8-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)	November 9, 2007

(Exact name of registrant as specified in its charter)

SHELLS SEAFOOD RESTAURANTS, INC.

Delaware	0-28258	65-0427966
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)
16313 N. Dale Mabry Hwy, Suite 100, Tampa, FL		33618
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (813) 961-0944

Not Applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02. Results of Operations and Financial Condition

Shells Seafood Restaurants, Inc. issued a press release today announcing its financial results for the third quarter of 2007. Included in the press release issued by the Company and furnished herewith as Exhibit 99.1 are certain non-GAAP financial measures. Management of the Company believes such non-GAAP financial measures are useful to investors assessing the financial condition and results of operations of the Company's core business operations because they exclude results which management believes are atypical and unlikely to occur with regularity in the future

A copy of the press release is furnished as Exhibit 99.1 to this report and is incorporated herein by reference.

This information, including the press release filed as Exhibit 99.1, shall not be deemed to be "filed” for purposes of Section 18 of the Securities Exchange Act of 1934 nor shall it be deemed to be incorporated by reference in any filing under the Securities Act of 1933.

Signature

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: November 9, 2007	SHELLS SEAFOOD RESTAURANTS, INC.
	By: /s/ Warren R. Nelson
	Warren R. Nelson
	Executive Vice President and CFO

Exhibit

99.1 Press Release dated November 9, 2007

EX-99.1

For more information call:

Warren Nelson

(813) 961-0944

SHELLS SEAFOOD RESTAURANTS, INC.

REPORTS THIRD QUARTER 2007 EARNINGS

TAMPA, FL, November 9, 2007 - Shells Seafood Restaurants, Inc. (OTC Bulletin Board: SHLL) today reported financial results for its third quarter ended September 30, 2007.

Key metrics -

Third quarter of 2007 compared to the third quarter of 2006:

·   Revenues decreased 14.7% to $9.0 million.

·   Comparable restaurant sales decreased 12.1%.

·   Net loss of $1,010,000, compared to a net loss of $962,000.

·   Net loss per share of $0.05, compared to net loss per share of $0.06.

First 39-weeks of 2007 compared to the first 39-weeks of 2006:

·   Revenues decreased 11.2% to $33.9 million.

·   Comparable restaurant sales decreased 9.7%.

·   Net loss of $2,126,000, compared to a net loss of $709,000. Excluding non-recurring items, net loss of $1,648,000, compared to a net loss of $1,011,000.

·   Net loss per share of $0.11, compared to a net loss per share of $0.04. Excluding non-recurring items, net loss per share of $0.08, compared to net loss per share of $0.06.

Leslie Christon, President and CEO, commented, “The restaurant industry continues to be challenged by a tough operating environment. Soft sales, increasing commodity expenses, and a higher than federal hourly wage rate are affecting us heavily in Florida, and we are disappointed in our financial results. We remain committed to delivering a quality experience to our guests, and to providing strong value in our menu offerings. Growing our guest traffic and strengthening our business fundamentals continue to be our highest priorities. Florida residents are heavily impacted by increasing expenses in the cost of living, and are looking for greater value for their dollar. We are responding with strong menu offerings at moderate prices, which will provide our guests with an exceptional lunch or dinner value. Supporting these offers with media will make a broader audience aware of the quality and value they can receive at Shells.”

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Operating Results

Revenues for the third quarter of 2007 decreased 14.7% to $9.0 million from $10.5 million in the third quarter of 2006, mostly due to a 12.1% decrease in same store sales and the second quarter 2007 closing and disposition of an underperforming restaurant. As of the end of the third quarter of 2007, the Company had 24 restaurants in operation, compared to 25 restaurants at the end of the third quarter of 2006.

Restaurant operating costs, consisting of food and beverage costs, labor, other operating costs and depreciation expense, were $9.0 million, or 100.9% of sales, in the third quarter of 2007, compared to $10.5 million, or 99.7% of sales, in the third quarter of 2006. The 1.2% increase in restaurant operating costs, as a percentage of sales, was mostly a result of a loss of operating leverage as reflected by the reduction in sales volume.

General & administrative expenses were $827,000, or 9.2% of revenues, in the third quarter of 2007 compared to $881,000, or 8.4% of revenues, in the third quarter of 2006. The unfavorable variance as a percentage of revenues reflects incremental stock option expense of $66,000, or 0.7% of revenues.

Loss from operations for the third quarter of 2007 of $891,000 was $85,000 greater than the loss from operations of $806,000 for the comparable period of 2006. Loss from operations for the first 39-weeks of 2007 of $1,863,000 was $1,524,000 greater than the loss from operations of $339,000 for the comparable period of 2006 and, excluding non-recurring items in both periods, the loss was $723,000 greater than the comparable period of 2006.

The net loss for the third quarter of 2007 was $1,010,000, or $0.05 per share based upon 22.2 million common shares outstanding, compared to a net loss in the third quarter of 2006 of $962,000, or $0.06 per share based upon 16.7 million common shares outstanding.

The net loss for the first 39-weeks of 2007 was $2,126,000, or $0.11 per share based upon 20.0 million common shares outstanding, compared to a net loss in the first 39 weeks of 2006 of $709,000, or $0.04 per share based upon 16.4 million common shares outstanding. As adjusted for non-recurring items as summarized in the ensuing financial tables, the net loss for the first 39-weeks of 2007 was $1,648,000, or $0.08 per share, compared to a net loss in the first 39-weeks of 2006 of $1,011,000, or $0.06 per share.

About the Company

The Company manages and operates 24 full-service, neighborhood seafood restaurants in Florida under the name “Shells”. Shells restaurants feature a wide selection of seafood items, including shrimp, oysters, clams, crawfish, mussels, scallops, lobster, crab and daily fresh fish specials, cooked to order in a variety of ways: steamed, sautéed, grilled, blackened and fried. Shells restaurants also offer a wide selection of signature pasta dishes, appetizers, salads, desserts and full bar service.

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Forward-Looking Statements

In addition to seasonal fluctuations, the Company’s quarterly and annual operating results are affected by a wide variety of other factors that could materially and adversely affect revenues and profitability, including changes in consumer preferences, tastes and eating habits; increases in food, labor costs and other operating expenses; the availability of food acceptable to our quality standards at acceptable prices; the availability of qualified labor; national, regional and local economic and weather conditions; promotional timings and seasonality; demographic trends and traffic patterns; changes in travel and tourism tendencies, particularly in light of world events; competition from other restaurants and food service establishments; availability of third party financing to fund capital or operating activities, if required; and the timing, costs and charges relating to restaurant openings, closings and remodelings. As a result of these and other factors, the Company may experience material fluctuations in future operating results on a quarterly or annual basis, which could materially and adversely affect its business, financial condition and stock price. Furthermore, this press release and other documents filed by the Company with the Securities and Exchange Commission (“SEC”) contain certain forward-looking statements with respect to the business of the Company and the industry in which it operates. These forward-looking statements are subject to certain risks and uncertainties, including those mentioned above, which may cause results to differ significantly from these forward-looking statements. The Company undertakes no obligation to update these forward looking statements on a regular basis. An investment in the Company involves various risks, including those mentioned above and those that are detailed from time-to-time in the Company’s SEC filings.

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SHELLS SEAFOOD RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
(In thousands, except per share data)
	Thirteen Week Period Ended												Thirty-nine Week Period Ended
	September 30, 2007						October 1, 2006						September 30, 2007						October 1, 2006
	Amount			Percent			Amount			Percent			Amount			Percent			Amount			Percent
Revenues:
Restaurant sales	$	8,954			99.7	%	$	10,485			99.6	%	$	33,779			99.7	%	$	38,042			99.7	%
Management fees		25			0.3	%		44			0.4	%		116			0.3	%		128			0.3	%
Total revenues		8,979			100.0	%		10,529			100.0	%		33,895			100.0	%		38,170			100.0	%
Restaurant operating costs:
Food and beverage (1)		2,905			32.4	%		3,398			32.4	%		10,984			32.5	%		12,248			32.2	%
Labor (1)		2,977			33.2	%		3,354			32.0	%		10,410			30.8	%		11,606			30.5	%
Other (1)		2,749			30.7	%		3,124			29.8	%		9,613			28.5	%		9,976			26.2	%
Depreciation and amortization (1)		412			4.6	%		578			5.5	%		1,373			4.1	%		1,643			4.3	%
Provision for impairment of assets (1)		-			0.0	%		-			-			610			1.8	%		-			-
Total restaurant operating costs (1)		9,043			100.9	%		10,454			99.7	%		32,990			97.7	%		35,473			93.2	%
Restaurant operating (loss) income (1)		(64	)		-0.7	%		75			0.7	%		905			2.7	%		2,697			7.1	%
General and administrative expenses		827			9.2	%		881			8.4	%		2,768			8.2	%		3,036			8.0	%
Loss from operations		(891	)		-9.9	%		(806	)		-7.7	%		(1,863	)		-5.5	%		(339	)		-0.9	%
Lease buy-out		-			0.0	%		-			-			-			0.0	%		212			0.6	%
Interest expense, net		(74	)		-0.8	%		(97	)		-0.9	%		(216	)		-0.6	%		(235	)		-0.6	%
Other expense		(45	)		-0.5	%		(59	)		-0.6	%		(47	)		-0.1	%		(347	)		-0.9	%
Net loss		(1,010	)		-11.2	%		(962	)		-9.2	%		(2,126	)		-6.2	%		(709	)		-1.8	%
Net loss per share of common stock:
Basic and diluted	$	(0.05	)				$	(0.06	)				$	(0.11	)				$	(0.04	)
Common shares used in computing net loss per share:
Basic and diluted		22,249						16,674						20,048						16,360
(1) As a percent of restaurant sales

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SHELLS SEAFOOD RESTAURANTS, INC.
(Dollars in thousands, except per share data)
(Unaudited)
	September 30,			October 1,
	2007			2006
Number of restaurants at end of period:
Company-owned restaurants (1)		21			22
Licensed restaurants		3			3
Total		24			25
Balance sheet data:
Cash	$	539		$	590
Working capital (deficiency)		(5,379	)		(6,048	)
Total assets		12,078			16,826
Long-term debt		1,152			1,813
Stockholders' equity		2,553			6,617
(1) Includes one joint venture restaurant in which the Company has a 51% equity interest.

	Thirteen Week Period Ended						Thirty-nine Week Period Ended
NON-RECURRING ITEMS:	September 30, 2007			October 1, 2006			September 30, 2007			October 1, 2006
Net loss, as reported	$	(1,010	)	$	(962	)	$	(2,126	)	$	(709	)
Non-recurring (expense) income:
Workers' comp insurance refund and reserve adjustment		-			-			-			152
Lease renewal costs		-			-			(39	)		-
Provision for impairment of assets		-			-			(610	)		-
Non-recurring items affecting (loss) income from operations		-			-			(649	)		152
Lease buyout option		-			-			-			212
Legal settlement proceeds		-			-			85			-
Lease termination fee		-			-			-			(23	)
Gain (loss) on disposal of assets		-			-			86			(39	)
Total non-recurring (expense) income		-			-			(478	)		302
Net loss, excluding non-recurring items		(1,010	)		(962	)		(1,648	)		(1,011	)
Net loss per share of common stock:
Basic and diluted, as reported	$	(0.05	)	$	(0.06	)	$	(0.11	)	$	(0.04	)
Basic and diluted, excluding non-recurring items	$	(0.05	)	$	(0.06	)	$	(0.08	)	$	(0.06	)
Common shares used in computing net loss per share
of common stock, excluding non-recurring items		22,249			16,674			20,048			16,360

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