home with them, in the form of 50's memorabilia. The Company's expansion strategy is to open restaurants either through Joint Venture agreements or Company owned units. Units may consist of a combination of full service restaurants or food court locations. Restaurant construction will take from 90-150 days to complete on a leased site. In considering site locations, the Company concentrates on trade demographics, such as traffic volume, accessibility and visibility. High Visibility Malls and Strip Malls in densely populated suburbs are the preferred locations. The Company also scrutinizes the potential competition and the profitability of national restaurant chains in the target market area. As part of the expansion program, the Company will inspect and approve each site before approval of any joint venture or partnership. A typical food court unit is approximately 500 square feet, whereas for a full service operation it is approximately 3,500 square feet. Food court operation consists of a limited menu. A full service restaurant consists of 30-35 tables seating about 140- 150 people. The bar area will hold 6-8 tables and seats 30-35 people. The restaurant industry is an intensely competitive one, where price, service, location, and food quality are critical factors. The Company has many established competitors, ranging from similar casual-style chains to local single unit operations. Some of these competitors have substantially greater financial resources and may be established or indeed become established in areas where the Eat at Joe's Company operates. The restaurant industry may be affected by changes in customer tastes, economic, demographic trends, and traffic patterns. Factors such as inflation, increased supplies costs and the availability of suitable employees may adversely affect the 10 restaurant industry in general and the Eat at Joe's Company Restaurant in particular. Significant numbers of the Eat at Joe's personnel are paid at rates related to the federal minimum wage and accordingly, any changes in this would affect the Company's labor costs. Results of Operations - From March 1, 1990 to December 12, 1995 the Company was an inactive corporation. From December 12, 1995 to November 1997 the Company was a development stage company and had not begun principal operations. During November and December, 1997 two restaurants were opened and began operations, two restaurants opened during May 1998, three restaurants opened during third quarter 1998, two restaurants opened during fourth quarter 1998, and three restaurants were acquired during March 1999. Additionally, 4 restaurants were closed during second quarter 1999, two were closed during fourth quarter 1999, and four more were closed during 2000. Accordingly, comparisons with prior periods are not meaningful. Total Revenues - For the years ended December 31, 2000 and 1999, the Company had total sales of approximately $1,913,000 and $3,461,000 respectively. Costs and Expenses - For the years ended December 31, 2000 and 1999, the Company had a net loss of approximately $3,017,000 and $6,452,000 respectively. The net loss for 2000 and 1999 is largely attributable to a loss on abandonment of assets from the closure of restaurants of approximately $1,972,000 and $4,359,000 respectively. The remaining loss from 2000 and 1999 is largely attributable to additional expenses incurred as the Company increases its Corporate overhead structure for the development of additional locations. Given the increases and decreases in number of restaurants during 2000 and 1999, any discussion of operating expenses as a percentage of sales would not be meaningful and might be misleading. LIQUIDITY AND CAPITAL RESOURCES The Company has met its capital requirements through the sale of its Common Stock, Convertible Preferred Stock, Convertible Debentures and Notes Payable. . Since the Company's re-activation in January, 1997, the Company's principal capital requirements have been the funding of (i) the development of the Company and its 1950's diner style concept, (ii) the construction of its existing units and the acquisition of the furniture, fixtures and equipment therein and (iii) towards the development of additional units. During 2000 and 1999 the company paid approximately $178,000 and $696,000, respectively for property and equipment.. During 2000 and 1999, the Company has raised approximately $800,000 and $2,010,000 through short-term notes payable and advances from majority stockholders. The net proceeds to the Company were used for additional unit development and working capital. For the years 2000 and 1999, the Company used approximately $445,000 and $1,341,000 in cash flow for operating activities. After the completion of its expansion plans, the Company expects future development and 11 expansion will be financed through cash flow from operations and other forms of financing such as the sale of additional equity and debt securities, capital leases and other credit facilities. There are no assurances that such financing will be available on terms acceptable or favorable to the Company. Government Regulations - The Company is subject to all pertinent Federal, State, and Local laws governing its business. Each Eat at Joe's is subject to licensing and regulation by a number of authorities in its State or municipality. These may include health, safety, and fire regulations. The Company's operations are also subject to Federal and State minimum wage laws governing such matters as working conditions, overtime and tip credits. ITEM 7 FINANCIAL STATEMENTS The financial statements of the Company and supplementary data are included beginning immediately following the signature page to this report. See Item 13 for a list of the financial statements and financial statement schedules included. ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There are not and have not been any disagreements between the Company and its accountants on any matter of accounting principles, practices or financial statements disclosure. PART III ITEM 9 DIRECTORS EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT Executive Officers and Directors The following table sets forth the name, age, and position of each executive officer and director of the Company: 12 Director's Name Age Office Term Expires Joseph Fiore 39 Chief Executive officer, Next Chairman of the Board of Annual Directors/Secretary Meeting James Mylock, Jr. 34 Director Next Annual Meeting Tim Matula 40 Director Next Annual Meeting Gino Naldini 49 President and Chief Operating Next Officer Annual Meeting Gary Usling 41 Chief Financial Officer Next Annual Meeting Joseph Fiore has been Chairman and Chief Executive Officer since October, 1996. In 1982, Mr. Fiore formed East Coast Equipment and Supply Co., Inc., a restaurant supply company that he still owns. Between 1982 and 1993, Mr. Fiore established 9 restaurants (2 owned and 7 franchised) which featured a 1950's theme restaurant concept offering a traditional American menu. James Mylock, Jr. has worked with Joseph Fiore in marketing and business development since graduating from the State University of New York at Buffalo in 1990. Tim Matula joined Shearson Lehman Brothers as a financial consultant in 1992. In 1994 he joined Prudential Securities and when he left Prudential in 1997, he was Associate Vice President, Investments, Quantum Portfolio Manager. Gino Naldini became President and Chief Operating Officer of the Company in December, 1998. From 1967 through 1998, Mr. Naldini held various senior executive positions with Toronto-based CARA Operations, operator of more than 400 restaurants. The restaurants operated by CARA include Swiss Chalet, operator of chicken rotisserie restaurants and Harvey's, Canada's second largest hamburger chain. Mr. Naldini's last held position with CARA was that of Senior Director of Operations. Mr. Usling has been Chief Financial Officer since January, 1999.From 1993 to 1998, he was employed with Penreal Capital Management, Inc. and his last held position as a Vice President. Peneral is a pension/real estate fund management company. From 1989 to 1993 he was Vice 13 President of Acquisitions and Development for Co-operators Development Corporation, a real estate and insurance firm. From 1984 to 1989 was employed by The Canada Life Assurance Company as an accountant. The Company's Certificate of Incorporation provides that the board of directors shall consist of from one to nine members as elected by the shareholders. Each director shall hold office until the next annual meeting of stockholders and until his successor shall have been elected and qualified. Board Meetings and Committees The Directors and Officers will not receive remuneration from the Company until a subsequent offering has been successfully completed, or cash flow from operating permits, all in the discretion of the Board of Directors. Directors may be paid their expenses, if any, of attendance at such meeting of the Board of Directors, and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as Director. No such payment shall preclude any Director from serving the Corporation in any other capacity and receiving compensation therefor. No compensation has been paid to the Directors. The Board of Directors may designate from among its members an executive committee and one or more other committees. No such committees have been appointed. Compliance with Section 16(a) of the Exchange Act Based solely upon a review of forms 3, 4, and 5 and amendments thereto, furnished to the Company during or respecting its last fiscal year, no director, officer, beneficial owner of more than 10% of any class of equity securities of the Company or any other person known to be subject to Section 16 of the Exchange Act of 1934, as amended, failed to file on a timely basis reports required by Section 16(a) of the Exchange Act for the last fiscal year. ITEM 10 EXECUTIVE COMPENSATION None of the executive officer's salary and bonus exceeded $100,000 during any of the Company's last two fiscal years. Employment Agreements Effective January 1, 1997, the Company entered into an employment Agreement with Joseph Fiore (the "Fiore Employment Agreement") under which Joseph Fiore serves as chairman of the board and chief executive officer of the Company. Pursuant to the Fiore Employment Agreement, 14 Mr. Fiore was to be paid $50,000 in 1997 and $75,000 in 1998. In addition, Mr. Fiore will receive family health insurance coverage until age 70 and life insurance coverage until age 70 with a death benefit of $1,000,000 and the use of an automobile, with all expenses associated with the maintenance and operation of the automobile paid by the Corporation. Mr. Fiore deferred all salaries and benefits under this agreement until the Company reaches profitability. ITEM 11 SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT Principal Shareholders The table below sets forth information as to each person owning of record or who was known by the Company to own beneficially more than 5% of the 44,894,967 shares of issued and outstanding Common Stock of the Company as of December 31, 2000 and information as to the ownership of the Company's Stock by each of its directors and executive officers and by the directors and executive officers as a group. Except as otherwise indicated, all shares are owned directly, and the persons named in the table have sole voting and investment power with respect to shares shown as beneficially owned by them. # of Name and Address Nature of Shares of Beneficial Owners Ownership Owned Percent Directors Joseph Fiore Common Stock 4,094,974 9% All Executive Officers Common Stock 5,342,837 13% and Directors as a Group (4 persons) ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS During 2000 and 1999, two officers and/or companies controlled by the two officers paid expenses and made advances to the Company. As of December 31, 2000, $1,373,022 in advances was due to officers and directors of the Company. 15 ITEM 13. EXHIBITS, AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this report. 1. Financial Statements Page Report of Robison, Hill & Co., Independent Certified Public Accountants.....F-3 Consolidated Balance Sheets as of December 31, 2000, and 1999...............F-4 Consolidated Statements of Operations for the years ended December 31, 2000, and 1999............................................F-6 Consolidated Statement of Stockholders' Equity for the years ended December 31, 2000, and 1999............................................F-7 Consolidated Statements of Cash Flows for the years ended December 31, 2000, and 1999............................................F-9 Notes to consolidated Financial Statements..................................F-11 2. Financial Statement Schedules The following financial statement schedules required by Regulation S-X are included herein. All schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. 3. Exhibits The following exhibits are included as part of this report: Exhibit Number Title of Document 3.1 Articles of Incorporation(1) 3.2 By-laws(1) 4.1 Certificate of Designations-Series A Convertible Preferred Stock(1) 4.2 Certificate of Designations-Series B Convertible Preferred Stock(1) 4.3 Form of Warrant Agreement(1) 16 4.4 Certificate of Designations-Series C Convertible Preferred Stock(1) 4.5 Certificate of Designations-Series D Convertible Preferred Stock(1) 10.1 Consulting Agreement-Wall Street Group, Ltd.(1) 10.2 Indenture of Lease between University of Pennsylvania and Eat at Joe's U. of P., Inc.(1) 10.3 Lease Abstract between Cherry Hill Center, Inc.and Eat at Joe's Cherry Hill, Inc.(1) 10.4 Lease Abstract between Echelon Mall, Inc. and E.A.J. Eachelon Mall, Inc.(1) 10.5 Lease Information Form between E.A.J. PHL, Airport, Inc. and Marketplace Redwood Limited Partnership(1) 10.6 Lease Abstract between Eat at Joe's U. of P., Inc. and UCA Realty Group, Inc.(1) 10.7 Lease Abstract between Rouse Philadelphia, Inc. and Eat at Joe's Gallery, Inc.(1) 10.8 Lease Information Form between E.A.J. Enterprises, Inc. and First Fidelity Bank, N.A(1) 10.9 Lease Abstract between Eat at Joe's Harbor Place, Inc. and Baltimore Center, Inc.(1) 10.10 Lease Abstract between E.A.J. Shoppington, Inc. and Wilmorite, Inc.(1) 10.11 Lease Abstract between Eat at Joe's Neshaminy, Inc. and General Growth Properties, Inc.(1) 10.12 Lease Abstract between Eat at Joe's Plymouth Incorporate and Plymouth Meeting, Inc.(1) 10.13 Lease Abstract between E.A.J. Danbury, Inc. and Wilmorite, Inc.(1) 10.14 Registration of trade name for Eat at Joe's(1) 10.15 Registration Rights Agreement(1) 21 Subsidiaries of the Company(1) (1) Incorporated by reference. (b) No reports on Form 8-K were filed. 17 SIGNATURES Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on it behalf by the undersigned, thereunto duly authorized. EAT AT JOE'S LTD. Dated: March 30, 2001 By /S/ Joseph Fiore ----------------------------------------------- Joseph Fiore, C.E.O., Chairman, Secretary, Director Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on this 30th day of March 2001. Signatures Title /S/ Joseph Fiore - ----------------------------- Joseph Fiore C.E.O., Chairman, Secretary, Director (Principal Executive, Financial and Accounting Officer) /S/ James Mylock, Jr. - ----------------------------- James Mylock, Jr. Director /S/ Tim Matula - ----------------------------- Tim Matula Director /S/ Gino Naldini - ----------------------------- Gino Naldini President, Chief Operating Officer and Director /S/ Gary Usling - ----------------------------- Gary Usling Chief Financial Officer and Director 18 EAT AT JOE'S LTD. AND SUBSIDIARIES - : - INDEPENDENT AUDITOR'S REPORT DECEMBER 31, 2000 AND 1999 TABLE OF CONTENTS Report of Independent Certified Public Accountants..........................F-3 Consolidated Balance Sheets, December 31, 2000 and 1999.....................F-4 Consolidated Statements of Operations, For The Years Ended December 31, 2000 and 1999...............................................F-6 Consolidated Statement of Changes in Stockholders' Equity, For The Years Ended December 31, 2000 and 1999...............................................F-7 Consolidated Statements of Cash Flows, For The Years Ended December 31, 2000 and 1999...............................................F-9 Notes to Consolidated Financial Statements..................................F-11 F - 2 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors and Stockholders Eat At Joe's Ltd. We have audited the accompanying consolidated balance sheets of Eat At Joe's Ltd., and subsidiaries (a Delaware corporation) as of December 31, 2000, and 1999 and the related consolidated statements of operations, changes in 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 Eat At Joe's Ltd., and subsidiaries as of December 31, 2000, and 1999, and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. Respectfully submitted, /S/ ROBISON, HILL & CO. Certified Public Accountants Salt Lake City, Utah March 30, 2001 F - 3 EAT AT JOE'S LTD., AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2000 AND 1999 2000 1999 ----------- ----------- ASSETS Current Assets: Cash and cash equivalents .................... $ 14,670 $ -- Receivables .................................. 3,411 10,439 Inventory .................................... 19,832 46,050 Other ........................................ -- -- Prepaid expense .............................. 13,217 76,442 Deposits ..................................... -- 1,710 ----------- ----------- Total Current Assets .................... 51,130 134,641 ----------- ----------- Property and equipment: Equipment .................................... 163,025 879,441 Furniture & Fixtures ......................... 5,454 47,239 Leasehold improvements ....................... 629,100 2,212,291 ----------- ----------- 797,579 3,138,971 Less accumulated depreciation ................ (196,945) (547,669) ----------- ----------- 600,634 2,591,302 ----------- ----------- Other Assets: Investments .................................. 100,000 100,000 Intangible and other assets net of amortization of $44,367 and $28,884 for 2000 and 1999, respectively ...... 110,470 125,954 ----------- ----------- Total Assets ............................ $ 862,234 $ 2,951,897 =========== =========== F - 4 EAT AT JOE'S LTD., AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2000 AND 1999 (Continued)
2000 1999 ------------ ------------ LIABILITIES Current Liabilities: Accounts payable and accrued liabilities .............. $ 462,431 $ 735,775 Short-term notes payable .............................. 518,302 342,926 Shareholders loans .................................... 1,373,022 724,760 ------------ ------------ Total Current Liabilities ........................ 2,353,755 1,803,461 ------------ ------------ ------------ Convertible Debentures, Net of Issue Costs ............ 1,338,448 1,383,290 ------------ ------------ Total Liabilities ................................ 3,692,203 3,186,751 ------------ ------------ STOCKHOLDERS EQUITY Preferred stock - $0.0001 par value. 10,000,000 shares authorized; -0- and 2 shares issued and outstanding -- -- Common Stock - $0.0001 par value. 50,000,000 shares Authorized.44,894,967 and 41,874,680 issued and Outstanding, respectively .......................... 4,490 4,187 Common Stock To Be Issued ............................. -- -- Additional paid-in capital ............................ 9,919,824 9,619,060 Cumulative Translation Adjustment ..................... 120,405 -- Retained deficit ...................................... (12,874,688) (9,858,101) ------------ ------------ Total Stockholders' Equity ....................... (2,829,969) (234,854) ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............ $ 862,234 $ 2,951,897 ============ ============
The accompanying notes are an integral part of these financial statements. F - 5 EAT AT JOE'S LTD., AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 2000, AND 1999
2000 1999 ------------ ------------ Revenues ......................................... $ 1,912,990 $ 3,461,176 Cost of Revenues ................................. 836,185 1,465,217 ------------ ------------ Gross Margin ..................................... 1,076,805 1,995,959 Expenses Labor and Related Expenses .................... 652,330 1,730,251 Rent .......................................... 224,804 495,043 Other General and Administrative .............. 832,716 1,054,756 ------------ ------------ Income (Loss) Before Depreciation and Amortization (633,045) (1,284,091) Depreciation and Amortization ................. 263,124 609,615 ------------ ------------ Net Loss from Continuing Operations .............. (896,169) (1,893,706) ------------ ------------ Other Income (Expense) Interest income ............................... -- 2,936 Interest expense .............................. (145,627) (198,879) Loss on sale of assets ........................ (1,972,070) (4,359,377) ------------ ------------ Net Other Income (Expense) ....................... (2,117,697) (4,555,320) ------------ ------------ Net Loss Before Income Taxes ..................... (3,013,866) (6,449,026) Income Tax Expense (Benefit) ..................... 2,720 2,725 ------------ ------------ Net Loss ......................................... (3,016,586) (6,451,751) ------------ ------------ Less: Preferred Dividends ........................ -- -- ------------ ------------ Net Loss To Common Stockholders .................. $ (3,016,586) $ (6,451,751) ============ ============ Basic Loss Per Common Share: ..................... $ (0.07) $ (0.24) ============ ============ Weighted Average Number of Common Shares ......... 43,857,607 26,406,856 ============ ============
The accompanying notes are an integral part of these financial statements. F - 6 EAT AT JOE'S LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 2000, AND 1999
Common Stock Additional Preferred Stock To Be Issued Common Stock Paid-in Retained ------------------- ------------------- ---------------------- Shares Amount Shares Amount Shares Amount Capital Deficit ----------- ---- ----------- ---- ----------- -------- ----------- ----------- Balance at January 1, 1999 ..... 113 $-- 1,312,500 $131 16,440,755 $ 1,644 $ 7,213,400 (3,406,350) Shares issued .................. -- -- (1,312,500) (131) 1,312,500 131 (198,500) -- Share issued in exchange for Property , Equipment, Goods and Services ....................... -- -- -- -- 1,824,044 182 281,043 -- Shares issued in cancellation of short-term debt and associated interest ....................... -- -- -- -- 4,240,000 424 2,194,473 -- Series A Preferred shares converted ...................... (46) -- -- -- 2,760,288 276 (276) -- Series B Preferred shares converted ...................... (31) -- -- -- 5,027,718 503 (503) -- Series C Preferred shares converted ...................... (14) -- -- -- 3,967,510 397 (397) -- Series D Preferred shares converted ...................... (20) -- -- -- 5,601,545 560 (560) --
F - 7
Common Stock Additional Preferred Stock To Be Issued Common Stock Paid-in Retained ------------------- ------------------- ---------------------- Shares Amount Shares Amount Shares Amount Capital Deficit ----------- ---- ----------- ---- ----------- -------- ----------- ----------- Convertible Debentures converted ...................... -- -- -- -- 700,320 70 130,380 -- Net loss for the year .......... -- -- -- -- -- -- -- (6,451,751) ----------- ---- ----------- ---- ----------- -------- ----------- ----------- Balance at December 31, 1999 ... 2 -- -- -- 41,874,680 4,187 9,619,060 (9,858,101) Convertible Debentures converted ...................... -- -- -- -- 800,000 80 162,420 -- Series B Preferred Shares Converted ...................... (2) -- -- -- 1,086,957 109 (109) -- Shares Issued for Services ..... -- -- -- -- 1,133,330 114 138,453 -- Net Loss ....................... -- -- -- -- -- -- -- (3,016,587) ----------- ---- ----------- ---- ----------- -------- ----------- ----------- Balance at December 31, 2000 ... -- -- -- -- 44,894,967 $ 4,490 $ 9,919,824 $(12,874,688) =========== ==== =========== ==== =========== ======== =========== ===========
The accompanying notes are an integral part of these financial statements. F - 8 EAT AT JOE'S LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2000, AND 1999
2000 1999 ----------- ----------- Cash Flows From Operating Activities Net loss for the period .............................. $(3,016,587) $(6,451,751) Adjustments to reconcile net loss to net cash Provided by operating activities Depreciation and Amortization ...................... 263,124 336,531 Currency Translation Adjustment .................... 120,405 -- Stock issued for services and expenses ............. 301,067 82,725 Loss on disposal of assets ......................... 1,972,070 4,359,377 Decrease (Increase) in Receivables ................. 7,028 15,422 Decrease (Increase) in inventory ................... 26,219 138,065 Decrease (Increase) in other assets ................ -- -- Decrease (Increase) in prepaid expense ............. 63,225 (68,109) Decrease (increase) in deposits .................... -- -- Increase in accounts payable and accrued liabilities (181,965) 247,143 ----------- ----------- Net Cash Provided by (Used in) Operating Activities ..... (445,414) (1,340,597) ----------- ----------- Cash Flows From Investing Activities Investments .......................................... -- (100,000) Purchase of property and equipment ................... (177,934) (695,567) Purchase of intangible assets ........................ -- -- ----------- ----------- Net Cash Provided by (Used in) Investing Activities ..... (177,934) (795,567) ----------- ----------- Cash Flows From Financing Activities Issuance of convertible preferred stock .............. -- -- Purchase of convertible preferred stock .............. -- -- Proceeds from convertible debenture .................. -- -- Advances from majority stockholders .................. 648,381 166,744 Repayments of notes and advances ..................... (162,500) (7,200) Proceeds from short-term notes payable ............... 152,137 1,842,663 ----------- ----------- Net Cash Provided by Financing Activities ............... 638,018 2,002,207 ----------- ----------- Increase (Decrease) in Cash ............................. 14,670 (133,957) Cash at beginning of period ............................. -- 133,957 ----------- ----------- Cash at End of Period ................................... $ 14,670 $ -- =========== ===========
F - 9 EAT AT JOE'S LTD. AND SUBSIDIARIES STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2000, AND 1999 (Continued) 2000 1999 ------------ ---------- Supplemental Disclosure of Interest and Income Taxes Paid Interest paid during the period ................. $ -- $ 70,348 ============ ========== Income taxes paid during the period ............. $ 2,720 $ 2,725 ============ ========== Supplemental Disclosure of Non-cash Investing and Financing Activities Leasehold Improvements Acquired with Issuance ... -- of Common Stock ............................... $ $ 198,500 ============ ========== Short-term Notes Settled with Issuance of Common Stock ................................. $ 162,500 $2,194,897 ============ ========== The accompanying notes are an integral part of these financial statements. F - 10 EAT AT JOE'S LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2000, AND 1999 NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This summary of accounting policies for Eat At Joe's, Ltd. And subsidiaries is presented to assist in understanding the Company's financial statements. The accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements. Organization and Basis of Presentation Eat At Joe's Ltd. (Company) was incorporated on January 6, 1988, under the laws of the State of Delaware, as a wholly-owned subsidiary of Debbie Reynolds Hotel and Casino, Inc. (DRHC) (formerly Halter Venture Corporation or Halter Racing Stables, Inc.) a publicly-owned corporation. DRHC caused the Company to register 1,777,000 shares of its initial 12,450,000 issued and outstanding shares of common stock with the Securities and Exchange Commission on Form S-18. DRHC then distributed the registered shares to DRHC stockholders. During the period September 30, 1988 to December 31, 1992, the Company remained in the development stage while attempting to enter the mining industry. The Company acquired certain unpatented mining claims and related equipment necessary to mine, extract, process and otherwise explore for kaolin clay, silica, feldspar, precious metals, antimony and other commercial minerals from its majority stockholder and other unrelated third-parties. The Company was unsuccessful in these start-up efforts and all activity was ceased during 1992 as a result of foreclosure on various loans in default and/or the abandonment of all assets. From 1992 until 1996 the Company had no operations, assets or liabilities. During the year ended December 31, 2000, the Company changed the domicile of each of the following subsidiaries to Nevada; E.A.J. Hold, Inc., E.A.J. Shoppes, Inc., E.A.J. Cherry Hill, Inc., E.A.J. Innerharbor, Inc., E.A.J. Neshaminy, Inc., E.A.J. PM, Inc., E.A.J. Echelon, Inc., E.A.J. Market East, Inc., E.A.J. MO, Inc., E.A.J. Syracuse, Inc., E.A.J. Walnut Street, Inc., and E.A.J. Owings, Inc. Principles of Consolidation The consolidated financial statements include the accounts of Eat At Joe's, LTD. And its wholly-owned subsidiaries, E.A.J. Hold, Inc., a Nevada corporation ("Hold"), E.A.J. PHL Airport, Inc., a Pennsylvania corporation, E.A.J. Shoppes, Inc., a Nevada corporation, E.A.J. Cherry Hill, Inc., a Nevada corporation, E.A.J. Innerharbor, Inc., a Nevada corporation, E.A.J. Neshaminy, Inc., a Nevada corporation, E.A.J. PM, Inc., a Nevada corporation, E.A.J. Echelon, Inc., a Nevada corporation, E.A.J. Market East, Inc., a Nevada corporation, E.A.J. MO, Inc., a Nevada corporation, E.A.J. Syracuse, Inc., a Nevada corporation, E.A.J. Walnut Street, Inc., a Nevada corporation, E.A.J. Owings, Inc., a Nevada corporation, and 1398926 Ontario, Inc. and 1337855 Ontario, Inc., British F - 11 EAT AT JOE'S LTD. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2000, AND 1999 (Continued) NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Columbia corporations. All significant intercompany accounts and transactions have been eliminated. Nature of Business The Company is developing, owns and operates theme restaurants styled in an "American Diner" atmosphere. Inventories Inventories consist of food, paper items and related materials and are stated at the lower of cost (first-in, first-out method) or market. Income Taxes The Company accounts for income taxes under the provisions of SFAS No. 109, "Accounting for Income Taxes." SFAS No.109 requires recognition of deferred income tax assets and liabilities for the expected future income tax consequences, based on enacted tax laws, of temporary differences between the financial reporting and tax bases of assets and liabilities. Depreciation Office furniture, equipment and leasehold improvements, are stated at cost. Depreciation and amortization are computed using the straight-line method over the estimated economic useful lives of the related assets as follows: Furniture & Fixtures 5-10 years Equipment 5- 7 years Leasehold improvements 8-15 years Maintenance and repairs are charged to operations; betterments are capitalized. The cost of property sold or otherwise disposed of and the accumulated depreciation thereon are eliminated from the property and related accumulated depreciation accounts, and any resulting gain or loss is credited or charged to income. F - 12 EAT AT JOE'S LTD. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2000, AND 1999 (Continued) NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Amortization Intangible assets are amortized over useful life of 10 years. The Company has adopted the Financial Accounting Standards Board SFAS No., 121, "Accounting for the Impairment of Long-lived Assets." SFAS No. 121 addresses the accounting for (i) impairment of long-lived assets, certain identified intangibles and goodwill related to assets to be held and used, and (ii) long-live lived assets and certain identifiable intangibles to be disposed of. SFAS No. 121 requires that long-lived assets and certain identifiable intangibles be held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If the sum of the expected future cash flows from the used of the asset and its eventual disposition (undiscounted and without interest charges) is less than the carrying amount of the asset, an impairment loss is recognized. Pervasiveness of Estimates The preparation of financial statements in conformity with generally accepted accounting principles required 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 the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Concentration of Credit Risk The Company has no significant off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements. The Company maintains the majority of its cash balances with one financial institution, in the form of demand deposits. Cash and Cash Equivalents For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes. F - 13 EAT AT JOE'S LTD. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2000, AND 1999 (Continued) NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Earnings (Loss) Per Share Diluted net income per common share was calculated based on an increased number of shares that would be outstanding assuming that the warrants are converted to common shares. The effect of outstanding common stock equivalents are anti-dilutive for 1999 and 1998 and are thus not considered. The reconciliations of the numerators and denominators of the basic earnings per share computations are as follows: For the Year Ended 1999 --------------------------------------------------------- Per Share Income Shares Amount ------------------ ----------------- ----------------- Basic EPS Net Loss to common shareholders $ (6,451,751) 26,406,856 $ (0.24) ================== ================= ================= For the Year Ended 2000 --------------------------------------------------------- Per Share Income Shares Amount ------------------ ----------------- ----------------- Basic EPS Net Loss to common shareholders $ (3,016,587) 43,857,607 $ (0.07) ================== ================= ================= F - 14 EAT AT JOE'S LTD. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2000, AND 1999 (Continued) NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Reclassifications Certain reclassifications have been made in the 1999 financial statements to conform with the 2000 presentation. NOTE 2 - SHORT-TERM NOTES PAYABLE Short-Term Notes Payable consist of loans from unrelated entities as of December 31, 2000 and 1999. The notes are payable one year from the date of issuance together with interest at 6.50% A.P.R. NOTE 3 - INCOME TAXES Deferred taxes result from temporary differences in the recognition of income and expenses for income tax reporting and financial statement reporting purposes. Deferred benefits of $1,020,000 and $2,040,000 for the years ended December 31, 2000 and 1999 respectively, are the result of net operating losses. The Company has recorded net deferred income taxes in the accompany consolidated balance sheets as follows: As at December 31, ---------------------------- 2000 1999 ------------- ------------- Future deductible temporary differences related to Reserves, accruals, and net operating losses $ 3,855,000 $ 2,829,000 Valuation allowance (3,855,000) (2,829,000) ------------- ------------- Net Deferred Income Tax $ -- $ -- ============= ============= F - 15 EAT AT JOE'S LTD. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2000, AND 1999 (Continued) NOTE 3 - INCOME TAXES (Continued) As of December 31, 2000, the Company had a net operating loss ("NOL") carry forward for income tax reporting purposes of approximately $11,337,000 available to offset future taxable income. This net operating loss carry forward expires at various dates between December 31, 2003 and 2018. A loss generated in a particular year will expire for federal tax purposes if not utilized within 20 years. Additionally, the Internal Revenue Code contains provisions which could reduce or limit the availability and utilization of these NOLs if certain ownership changes have taken place or will take place. In accordance with SFAS No. 109, a valuation allowance is provided when it is more likely than not that all or some portion of the deferred tax asset will not be realized. Due to the uncertainty with respect to the ultimate realization of the NOLs, the Company established a valuation allowance for the entire net deferred income tax asset of $3,787,000 as of December 31, 2000. Also consistent with SFAS No. 109, an allocation of the income (provision) benefit has been made to the loss from continuing operations. The difference between the effective income tax rate and the federal statutory income tax rate on the loss from continuing operations are presented below: As at December 31, ---------------------------- 2000 1999 ------------- ------------- Benefit at the federal statutory rate of 34% $ 1,020,000 $ 2,040,000 Nondeductible expenses -- -- ------------- ------------- Utilization of net operating loss carryforward $ 1,020,000 $ (2,040,000) ------------- ------------- $ -- $ -- ============= ============= NOTE 4 - PURCHASE OF SUBSIDIARIES The Company has entered into a non-binding letter of intent to acquire a 16 unit regional restaurant chain. Either party to the letter may terminate the letter of intent without penalty. The parties have agreed to proceed toward negotiation of a mutually agreeable purchase agreement. No assurances can be given that the purchase of the restaurant chain will be completed. In March of 1999, 1337855 Ontario, Inc. ("Ontario"), wholly owned subsidiary of the Company entered into a purchase agreement with Koo Koo Roo Canada Limited (Koo Koo Roo) to acquire certain assets and assume certain liabilities of that company. Koo Koo Roo is a California-based casual dining, quick service restaurant chain featuring skinless flame broiled chicken, roasted hand-carved turkey and made-to-order tossed salads and specialty sandwiches. In F - 16 EAT AT JOE'S LTD. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2000, AND 1999 (Continued) NOTE 4 - PURCHASE OF SUBSIDIARIES (Continued) consideration for its payment of approximately $375,000, Ontario acquired (1) a 20 year exclusive license agreement in Canada with a 20 year renewal term to operate Koo Koo Roo restaurants; (2) re-negotiated the leases to operate 3 existing Koo Koo Roo locations in Toronto, and (3) satisfied outstanding debt obligations due the second lender to Koo Koo Roo. On July 1, 2000, the Company opened a new restaurant in Toronto, Ontario. The restaurant is called "Mediterraneo" and offers primarily Italian Cuisine. NOTE 5 - RENT AND LEASE EXPENSE The Company occupies various retail restaurant space under operating leases beginning October 1997 and expiring at various dates through 2012. The minimum future lease payments under these leases for the next five years are: Year Ended December 31, Real Property Equipment - --------------------------------- ----------------- ----------------- 2001 269,808 - 2002 269,808 - 2003 269,808 - 2004 269,808 - 2005 269,808 - ----------------- ----------------- Total five year minimum lease payments $ 1,349,040 $ - ================= ================= The leases generally provides that insurance, maintenance and tax expenses are obligations of the Company. It is expected that in the normal course of business, leases that expire will be renewed or replaced by leases on other properties. NOTE 6 - RELATED PARTY TRANSACTIONS During 2000 and 1999, an officer, Joe Fiore, CEO of the Company, and/or companies controlled by the officer paid expenses and made advances to the Company. As of December 31, 2000, $1,373,022 in advances was due to Mr. Fiore. F - 17 EAT AT JOE'S LTD. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2000, AND 1999 (Continued) NOTE 7 - CONVERTIBLE PREFERRED STOCK, DEBENTURES, WARRANTS & OPTIONS Holders of Convertible Preferred Stock received 1,086,957 shares of the Company's Common stock during 2000 in conversion of 2 shares of Series B Convertible Preferred Stock. As of December 31, 2000 there were no remaining shares of Convertible Preferred Stock outstanding. During 2000, holders of $162,500 of Convertible debentures received 800,000 shares of Common Stock on conversion of debentures. The following table sets forth the options and warrants outstanding as of December 31, 2000 and 1999. 2000 1999 ------------- ------------- Options & warrants outstanding, beginning of year 1,247,750 1,247,750 Granted - - Expired - - Exercised - - ------------- ------------- Options & warrants outstanding, end of year 1,247,750 1,247,750 ============= ============= Exercise price for options & warrants outstanding, end of year $0.50 to $1.79 $0.50 to $1.79 ============== ============== NOTE 8 - RESTAURANT CLOSURES During 1999, E.A.J. Cherry Hill, Inc., E.A.J. Gallery, Inc., Eat At Joe's Harborplace, Inc., E.A.J. Echelon Mall, Inc., and two of the 1337855 Ontario restaurants were closed and substantially all assets and leasehold improvements abandoned. This abandonment of assets has been reported in the accompanying financial statements as a loss on sale of assets at $4,359,377 for the year ended December 31, 1999. During 2000, E.A.J. MO, Inc., E.A.J. Shoppes, Inc., E.A.J. Walnut Street, Inc., and the third 137855 Ontario restaurants were closed and substantially all assets and leasehold improvements abandoned. This abandonment of assets has been reported in the financial statements as a loss on sale of assets at $1,808,168 for the year ended December 31, 2000. F - 18 EAT AT JOE'S LTD. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2000, AND 1999 (Continued) NOTE 9 - SELECTED FINANCIAL DATA (Unaudited) The following table set forth certain unaudited quarterly financial information:
1999 Quarters Ended -------------------------------------------------------- Mar 31 Jun 30 Sep 30 Dec 31 ----------- ----------- ----------- ----------- Income statement data: Net sales ................... $ 846,995 $ 1,091,321 $ 849,716 $ 673,143 Gross profit ................ 588,915 661,481 374,672 370,891 Income (loss) from operations before depreciation & amortization 39,641 (282,217) (592,926) (448,589) Loss from operations ........ (114,665) (458,104) (765,557) (555,380) Other income ................... (53,462) (45,860) (1,429,643) (3,026,354) ----------- ----------- ----------- ----------- Loss before taxes .............. (168,127) (503,645) (2,195,881) (3,581,734) Income tax (provision) benefit . (682) (681) (681) (681) ----------- ----------- ----------- ----------- Net Income (Loss) .............. $ (168,809) $ (504,645) $(2,195,881) $(3,582,415) =========== =========== =========== ===========
2000 Quarters Ended -------------------------------------------------------- Mar 31 Jun 30 Sep 30 Dec 31 ----------- ----------- ----------- ----------- Income statement data: Net sales ................... $ 532,114 $ 996,177 $ 1,540,041 $ 1,912,990 Gross profit ................ 336,261 631,956 933,588 1,076,805 Income (loss) from operations before depreciation & amortization (194,027) (240,767) (378,861) (633,045) Loss from operations ........ (294,940) (442,569) (608,147) (896,170) Other income ................... (31,849) (64,496) (1,809,324) (2,117,697) ----------- ----------- ----------- ----------- Loss before taxes .............. (326,789) (507,065) (2,417,471) (3,013,867) Income tax (provision) benefit . (478) (950) (1,425) (2,720) ----------- ----------- ----------- ----------- Net Income (Loss) .............. $ (327,264) $ (508,015) $(2,418,896) $(3,016,587) =========== =========== =========== ===========
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