-----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, TLHOSEftb/QaEPWpEFwvfRHsplb6TEwBoXcictVG4c/sQzlN46w+FiJWW/lUVWTu GP5SpsT7NppN59nYW7K5JQ== 0000939802-04-000153.txt : 20040330 0000939802-04-000153.hdr.sgml : 20040330 20040330151124 ACCESSION NUMBER: 0000939802-04-000153 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20031231 FILED AS OF DATE: 20040330 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: 1934 Act SEC FILE NUMBER: 033-20111 FILM NUMBER: 04700458 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 form10ksb123103.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, 2003 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) 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 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. [X] State issuer's revenues for its most recent fiscal year. $1,233,547 ---------- As of December 31, 2003, there were 45,048,299 shares of the Registrant's common stock, par value $0.0001, issued, and 2 shares of Series E Convertible preferred stock (convertible to 1,480 common shares), par value $0.0001. The aggregate market value of the Registrant's voting stock held by non-affiliates of the Registrant was approximately $587,641 computed at the average bid and asked price as of December 31, 2003. 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.........................................................................7 Item 3. Legal Proceedings...............................................................................7 Item 4. Submission of Matters to a Vote of Security Holders.............................................8 PART II Item 5. Market for Common Equity and Related Stockholder Matters........................................8 Item 6. Management's Discussion and Analysis or Plan of Operations......................................9 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..............................................13 Item 10. Executive Compensation.........................................................................15 Item 11. Security Ownership of Certain Beneficial Owners and Management.................................16 Item 12. Certain Relationships and Related Transactions.................................................16 Item 13. Exhibits and Reports on Form 8-K...............................................................17 Item 14. Controls and Procedures........................................................................18 Item 15. Principal Accountant Fees and Services.........................................................19
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 one theme restaurant located in Philadelphia, Pennsylvania. The Company is planning at least four acquisitions during 2003, 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. 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 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. 4 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 thirteen 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. 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. Each of the subsidiaries was organized to operate a single restaurant. The Company presently owns and operates one theme restaurant located in Philadelphia, Pennsylvania and operated under the subsidiary E.A.J. PHL Airport Inc. The Company is planning at least four acquisitions during 2004, 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. All administrative activities of the Company have been conducted by corporate officers from either their home or shared business offices located at 670 White Plains Road, Suite 120, Scarsdale, NY 10583. 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. OPERATING LOSSES The Company has incurred net losses of approximately $257,000 and $383,000 for the years ended December 31, 2003 and December 31, 2002, respectively. Such operating losses reflect developmental and other start-up activities for 2003 and 2002 and the loss on abandonment of assets during 2002. 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 5 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 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 2005. Since the Company's formation, it has funded its operations and capital expenditures primarily through private placements of debt and equity 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. 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 6 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 As of March 25, 2004, the Company had approximately 12 employees, none of whom is represented by a labor union. ITEM 2 DESCRIPTION OF PROPERTY All administrative activities of the Company have been conducted by corporate officers from either their home or shared business offices located at 670 White Plains Road, Suite 120, Scarsdale, NY 10583. 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 $7,083 per month basic rent plus 15% -18% of gross revenues above $850,000 under the lease which expires April 2007. ITEM 3 LEGAL PROCEEDINGS NONE 7 ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were subject to a vote of security holders during the year 2003. 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. 2002: High Low First Quarter $ 0.035 $ 0.018 Second Quarter $ 0.030 $ 0.016 Third Quarter $ 0.020 $ 0.009 Fourth Quarter $ 0.017 $ 0.008 2003: First Quarter $ 0.013 $ 0.007 Second Quarter $ 0.050 $ 0.007 Third Quarter $ 0.045 $ 0.015 Fourth Quarter $ 0.025 $ 0.011 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. 8 The number of shareholders of record of the Company's Common Stock as of February 29, 2004 was approximately 558. On July 29, 2003, the Board of Directors Resolved to change the authorized capital stock from 50,000,000 common shares to 250,000,000 common shares. There was no change to the par value. On August 8, 2003, the Board of Directors resolved to issue 20,000 shares of Series E Convertible Preferred Stock with a par value of $0.0001 per share to Joseph Fiore as payment for a $100,000 advance to the company. 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. 9 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 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 - During the second quarter of 2002, the Mediteraneo restaurant in Etobicoke, Ontario, Canada was 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 of $116,467 for the year ended December 31, 2002. Accordingly, comparisons with prior periods may not be meaningful. Total Revenues - For the years ended December 31, 2003 and 2002, the Company had total sales of approximately $1,233,000 and $1,296,000 respectively. Costs and Expenses - For the years ended December 31, 2003 and 2001, the Company had a net loss of approximately $256,000 and $383,000 respectively. The net loss for 2003 is lower than 2002 due largely to the 2002 loss on abandonment of assets from the closure of restaurants of approximately $116,000, and the 2003 gain on sale of marketable securities of $82,866. The remaining difference is due to additional expenses incurred as the Company increases its Corporate overhead structure for the development of additional locations. 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 2003, the Company generated approximately $408,000 cash from investing activities from the sale of marketable equity securities. As of December 31, 2003, the company owns marketable securities valued at approximately $2,612,000 with corresponding liabilities of $2,282,000. During 2003 and 2002, the Company has raised approximately $156,000 and $140,000 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. 10 For the year ended December 31, 2003 and 2002, operating activities used approximately $176,000 and $130,000 in cash flow. After the completion of its expansion plans, the Company expects future development and 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. Critical Accounting Policies -The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Note 1 to the Consolidated Financial Statements describes the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. Estimates are used for, but not limited to, contingencies and taxes. Actual results could differ materially from those estimates. The following critical accounting policies are impacted significantly by judgments, assumptions, and estimates used in the preparation of the Consolidated Financial Statements. We are subject to various loss contingencies arising in the ordinary course of business. We consider the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss in determining loss contingencies. An estimated loss contingency is accrued when management concludes that it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated. We regularly evaluate current information available to us to determine whether such accruals should be adjusted. We recognize deferred tax assets (future tax benefits) and liabilities for the expected future tax consequences of temporary differences between the book carrying amounts and the tax basis of assets and liabilities. The deferred tax assets and liabilities represent the expected future tax return consequences of those differences, which are expected to be either deductible or taxable when the assets and liabilities are recovered or settled. Future tax benefits have been fully offset by a 100% valuation allowance as management is unable to determine that it is more likely than not that this deferred tax asset will be realized. 11 Recently Enacted and Proposed Regulatory Changes - Recently enacted and proposed changes in the laws and regulations affecting public companies, including the provisions of the Sarbanes- Oxley Act of 2002 and rules proposed by the SEC and NASDAQ could cause us to incur increased costs as we evaluate the implications of new rules and respond to new requirements. The new rules could make it more difficult for us to obtain certain types of insurance, including directors and officers liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on the Company's board of directors, or as executive officers. We are presently evaluating and monitoring developments with respect to these new and proposed rules, and we cannot predict or estimate the amount of the additional costs we may incur or the timing of such costs. 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. 12 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:
Director's Name Age Office Term Expires Joseph Fiore 42 Chief Executive Officer, Next Chief Financial Officer, Annual Chairman of the Board of Meeting Director/Secretary James Mylock, Jr. 37 Director Next Annual Meeting Tim Matula 43 Director Next Annual Meeting Gino Naldini 52 President and Chief Operating Next Officer Annual Meeting
Joseph Fiore has been Chairman, Chief Executive Officer, and Chief Financial 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. 13 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. 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. 14 Audit Committee Financial Expert The Company's board of directors does not have an "audit committee financial expert," within the meaning of such phrase under applicable regulations of the Securities and Exchange Commission, serving on its audit committee. The board of directors believes that all members of its audit committee are financially literate and experienced in business matters, and that one or more members of the audit committee are capable of (i) understanding generally accepted accounting principles ("GAAP") and financial statements, (ii) assessing the general application of GAAP principles in connection with our accounting for estimates, accruals and reserves, (iii) analyzing and evaluating our financial statements, (iv) understanding our internal controls and procedures for financial reporting; and (v) understanding audit committee functions, all of which are attributes of an audit committee financial expert. However, the board of directors believes that there is not any audit committee member who has obtained these attributes through the experience specified in the SEC's definition of "audit committee financial expert." Further, like many small companies, it is difficult for the Company to attract and retain board members who qualify as "audit committee financial experts," and competition for these individuals is significant. The board believes that its current audit committee is able to fulfill its role under SEC regulations despite not having a designated "audit committee financial expert." 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, 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. 15 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 45,048,299 shares of issued and outstanding Common Stock of the Company as of December 31, 2003 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 4,096,454 * 9% All Executive Officers Common Stock 5,344,317 * 12% and Directors as a Group (5 persons)
* Includes 2 shares (convertible to 1,480 common shares) of Series E convertible preferred shares on an as if converted basis. ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS During 2003 and 2002, officers of the Company, and/or companies controlled by the officers paid expenses and made advances to the Company. As of December 31, 2003 and 2002, $1,814,794 and $1,759,266 in advances was due to these officers. On August 8, 2003, the Board of Directors resolved to issue 20,000 shares of Series E Convertible Preferred Stock with a par value of $0.0001 per share to Joseph Fiore as payment for a $100,000 in advances to the company. During 2003, the Company acquired marketable securities from a related party pursuant to a joint venture agreement. In accordance with the agreement the Company acquired marketable securities valued at $3,899,079 in exchange for accounts payable of $2,921,529 with the remainder 16 being reported as contributed capital of $977,550. During 2003, the Company has sold marketable securities for $1,041,282, and recorded a net gain on sale of $85,214. As of December 31, 2003, the remaining securities are recorded in the accompanying Balance Sheet at their fair market values of $2,611,830 and accounts payable include $2,281,989 due to related parties. 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-1 Consolidated Balance Sheets as of December 31, 2003, and 2002...................................................F-2 Consolidated Statements of Operations for the years ended December 31, 2003, and 2002................................................................................F-4 Consolidated Statement of Stockholders' Equity for the years ended December 31, 2003, and 2002................................................................................F-5 Consolidated Statements of Cash Flows for the years ended December 31, 2003, and 2002................................................................................F-6 Notes to consolidated Financial Statements......................................................................F-7
2. 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 Form of Warrant Agreement(1) 10.1 Lease Information Form between E.A.J. PHL, Airport, Inc. and Marketplace Redwood Limited Partnership(1) 10.2 Registration of trade name for Eat at Joe's(1) 10.2 Registration Rights Agreement(1) 21 Subsidiaries of the Company(1) 17 31 Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32 Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1) Incorporated by reference. (a) No reports on Form 8-K were filed. Item 14. Controls and Procedures The Company's Chief Executive Officer and Chief Financial Officer have concluded, based on an evaluation conducted within 90 days prior to the filing date of this annual report on Form 10- KSB, that the Company's disclosure controls and procedures have functioned effectively so as to provide those officers the information necessary whether: (i) this annual report on Form 10-KSB contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report on Form 10-KSB, and (ii) the financial statements, and other financial information included in this annual report on Form 10-KSB, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this annual report on Form 10-KSB. There have been no significant changes in the Company's internal controls or in other factors since the date of the Chief Executive Officer's and Chief Financial Officer's evaluation that could significantly affect these internal controls, including any corrective actions with regards to significant deficiencies and material weaknesses. 18 Item 15. Principal Accountant Fees and Services The following is a summary of the fees billed to us by Robison, Hill & Company for professional services rendered for the years ended December 31, 2003 and 2002:
Service 2003 2002 - ------------------------------ ------------------ ------------------ Audit Fees $ 16,510 $ 19,174 Audit-Related Fees - - Tax Fees 1,495 2,016 All Other Fees - - ------------------ ------------------ Total $ 18,005 $ 21,190 ================== ==================
Audit Fees. Consists of fees billed for professional services rendered for the audits of our consolidated financial statements, reviews of our interim consolidated financial statements included in quarterly reports, services performed in connection with filings with the Securities & Exchange Commission and related comfort letters and other services that are normally provided by Robison, Hill & Company in connection with statutory and regulatory filings or engagements. Tax Fees. Consists of fees billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and local tax compliance and consultation in connection with various transactions and acquisitions. Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors The Audit Committee, is to pre-approve all audit and non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services and other services as allowed by law or regulation. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specifically approved amount. The independent auditors and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent auditors in accordance with this pre-approval and the fees incurred to date. The Audit Committee may also pre-approve particular services on a case-by-case basis. The Audit Committee pre-approved 100% of the Company's 2003 audit fees, audit-related fees, tax fees, and all other fees to the extent the services occurred after May 6, 2003, the effective date of the Securities and Exchange Commission's final pre-approval rules. 19 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 29, 2004 By /S/ Joseph Fiore ---------------------------------------------- Joseph Fiore, C.E.O., C.F.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 28th day of March 2003. Signatures Title /S/ Joseph Fiore Joseph Fiore C.E.O., C.F.O., Chairman, Secretary, Director (Principal Executive, Financial and Accounting Officer) /S/ James Mylock, Jr. James Mylock, Jr. Director /S/ Tim Matula Tim Matula Director Gino Naldini President, Chief Operating Officer 20 EAT AT JOE'S LTD. AND SUBSIDIARIES - : - INDEPENDENT AUDITOR'S REPORT DECEMBER 31, 2003 AND 2002 TABLE OF CONTENTS
Report of Independent Certified Public Accountants..............................................................F-1 Consolidated Balance Sheets, December 31, 2003 and 2002.........................................................F-2 Consolidated Statements of Operations, For The Years Ended December 31, 2003 and 2002...................................................................................F-4 Consolidated Statement of Changes in Stockholders' Equity, For The Years Ended December 31, 2003 and 2002...................................................................................F-5 Consolidated Statements of Cash Flows, For The Years Ended December 31, 2003 and 2002...................................................................................F-6 Notes to Consolidated Financial Statements......................................................................F-7
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, 2003, and 2002 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 auditing standards generally accepted in the United States of America. 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, 2003, and 2002, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Respectfully submitted, /s/ Robison, Hill & Co. Certified Public Accountants Salt Lake City, Utah March 25, 2004 F - 1 EAT AT JOE'S LTD., AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2003 AND 2002
2003 2002 ------------------ ------------------ ASSETS Current Assets: Cash and cash equivalents $ 440,637 $ 70,607 Receivables 6,337 6,539 Inventory 7,500 7,500 Prepaid expense 10,693 10,668 Marketable Securities 2,611,830 4,872 ------------------ ------------------ Total Current Assets 3,076,997 100,186 ------------------ ------------------ Property and equipment: Equipment 98,740 98,740 Furniture & Fixtures 3,964 3,964 Leasehold improvements 376,165 376,165 ------------------ ------------------ 478,869 478,869 Less accumulated depreciation (334,350) (279,815) ------------------ ------------------ Total Property & Equipment 144,519 199,054 ------------------ ------------------ Other Assets: Investments - - Intangible and other assets net of amortization of $90,818 and $75,335 for 2003 and 2002, respectively 64,019 79,502 ------------------ ------------------ Total Other Assets 64,019 79,502 ------------------ ------------------ TOTAL ASSETS $ 3,285,535 $ 378,742 ================== ==================
F - 2 EAT AT JOE'S LTD., AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2003 AND 2002 (Continued)
2003 2002 ------------------ ------------------ LIABILITIES Current Liabilities: Accounts payable and accrued liabilities $ 2,449,834 $ 216,808 Short-term notes payable 275,821 292,536 Shareholders loans 1,814,794 1,759,266 ------------------ ------------------ Total Current Liabilities 4,540,449 2,268,610 ------------------ ------------------ Convertible Debentures, Net of Issue Costs 1,742,453 1,596,916 ------------------ ------------------ Total Liabilities 6,282,902 3,865,526 ------------------ ------------------ STOCKHOLDERS EQUITY Preferred stock - $0.0001 par value. 10,000,000 shares authorized; 20,000 Series E shares issued and outstanding December 31, 2003 and 0 shares issued and outstanding December 31, 2002 2 - Common Stock - $0.0001 par value. 250,000,000 shares authorized; 45,048,299 and 45,048,299 issued and outstanding, respectively. 4,505 4,505 Additional paid-in capital 11,016,614 9,939,066 Cumulative Translation Adjustment - - Unrealized Losses on available-for-sale securities (336,886) (5,360) Retained deficit (13,681,602) (13,424,995) ------------------ ------------------ Total Stockholders' Equity (2,997,367) (3,486,784) ------------------ ------------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,285,535 $ 378,742 ================== ==================
The accompanying notes are an integral part of these financial statements. F - 3 EAT AT JOE'S LTD., AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 2003, AND 2002
2003 2002 ------------------ ------------------ Revenues $ 1,233,547 $ 1,296,018 Cost of Revenues 431,227 476,007 ------------------ ------------------ Gross Margin 802,320 820,011 Expenses Labor and Related Expenses 290,420 288,520 Rent 199,688 152,903 Other General and Administrative 433,412 390,792 ------------------ ------------------ Income (Loss) Before Depreciation and Amortization (121,200) (12,204) Depreciation and Amortization 70,018 88,944 ------------------ ------------------ Net Loss from Continuing Operations (191,218) (101,148) ------------------ ------------------ Other Income (Expense) Interest income 76 - Interest expense (147,801) (152,929) Gain (Loss) on disposition of assets - (116,467) Gain (Loss) on sale of Marketable Securities 82,866 (676) Other - (11,345) ------------------ ------------------ Net Other Income (Expense) (64,859) (281,417) ------------------ ------------------ Net Loss Before Income Taxes (256,077) (382,565) Income Tax Expense (Benefit) 530 530 ------------------ ------------------ Net Loss $ (256,607) $ (383,095) ================== ================== Basic Loss Per Common Share: $ (0.01) $ (0.01) ================== ================== Weighted Average Number of Common Shares 45,048,299 45,048,299 ================== ==================
The accompanying notes are an integral part of these financial statements. F - 4 EAT AT JOE'S LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 2003, AND 2002
Additional Cumulative Unrealized Preferred Stock Common Stock Paid-in Translation Loses on Retained ------------ ------------------- Shares Amount Shares Amount Capital Adjustment Securities Deficit Total ------ ---- ---------- ------- ------------ ------- --------- --------- ------------ Balance at January 1, 2002 ..... -- $-- 45,048,299 $ 4,505 $ 9,927,476 $32,581 $ -- $(13,041,900) $ (3,077,338) Contributed Capital ............ -- -- -- -- 11,590 -- -- -- 11,590 Net Loss ....................... -- -- -- -- -- -- -- (383,095) (383,095) Currency Translation ........... -- -- -- -- -- (32,581) -- -- (32,581) Unrealized Loss on available-for-sale securities -- -- -- -- -- -- (5,360) -- (5,360) ------ ---- ---------- ------- ------------ ------- --------- --------- ------------ Total Comprehensive Loss ....... -- -- -- -- -- (32,581) (5,360) (383,095) (421,036) ------ ---- ---------- ------- ------------ ------- --------- --------- ------------ Balance at December 31, 2002 ... -- -- 45,048,299 4,505 9,939,066 -- (5,360) (13,424,995) (3,486,784) Share issued for debt .......... 20,000 2 -- -- 99,998 -- -- -- 100,000 Contributed Capital ............ -- -- -- -- 977,550 -- -- -- 977,550 Net Loss ....................... -- -- -- -- -- -- -- (256,607) (256,607) Currency Translation ........... -- -- -- -- -- -- -- -- -- Unrealized Loss on available-for-sale securities -- -- -- -- -- -- (331,526) -- (331,526) ------ ---- ---------- ------- ------------ ------- --------- --------- ------------ Total Comprehensive Loss ....... -- -- -- -- -- -- (331,526) (256,607) (588,133) ------ ---- ---------- ------- ------------ ------- --------- --------- ------------ Balance at December 31, 2003 ... 20,000 $ 2 45,048,299 $ 4,505 $ 11,016,614 $ -- $(336,886) $(13,681,602) $ (2,997,367) ====== ==== ========== ======= ============ ======= ========= ========= ============
The accompanying notes are an integral part of these financial statements. F - 5 EAT AT JOE'S LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2003, AND 2002
2003 2002 ------------------ ------------------ Cash Flows From Operating Activities Net loss for the period $ (256,607) $ (383,095) Adjustments to reconcile net loss to net cash Provided by operating activities Depreciation and Amortization 70,018 88,944 (Gain) Loss on sale of marketable securities (82,826) 676 Currency Translation Adjustment - (32,582) Unrealized (Gain) Loss on Marketable Securities (331,526) - Loss on disposal of assets - 116,467 Decrease (Increase) in Receivables 202 (6,539) Decrease (Increase) in inventory - 11,616 Decrease (Increase) in prepaid expense (26) (2,458) Increase (Decrease) in accounts payable & accrued liabilities 424,882 76,966 ------------------ ------------------ Net Cash Provided by (Used in) Operating Activities (175,883) (130,005) ------------------ ------------------ Cash Flows From Investing Activities Purchase of marketable securities (639,540) (7,000) Proceeds from sale of marketable securities 1,047,925 7,682 Purchase of property and equipment - (2,476) ------------------ ------------------ Net Cash Provided by (Used in) Investing Activities 408,385 (1,794) ------------------ ------------------ Cash Flows From Financing Activities Advances from majority stockholders 155,528 142,423 Repayments of notes and advances (18,000) (2,492) Proceeds from short-term notes payable - 299 ------------------ ------------------ Net Cash Provided by Financing Activities 137,528 140,230 ------------------ ------------------ Increase (Decrease) in Cash 370,030 8,431 Cash at beginning of period 70,607 62,176 ------------------ ------------------ Cash at End of Period $ 440,637 $ 70,607 ================== ================== Supplemental Disclosure of Interest and Income Taxes Paid Interest paid during the period $ - $ 17,343 Income taxes paid during the period $ 1,060 $ 200 Supplemental Disclosure of Non-cash Investing and Financing Activities Marketable Securities acquired through related party payables $ 2,921,529 $ - Marketable Securities acquired through contributed capital $ 977,550 $ 11,590 Preferred stock issued in satisfaction of shareholder loans $ 100,000 $ -
The accompanying notes are an integral part of these financial statements. F - 6 EAT AT JOE'S LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2003, AND 2002 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. On July 29, 2003, the Board of Directors Resolved to change the authorized capital stock from 50,000,000 common shares to 250,000,000 common shares. There was no change to the par value. Nature of Business The Company is developing, owns and operates theme restaurants styled in an "American Diner" atmosphere. F - 7 EAT AT JOE'S LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2003, AND 2002 (Continued) NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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. 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 Columbia corporations. All significant intercompany accounts and transactions have been eliminated. 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. 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 - 8 EAT AT JOE'S LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2003, AND 2002 (Continued) NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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. 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. F - 9 EAT AT JOE'S LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2003, AND 2002 (Continued) NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Earnings (Loss) Per Share Basic loss per share has been computed by dividing the loss for the year applicable to the common stockholders by the weighted average number of common shares outstanding during the years. 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 2003 and 2002 and are thus not considered. 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. Reclassifications Certain reclassifications have been made in the 2002 financial statements to conform with the 2003 presentation. F - 10 EAT AT JOE'S LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2003, AND 2002 (Continued) NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Investment in Marketable Securities The Company's securities investments that are bought and held for an indefinite period of time are classified as available-for-sale securities. Available-for-sale securities are recorded at fair value on the balance sheet in current assets, with the change in fair value during the period excluded from earnings and recorded net of tax as a component of other comprehensive income. Investments in securities are summarized as follows:
December 31, 2003 --------------------------------------------------------- Gross Gross Unrealized Unrealized Fair Gain Loss Value ----------------- ------------------ ------------------ Available-for-sale securities $ - $ 331,526 $ 2,611,830 ================= ================== ================== December 31, 2002 --------------------------------------------------------- Gross Gross Unrealized Unrealized Fair Gain Loss Value ----------------- ------------------ ------------------ Available-for-sale securities $ - $ 5,360 $ 4,872 ================= ================== ==================
Realized Gains and losses are determined on the basis of specific identification. During the years ended December 31, 2003 and 2002, sales proceeds and gross realized gains and losses on securities classified as available-for-sale securities were:
For the Year Ended December 31, 2003 2002 ------------------ ------------------ Sale Proceeds $ 1,047,925 $ 7,713 ================== ================== Gross Realized Losses $ 3,588 $ 676 ================== ================== Gross Realized Gains $ 86,414 $ - ================== ==================
F - 11 EAT AT JOE'S LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2003, AND 2002 (Continued) NOTE 2 - SHORT-TERM NOTES PAYABLE Short-Term Notes Payable consist of loans from unrelated entities as of December 31, 2003 and 2002. The notes are payable one year from the date of issuance together with interest at 6.50% A.P.R. NOTE 3 - INCOME TAXES As of December 31, 2003, the Company had a net operating loss carryforward for income tax reporting purposes of approximately $12,000,000 that may be offset against future taxable income through 2021. Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited. No tax benefit has been reported in the financial statements, because the Company believes there is a 50% or greater chance the carryforwards will expire unused. Accordingly, the potential tax benefits of the loss carryforwards are offset by a valuation allowance of the same amount. NOTE 4 - RELATED PARTY TRANSACTIONS During 2003 and 2002, officers of the Company, and/or companies controlled by the officers paid expenses and made advances to the Company. As of December 31, 2003 and 2002, $1,814,794 and $1,759,266 in advances was due to these officers. During 2003, the Company acquired marketable securities from a related party pursuant to a joint venture agreement. In accordance with the agreement the Company acquired marketable securities valued at $3,899,079 in exchange for accounts payable of $2,921,529 with the remainder being reported as contributed capital of $977,550. During 2003, the Company has sold marketable securities for $1,041,282, and recorded a net gain on sale of $85,214. As of December 31, 2003, the remaining securities are recorded in the accompanying Balance Sheet at their fair market values of $2,611,830 and accounts payable include $2,281,989 due to related parties. On August 8, 2003, the Board of Directors resolved to issue 20,000 shares of Series E Convertible Preferred Stock with a par value of $0.0001 per share to Joseph Fiore as payment for a $100,000 advance to the company. F - 12 EAT AT JOE'S LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2003, AND 2002 (Continued) NOTE 5 - PURCHASE OF SUBSIDIARIES The Company has entered into a non-binding letter of intent to acquire a 16 unit regional restaurant chain for an investment of $100,000. 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. During 2002, the company established a 100% valuation allowance against this asset recorded a corresponding loss in the accompanying financial statements. NOTE 6 - RESTAURANT CLOSURES During 2002, the Mediteraneo restaurant in Etobicoke, Ontario, Canada was 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 of $116,467 for the year ended December 31, 2002. NOTE 7 - RENT AND LEASE EXPENSE 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 $7,083 per month basic rent plus 15% -18% of gross revenues above $850,000 under the lease which expires April 2007. The minimum future lease payments under these leases for the next five years are: Year Ended December 31, Real Property - --------------------------------- ----------------- 2003 $ 85,000 2004 85,000 2005 85,000 2006 85,000 2007 85,000 ----------------- Total five year minimum lease payments $ 425,000 ================= The lease 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. F - 13 EAT AT JOE'S LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2003, AND 2002 (Continued) NOTE 8 - WARRANTS & OPTIONS The following table sets forth the options and warrants outstanding as of December 31, 2003 and 2002.
2003 2002 ------------------ ------------------ Options & warrants outstanding, beginning of year 447,750 447,750 Granted - - Expired (447,750) - Exercised - - ------------------ ------------------ Options & warrants outstanding, end of year - 447,750 ================== ================== Exercise price for options & warrants outstanding, end of year N/A $1.01 to $1.79 ================== ==================
NOTE 9 - CONVERTIBLE PREFERRED STOCK The Series E Convertible Preferred Stock carries the following rights and preferences; * No dividends. * Convertible to common stock at the average closing bid price for the Company's common stock for the 5 trading days prior to the conversion date, and is adjustable to prevent dilution. * Redeemable at the Option of the Company at par value only after repayment of the shareholder loans from Joseph Fiore and subject to the holders option to convert. * Entitled to vote 1,000 votes per share of Series E Convertible Preferred Shares. * Entitled to liquidation preference at par value. * Is senior to all other share of preferred or common shares issued past, present and future. F - 14 EAT AT JOE'S LTD. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2003, AND 2002 (Continued) NOTE 10 - BUSINESS CONDITION The Company has incurred a net loss for the years ended December 31, 2003 and 2002 of $256,607 and $383,095 respectively, and the Company used cash of $175,883 and 130,005 in operating activities for the years ended December 31, 2003 and 2002, respectively. As of December 31, 2003, the Company had a working capital deficit of $1,463,452. Management plans to open at least four new restaurants during 2004. The Company needs to obtain additional financing to fund payment of obligations and to provide working capital for operations and to finance future growth. The Company is actively pursuing alternative financing and has had discussions with various third parties, although no firm commitments have been obtained. In the interim, shareholders of the Company have committed to meeting its operating expenses. Management believes these efforts will generate sufficient cash flows from future operations to pay the Company's obligations and realize other assets. There is no assurance any of these transactions will occur. NOTE 11 - JOINT VENTURE AGREEMENTS On August 8, 2003, the Board resolved to enter into a joint venture agreement with Berkshire Capital Management Co., Inc., a related party, for the purpose of utilizing the Company's tax loss carry forward to sell Berkshire's acquired free trading stock in other public companies. On September 1, 2003, the Board resolved to enter into a joint venture agreement with Berkshire Capital Management Co., Inc., a related party, for the purpose of locating merger candidates for twelve of the Company's wholly owned subsidiaries. NOTE 12 - SALE OF SUBSIDIARY On October 23, 2003, The Company entered into a Purchase Agreement with Offshore Creations, Inc. (A Nevada corporation) to sell the Company's wholly owned subsidiary E.A.J. Innerharbor. Pursuant to this agreement, the Company received 1,200,000 (approximately 3%) of restricted stock of the corporation surving the merger of Offshore Creations, Inc. and E.A.J. Innerharbor, Inc. F - 15 EX-31 3 form10ksb123103ex31.txt Exhibit 31 Section 302 Certifications I, Joseph Fiore, certify that: 1. I have reviewed this annual report on form 10-KSB of Eat at Joe's Ltd. 2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report. 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) Designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared. b) Evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and c) Presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and Date: March 29, 2004 /s/ Joseph Fiore Joseph Fiore CEO, CFO, Chairman, Secretary, Director (Principal Executive & Accounting Officer) EX-32 4 form10ksb123103ex32.txt Exhibit 32 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Annual Report of Eat at Joe's, Ltd., on Form 10-KSB for the year ending December 31, 2003 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned, Joseph Fiore, Chief Executive Officer and Principal Accounting Officer of the Company, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief: 1. The Report fully complies with the requirements of section 13 (a) or 15 (d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. Date: March 29, 2004 /s/ Joseph Fiore Joseph Fiore CEO, CFO, Chairman, Secretary, Director (Principal Executive & Accounting Officer) A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----