As filed with the Securities and Exchange Commission on May ___, 1999
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
EAT AT JOE'S, LTD
(Name of Small Business Issuer in its Charter)
DELAWARE 5812 75-2636283
(State or other jurisdiction (Primary standard industrial (I.R.S Employer
of incorporation) classification code number) (Identification no.)
670 WHITE PLAINS ROAD
SCARSDALE, NEW YORK 10583
(914) 725-2700
(Address and Telephone Number of Principal Executive Offices)
JOSEPH FIORE, CHIEF EXECUTIVE OFFICER
EAT AT JOE'S, LTD.
670 WHITE PLAINS ROAD
SCARSDALE, NEW YORK 10583
(914) 725-2700
(Name, Address, and Telephone Number of Agent For Service)
Copies to:
JAMES EISBERG, ESQ
BECKMAN, MILLMAN & SANDERS, LLP
116 JOHN STREET, 13TH FLOOR
NEW YORK, NEW YORK 10038
(212) 406 4700
FAX (212) 406 3750
<PAGE>
APPROXIMATE DATE OF PROPOSED SALE TO THE PUBLIC: As soon as practicable
after the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
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Proposed Proposed Max.
Title of Each Class Maximum Offering Aggregate Amount of
of Securities Amount to be Price per Offering Registration
to be registered registered(1) Security Price(1) fee
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Common Stock
$.0001 par value
underlying Warrants 1,186,400 (2) 1.00 1,186,400 344
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Common Stock $.0001
par value issuable
upon conversion of
outstanding Convertible
Preferred Stock
and Debentures 17,842,004 (3) 1.00 17,842,004 5,175
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$19,028,404 $5,519
Total
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(ii)
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457 under the Securities Act of 1933, as amended.
(2) Pursuant to Rule 415 under the Securities Act of 1933, as amended, this
registration statement also covers such additional securities as may become
issuable upon exercise of warrants issued to J. P. Carey Securities, Inc.,
and Sovereign Capital Advisers (and their designees) who served as agents
for the placement of the Company's securities in 1998 and to Blue Heron
Venture Fund, Ltd.
(3) Includes (a) the estimated number of shares that may be issued upon
conversion of the Series A, B, C and D Convertible Preferred Stock; (b) the
estimated number of shares that may be issued upon conversion of the 8%
Series 1 Secured Convertible Debenture, and (c) shares issuable upon the
exercise of certain outstanding purchase warrants.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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(iii)
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EAT AT JOE'S, LTD
CROSS REFERENCE SHEET
PURSUANT TO RULE 404
ITEM NUMBER IN
FORM SB-2 AND TITLE OF ITEM LOCATION IN PROSPECTUS
PROSPECTUS
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Item 1. Front of Registration Statement and
Outside Front Cover of Prospectus..... Cover Page
Item 2. Inside Front and Outside Cover Pages
of Prospectus.......................... Inside Front and Outside
Cover Pages of Prospectus
Item 3. Summary Information and Risk Factors.... Prospectus Summary; The
Company; Risk Factors
Item 4. Use of Proceeds......................... Not Applicable
Item 5. Determination of Offering Price......... Outside Front Cover Page;
Price Range of Common
Stock
Item 6. Dilution................................ Not Applicable
Item 7. Selling Security Holders................ Principal and Selling
Shareholders
Item 8. Plan of Distribution.................... Principal and Selling
Shareholders
Item 9. Legal Proceedings....................... Business
Item 10. Directors, Executive Officers, Promoters
and Control Persons..................... Management
Item 11. Security Ownership of Certain Beneficial
Owners and Management................... Principal and Selling
Shareholders
(iv)
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Item 12. Description of Securities............... Description of Securities
Item 13. Interest of Named Experts and Counsel... Legal Matters; Experts
Item 14. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................ Management
Item 15. Organization Within Last Five Years..... Certain Transactions
Item 16. Description of Business................. The Company; Business
Item 17. Management's Discussion and Analysis or
Plan of Operation...................... Management's Discussion
and Analysis of Financial
Condition and Results of
Operations
Item 18. Description of Property................. Business
Item 19. Certain Relationships and Related
Transactions........................... Certain Transactions
Item 20. Market for Common Equity and Related
Stockholder Matters.................... Outside Front Cover Page
of Prospectus; Risk
Factors
Item 21. Executive Compensation.................. Management
Item 22. Financial Statements.................... Financial Statements
Item 23. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure............................. Not Applicable
(v)
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY, NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION; DATED May ___, 1999
EAT AT JOE'S, LTD
11,675,975 Shares of Common Stock
11,675,975 shares of Common Stock of Eat at Joe's, Ltd. ("Company") are
being sold ("Offering") by certain shareholders of the Company (the "Selling
Shareholders"). The Company will not receive any proceeds from the sale of the
shares by the Selling Shareholders. See "Principal and Selling Shareholders."
The Prospectus covers 10,875,975 shares of Common Stock issuable upon
conversion of shares of Series A, B, C and D Convertible preferred Stock and 8%
Series 1 Secured Convertible Debenture which were sold in private placements
during the period March through September, 1998 as well as shares issuable upon
the exercise of certain outstanding purchase warrants which were issued in
connection with the private placements. Based upon the trading prices of the
Common Stock prior to April 20, 1999 the convertible securities would convert
into approximately 10,875,975 shares of Common Stock. Based on the current
market value of the Company's shares, at conversion ratios of between 40 and
65%, the underlying shares were purchased at discounts ranging from 25 to 58%
from market. The Prospectus also covers shares of Common Stock issuable upon the
exercise of warrants which were issued in connection with the cancellation of
approximately $700,000 of indebtedness. The foregoing estimate is for
illustrative purposes only. The actual number of shares of Common stock issuable
upon conversion of the convertible securities(and accompanying warrants)is
subject to adjustment and could be materially more or less than such estimated
amount, depending upon factors that cannot be predicted by the Company at this
time, including, among others, the future market price of the Common Stock. See
"Risk Factors"-"Risk of Low Priced Stocks."
<PAGE>
Shares may be offered by Selling Shareholders from time to time in
transactions (which may include block transactions) in the over-the-counter
market, in negotiated transactions, or a combination of such methods of sale, at
fixed prices which may be changed, at market prices prevailing at a time of
sale, or at negotiated prices. The Selling Shareholders may effect such
transactions by selling shares directly to purchasers or through broker dealers
who may act as agents or principals. Such broker dealers may receive
compensation in the form of discounts, concessions or commission from the
Selling Shareholders and/or the purchasers of the Selling Shareholder shares for
whom they may sell as principals or both (which compensation as to a particular
broker dealer might be in excess of customary commissions).
The Securities Act of 1933, as amended (the "Act") may impose liability on
Selling Shareholders or any broker/dealer who may be used by the Selling
Shareholders for violations of federal securities laws. If the registration
statement contains untrue statements or omissions of material facts, liability
may be imposed on the Selling Shareholders or any broker/dealer used by the
Selling Shareholder. Generally, if any liability is found, the investors
purchasing the shares will have a claim for damages against the Selling
Shareholders and/or the broker/dealer.
The Company's Common Stock is quoted on the OTC Bulletin Board under the
symbol JOES. The closing bid price for the Common Stock on May ___, 1999 as
reported by the OTC Bulletin Board was $_____ per share. See "Price Range of
Common Stock."
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" COMMENCING
ON PAGE 5.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE. THESE ARE SPECULATIVE SECURITIES.
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2
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The date of this Prospectus is May ___, 1999.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements (including the notes thereto) appearing
elsewhere in this Prospectus. Unless otherwise indicated, the information in
this Prospectus assumes no exercise of the Warrants referred to herein.
Investors should carefully consider the information set forth under the caption
"Risk Factors."
THE COMPANY
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 Company presently owns
and operates eight restaurants; four restaurants located in Philadelphia,
Pennsylvania; one each in Cherry Hill, Moorestown and Vorhees, New Jersey and
one in Baltimore, Maryland ("Existing Units"). The Company is planning to open 2
additional restaurants during 1999. All these restaurants will be located within
two hours from the Company's operation's center in Cherry Hill, New Jersey. 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 operations have generated losses since its inception.
Approximately $1,300,000 will be required to open the additional restaurants.
Management anticipates that sources of funds for the construction of the
additional units will come from funds on hand ($200,000); cash flow from
operations ($50,000); private placements of securities ($750,000); and landlord
contributions for build out alterations ($300,000).
The restaurants will be decorated in a 1950's diner style. Each restaurant
will offer three meals a day from an extensive 50's diner style menu including:
eggs and hot cakes for breakfast; soup, sandwiches and salads for lunch;
burgers, meat loaf and chicken entrees for dinner. All units will offer take out
service.
The Company opened a 550 square foot Philadelphia location ("Shops at
Penn") in November 1997, 600 square foot Cherry Hill location in December 1997
;470 square foot location in Vorhees, New Jersey in May, 1998; 845 square foot
location at the Philadelphia Airport in May 1998; 4,000 square foot University
City Diner location (Philadelphia) in July 1998; 2,000 square foot Market East
(Philadelphia) location in August 1998; 3,680 square foot Moorestown Mall
(Moorestown, New Jersey) location in October, 1998; and 2,530 square foot
Gallery at Harbor Place (Baltimore) location in September, 1998. Four of the
restaurants are located in food courts in malls with common seating provided by
the mall operator and four are sit down restaurants
3
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The Company's revenues are not yet sufficient to cover its expenses and it
is compelled to issue securities convertible into common stock at a significant
discount to market to finance itself. The Company projects it will be operating
on a break-even basis at the end of 1998.
The Company was incorporated in January 1988 as a Delaware corporation.
Through December 1992 it engaged in businesses unrelated to the present
restaurant business. See Note 1 to Consolidated Financial Statements, page F-8.
The Company was inactive from December 1992 through January 1997 when its
shareholders adopted a plan of reorganization and merger with E.A.J. Holding
Co., Inc. and subsequently began development of its present business. The
Company's financial offices are located at 670 White Plains Road, Scarsdale, New
York 10583 and its telephone number is 914 725 2700. The Company's operation's
office is located at 1415 Route 70 East, Suite 412, Cherry Hill, New Jersey
08034.
THE OFFERING
Common Stock Offered by the Selling Stockholders........... Shares 11,675,975
Common Stock to be outstanding after the Offering.......... Shares 27,586,835
OTC Bulletin Board Symbol.................................. JOES
4
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SUMMARY FINANCIAL INFORMATION
Fiscal Years Ended December 31
1994(1) 1995(1) 1996 1997 1998
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Income Statement Data:
Net sales $ - $ - $ - $ 84,781 $ 2,519,255
Gross profit - - - 46,772 1,816,774
Operating loss - - (14,762) (294,718) (835,391)
Other expense, net - - (3,938) (4,304) (157,949)
------- ------- -----------
Loss before inc. taxes - - (18,700) (299,022) (993,340)
Income taxes - - - - (2,725)
Net Loss $ - $ - $ (18,700) $(299,022) $(1,080,797)
Per Share Data
Net loss $ - $ - $ - $ (0.02) $ (0.16)
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Weighted average
shares outstanding 313,973 313,973 6,535,247 11,729,107 13,062,921
December 31, 1998
Actual As Adjusted(2)
Balance Sheet Data:
Working Capital $ (1,161,465) $(1,161,465)
Total Assets 6,728,361 6,728,361
long-term debt - -
Shareholders' equity 3,808,825 3,808,825
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(1) The Company was inactive during 1994 and 1995
(2) Reflects the consummation of the offering as if the offering had occurred at
December 31, 1998.
5
<PAGE>
RISK FACTORS
An investment in the Common Stock of the Company offered hereby is highly
speculative and involves a high degree of risk. Investors could lose their
entire investment. Prospective investors should carefully consider the following
factors, along with the other information set forth in this Prospectus, in
evaluating the Company, its business and prospects before purchasing the Common
Stock.
LACK OF PROFITABILITY; LACK OF OPERATING HISTORY
The Company opened its first restaurant in November 1997, its second in
December 1997, and six others during 1998. The Company had a loss of
approximately $1,081,000 for the year ended December 31, 1998. The Company had a
working capital deficit of 1,161,465 and a retained earnings deficit of
$3,406,350 at December 31, 1998. Prior to the opening of its Philadelphia
location ("Shoppes at Penn'), the Company had no operations or revenues.
Accordingly, the Company's operations are subject to all of the risks inherent
in the establishment of a new business enterprise, including the lack of
operating history. The likelihood of success of the Company must be considered
in light of the problems, expenses, difficulties, complications and delays
frequently encountered in connection with the establishment of any company.
There can be no assurance that future operations of such restaurants, or any
future restaurants, will be profitable. Future revenues and profits, if any,
will depend upon various factors, including the market acceptance of the
Company's 50's diner decor concept, the quality of restaurant operations, and
general economic conditions. Frequently, restaurants, particularly
theme-oriented restaurants, experience a decline of revenue growth or of actual
revenues as the restaurant's "initial honeymoon" period expires and consumers
tire of the related theme. There is no assurance that the Company can operate
profitably or that it will successfully implement its expansion plans, in which
case the Company will continue to be dependent on the revenues of the Existing
Units. Furthermore, to the extent that the Company's expansion strategy is
successful, the Company must manage the transition to multiple site operations,
higher volume operations, the control of overhead expenses and the addition of
necessary personnel.
LIMITED MANAGEMENT EXPERIENCE/NEED FOR ADDITIONAL MANAGEMENT
The success of the Company will depend upon the Company's ability to
attract and retain a highly qualified management team. Joseph Fiore and Andrew
Cosenza, Jr., the Company's Chairman and former President respectively, each
have over 15 years experience in the multi-unit restaurant business. In August
1998 Joseph Wolf was hired as the Company's President and Chief and Executive
Officer. As the Company expands its operations and additional management
employees are hired, it is envisioned that Messrs. Fiore and Cosenza will devote
less time to the operations of the Company. The Company will also need to hire
other corporate level and management employees to help implement and operate its
expansion plans, including a chief financial officer, retail leasing specialist
and construction coordinator. The failure to obtain, or delays in obtaining, key
employees could have a material adverse effect on the Company. See "Management."
6
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LIMITED BASE OF OPERATIONS
The Company currently operates only 8 restaurants in the United States and
plans to open 2 additional restaurants in the third quarter of 1999. The
combination of the relatively small number of locations and the significant
investment associated with each new unit may cause the operating results of the
Company to fluctuate significantly and adversely affect the profitability of the
Company. Due to this relatively small number of current and planned locations
for the current year, poor operating results at any one unit or a delay in the
planned opening of a unit could materially affect the profitability of the
entire Company. Future growth in revenues and profits will depend to a
substantial extent on the Company's ability to increase the number of its
restaurants. Additionally, the Company's history does not provide any basis for
prediction as to whether individual units will tend to show increases or
decreases in comparable unit sales. The Company has not conducted extensive
market surveys in determining restaurant locations but has relied on the
expertise of its management. Management anticipates that sources of funds for
the construction of the additional units will come from cash flow from
operations ($50,000); private placements of securities ($750,000); and landlord
contributions for build out alterations ($300,000) and funds on hand (200,000)An
investor, Zakeni Limited, unrelated to the Company or its affiliates has
purchased $1,500,000 principal amount of the Company's convertible debentures
during 1998. While there is no assurance that the Company will be able to
continue raising funds from private sources, it believes it will able to
continue to do so.
LIMITED FINANCIAL RESOURCES; NEED FOR ADDITIONAL FINANCING
The Company's ability to execute its business strategy depends to a
significant degree on its ability to obtain substantial equity capital to
finance the development of additional restaurants. During the remainder of this
year, The Company will seek to raise expansion funds as needed by the sale of
equity securities or by borrowing. There is no assurance that the Company will
be successful in this financing effort. The proceeds("New Financings"), if
obtained will provide the Company with the financing required to develop and
open 2 additional restaurants in 1999 and for working capital purposes. The
total cost of developing the Shops at Penn unit was approximately $195,000,
which included $125,000 for the design and construction, $50,000 for equipment,
furniture and fixtures, and $20,000 for other costs. The total cost of
developing the Cherry Hill unit was approximately $215,000, which included
$140,000 for the design and construction, $55,000 for equipment, furniture and
fixtures, and $20,000 for other costs. The Company estimates that the costs of
developing 2 additional restaurants presently planned for the third quarter of
1999 will be approximately $1,300,000. If the proceeds of the New Financings are
not sufficient to develop such units, the expansion strategy of the Company will
be adversely affected. If additional funds are required, there can be no
assurance that any additional funds will be available on terms acceptable to the
Company or its shareholders. New investors may seek and obtain substantially
better terms than were granted its present investors and the issuance of such
securities would result in dilution to the existing shareholders. Furthermore,
as the Company prepares to open additional units, it will expend a relatively
higher amount on administrative expenses than would a mature Company with such
operations.
7
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SECURITY INTEREST
The Company's indebtedness to the holder of its convertible debenture in
the principal amount of $1,500,000 due July 2001, is collateralized by
substantially all of the assets of the Company. If this debt is not paid, the
secured party could foreclose on substantially all of the assets of the Company
which would materially adversely affect the Company's business plans and
financial condition.
EXPANSION STRATEGY
The Company's ability to open and successfully operate additional units
will also depend upon the hiring and training of skilled restaurant management
personnel and the general ability to successfully manage growth, including
monitoring restaurants and controlling costs, food quality and customer service.
While the Company's present senior management has experience developing and
operating multi-unit facilities, the Company anticipates that the opening of
additional units will give rise to additional expenses associated with managing
operations located in multiple markets. Furthermore, the Company believes that
competition for unit-level management has become increasingly intense as
additional restaurant chains expand to new markets. Achieving consumer awareness
and market acceptance will require substantial efforts and expenditures by the
Company. An extraordinary amount of management's time may be drawn to such
matters and negatively impact operating results. There can be no assurance that
the Company will be able to enter into any other contracts for development of
additional units on terms satisfactory to the Company. Accordingly, there can be
no assurance that the Company will be able to open new units or that, if opened,
those units can be operated profitably. See "Business -- Expansion Strategy."
THE RESTAURANT INDUSTRY AND COMPETITION
The restaurant industry is highly competitive with respect to price,
service, quality and location and, as a result, has a high failure rate. There
are numerous well-established competitors, including national, regional and
local restaurant chains, possessing substantially greater financial, marketing,
personnel and other resources than the Company. There can be no assurance that
the Company will be able to respond to various competitive factors affecting the
restaurant industry. The restaurant industry is also generally affected by:
changes in consumer preferences, national, regional and local economic
conditions, and demographic trends. The performance of restaurant facilities may
also be affected by factors such as traffic patterns, demographic
considerations, and the type, number and location of competing facilities. In
addition, factors such as inflation, increased labor and employee benefit costs,
and a lack of availability of experienced management and hourly employees may
also adversely affect the restaurant industry in general and the Company's
restaurants in particular. Restaurant operating costs are further affected by
increases in the minimum hourly wage, unemployment tax rates and similar matters
over which the Company has no control. Finally, by the nature of its business,
the Company would be subject to potential liability from serving contaminated or
improperly prepared food.
8
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CONCEPT EVOLUTION
The Company presently intends that most of its future restaurants will
feature the 50's diner decor similar to that in the Existing Units. The
restaurants will be positioned to offer an "every day" type of dining
opportunity, i.e. a place where individuals who live and work nearby can
comfortably enjoy a wide variety of high quality fresh food at affordable
prices. However, this concept is evolving and a number of factors could change
this theme as applied in different locations. These factors include demographic
and regional differences, locations that have more or less traffic than the
areas in which those units are located, type of available floor space, and the
availability of specialty items such as antiques. Accordingly, future units
could be larger or smaller than those units, could vary in the mix of
retail/restaurant operations, and could have differences in the application of
the 50's diner theme.
Management of the Company has a long relationship with owners of commercial
real estate and brokers acting on their behalf. Properties have been offered to
the Company on a regular basis and the Company usually has been able to obtain
the locations it was seeking.
CENTRALIZED FOOD COMMISSARY.
Soups, sauces, toppings and certain entrees are prepared in a central
commissary and delivered to individual restaurant units. The agreement with the
commissary is on a month to month basis. Management believes the individual
restaurant units can prepare all food in house without any material increase in
costs and may in the future do so.
Food prepared at the central commissary is generally transported in
air-tight cry-o-vac packaging and transported in refrigerated trucks. As the
Company's units are located only several hours from the commissary, all foods
are delivered on the same day as they are shipped. The foods prepared at the
commissary lend themselves to being cooked at the individual units. For
instance, meat loaf is prepared and put together at the commissary and shipped
to the units for baking.
LONG-TERM, NON-CANCELABLE LEASES
In carrying out its plan to develop, own and operate theme restaurants, the
Company will enter into leases which are non-cancelable and range in term from 8
to 15 years. Any right to sublet or assignment requires approval of the
landlord. If a restaurant unit does not perform at a profitable level, and the
decision is made to close the restaurant, the Company may nevertheless be
committed to perform its obligations under the applicable lease, which would
include, among other things, payment of the base rent for the balance of the
respective lease term. If such a restaurant closing were to occur at one of
these locations, and the Company was unable to sublet the premises, the Company
would lose a unit without necessarily receiving an adequate return on the its
investment. See "Business -- Property and Unit Locations" and "Certain
Transactions."
9
<PAGE>
TRANSACTIONS WITH MANAGEMENT; CONFLICTS OF INTEREST
Anthony Cosenza, Jr., the Company's former President is the owner of Cozco
Management Corp., a mall food court operating company in the Philadelphia area.
Cozco operates 35 food court restaurant units, none which carry out the concept
of the Company's operations. In the opinion of management, none of the Company's
existing or planned locations compete with the Cozco locations. To date the
Cozco locations, which do not carry out the 50s theme or offer a diner type menu
have been located in food courts and offer a limited service menu dictated by
the landlord. In the event of a conflict for a sit down location or a food court
location featuring a diner type menu, the Company shall have a right of first
refusal. The Company's operations office consists of 3,000 square feet and
shares space with Cozco in Cherry Hill, New Jersey. The Company pays a monthly
rent of $3,786 on a month to month tenancy to an unaffiliated party. Cozco pays
most of the overhead costs associated with the space and operations at the
location. See "Certain Transactions."
To obviate any conflicts of interest between the Company and Cozco, certain
policies have been adopted by the Company. These policies include a prohibition
against general contractors doing business with both companies and provides that
the company which first used a general contractor shall have the right to
continue such use (on occasions the parties have waived adherence to this policy
to the benefit of the Company); requirement for a verification statement to be
signed by vendor and/or service provider and the requirement that the officer
authorizing a major expenditure, not be the officer signing checks for the
payment of the expenditure.
CONTROL OF THE COMPANY; DEPENDENCE ON KEY PERSONNEL
Following this Offering, Joseph Fiore and Andrew Cosenza Jr., will control
approximately 20 % of the Company's Common Stock. Therefore, Messrs. Fiore and
Cosenza will have the ability to direct its operations and financial affairs and
to substantially influence the election of members of the Board of Directors of
the Company. The loss of the services of Mr. Fiore who devotes 95% of his
working time to the Company and Mr. Cosenza, who devotes whatever percentage of
his working time is reasonably requested by the Chairman and President, could
have a substantial adverse effect on the Company's ability to achieve its
objectives. The Company currently has no key man insurance on either Mr. Fiore
or Mr. Cosenza.
CURRENT REGISTRATION STATEMENT
The Company is required to maintain the effectiveness of the Registration
Statement until the earlier of September, 2000 or the date on which the holders
of the Company's Preferred Stock or Debentures shall have sold the Common Shares
into which said securities were convertible.
10
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GOVERNMENT REGULATION
The restaurant business is subject to various federal, state and local
government regulations, including those relating to the sale of food and
alcoholic beverages. The failure to maintain food and liquor licenses would have
a material adverse effect on the Company's operating results. In addition,
restaurant operating costs are affected by increases in the minimum hourly wage,
unemployment tax rates, sales taxes and similar costs over which the Company has
no control. Many of the Company's restaurant personnel will be paid at rates
based on the federal minimum wage. Recent increases in the minimum wage are not
expected to materially impact the Company's labor costs. The Company will be
subject to "dram shop" statutes in certain states, including New Jersey and
Pennsylvania which generally allow a person injured by an intoxicated person to
recover damages from an establishment that served alcoholic beverages to such
intoxicated person. The Company has obtained liability insurance against such
potential liability.
TRADEMARKS
The Company has been granted a servicemark registration for the name Eat at
Joe's. There can be no assurance that the Company can protect such mark and
design against prior users in areas where the Company conducts operations. There
is no assurance that the Company will be able to prevent competitors from using
the same or similar marks, concepts or appearance.
ABSENCE OF DIVIDENDS
At the present time, the Company intends to use any earnings which may be
generated to finance further growth of the Company's business. Accordingly,
investors should not purchase the shares with a view towards receipt of cash
dividends from any Shares.
RISK OF LOW-PRICED STOCKS
Rules 15g-1 through 15g-9 promulgated under the Securities Exchange Act of
1934 ("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.
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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 ("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 quotation 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.
ADVERSE EFFECT OF ISSUING OF SHARES AT A DISCOUNT
The Company has raised approximately $4 million through the sale of
securities convertible into its common stock at a discount to the market price.
The Company's history of losses and working capital deficit caused by the demand
for funds to open restaurants have not permitted it to obtain traditional debt
or equity financing. The difference between the market price and the discounted
price is recorded as dividend and has an adverse effect on the earnings of the
Company. The decrease in earnings may adversely affect the market value of the
Company's Common Stock. The right of the purchaser of the Company's convertible
securities to convert them into common stock at his or her option, is similar to
that available to an underwriter of securities.
SHARES ELIGIBLE FOR FUTURE SALE
The sale, or availability for sale, of substantial amounts of Common Stock
in the public market subsequent to this offering may adversely affect the
prevailing market price of Common Stock and may impair the Company's ability to
raise additional capital by the sale of its equity securities. See "Description
of Securities -- Shares Eligible for Future Sale."
POTENTIAL ANTI-TAKEOVER EFFECTS OF DELAWARE LAW
The Company is subject to Delaware statutes regulating business
combinations ,tender offers and proxy contests, which may hinder or delay a
change in control of the Company. See "Description of Securities."
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CAPITALIZATION
The following table sets forth the capitalization of the Company as of
December 31, 1998, as further adjusted to give effect to the sale of the Common
Stock offered hereby. See the Consolidated Financial Statements.
December 31, 1998
Actual As adjusted(1)
Short-term debt:
Notes payable and shareholder loans $ 1,087,455 $ 1,087,455
----------- -----------
Long-term debt:
Convertible Debenture 1,343,449 1,343,449
------------ -----------
Shareholders' equity:
Preferred Stock, $0.0001 par value, 10,000,000
shares authorized, 113 shares issued and
outstanding - -
Common Stock, $0.0001 par value, 50,000,000
shares authorized, 16,440,755 shares issued
and outstanding 1,644 1,644
Additional paid-in capital 7,213,400 7,213,400
Retained deficit (3,406,350) (3,406,350)
Total shareholders equity 3,808,825 3,808,825
----------- -----------
$ 6,728,361 6,728,361
----------- -----------
(1)Does not include 1,247,750 shares of Common Stock issuable upon exercise of
Warrants at an exercise price of $0.50 to $1.79 per share
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SELECTED CONSOLIDATED FINANCIAL DATA
The consolidated statement of income date set forth below with respect to
the year ended December 31, 1997 and 1998, and the consolidated balance sheet
data at December 31, 1997 and 1998, are derived from, and are qualified by
reference to, the audited consolidated financial statements included elsewhere
in this prospectus. The data presented below are qualified by reference to
Consolidated Financial Statement included elsewhere in this prospectus and
should be read in conjunction with such financial statements and related notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
================================================================================
Fiscal Years Ended December 31
================================================================================
1994(1) 1995(1) 1996 1997 1998
---------------------------------------------------
Income Statement Data:
Net sales $ - $ - $ - $ 84,781 $ 2,519,255
Gross profit - - - 46,772 1,816,774
Operating loss - - (14,762) (294,718) (835,391)
Other expense, net - - (3,938) (4,304) (157,949)
------- ------- -----------
Loss before inc. taxes - - (18,700) (299,022) (993,340)
Income taxes - - - - (2,725)
Net Loss $ - $ - $ (18,700) $(299,022) $(1,080,797)
Per Share Data
Net loss $ - $ - $ - $ (0.02) $ (0.16)
--------- --------- -----------
Weighted average
shares outstanding 313,973 313,973 6,535,247 11,729,107 13,062,921
================================================================================
Fiscal Years Ended December 31
================================================================================
1994(1) 1995(1) 1996 1997 1998
---------------------------------------------------
Balance Sheet Data:
Working Capital $ - $ - $100,247 $(1,158,474) $(1,161,465)
Total Assets - - 291,072 2,314,974 6,728,361
Long-term debt - - - - -
Shareholders' equity - - 271,337 872,315 3,808,825
- ---------------
(1) The Company was inactive during 1994 and 1995.
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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company was re-activated in January 1997 to develop, own and operate
1950's style diner style restaurants featuring popular dishes at affordable
prices under the name "Eat at Joe's(R)." The Company opened its first restaurant
in the Shoppes at Penn in November , 1997 and its second restaurant in the
Cherry Hill Mall, Cherry Hill, New Jersey in December 1997, and during 1998, 6
additional restaurants. Prior to opening these restaurants the Company had no
revenues and its activities were devoted solely to development. The Company is
developing 2 additional restaurants to open in the third quarter of 1999.
Future revenues and profits, if any, will depend upon various factors,
including market acceptance of the 1950's diner style concept, the quality of
the restaurant operations, the ability to expand to multi-unit locations and
general economic conditions. The Company's present sources of revenue are
limited to its Existing Units. There can be no assurances the Company will
successfully implement its expansion plans, in which case it will continue to be
dependent on the revenues from the Existing Units. The Company also faces all of
the risks, expenses and difficulties frequently encountered in connection with
the expansion and development of a new and expanding business. Furthermore, to
the extent that the Company's expansion strategy is successful, it must manage
the transition to multiple site operations, higher volume operations, the
control of overhead expenses and the addition of necessary personnel.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997.
Revenues from operations commenced in November 1997 with the opening of the
Shoppes at Penn restaurant. Accordingly, comparisons with periods prior to
November 1997 are not meaningful.
Total Revenues -For the years ended December 31, 1998 and 1997, the Company had
total sales of approximately $2,519,000 and $85,000 respectively.
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Costs and Expenses - For the years ended December 31, 1998 and 1997, the Company
had a net loss of approximately $1,081,000 and $299,000 respectively. The net
loss for 1998 and 1997 is largely attributable to additional expenses incurred
as the Company increases its Corporate overhead structure for the development of
additional locations supported by revenues from operating units two of which
were open for business during November and December 1997, two of which were
opened during May 1998, three were opened during the third quarter 1998 (1 per
month), and one was opened during October 1998. Given the limited operations
which took place in 1997, 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 and borrowings. In 1997, $900,000 was raised through the exercise of
900,000 warants. The warrants are exerciseable at $1 per share and expire in
November 1998. Also, the Company borrowed $995,000 including $690,000 from
Messrs. Fiore and Cosenza . The net proceeds to the Company were used for
additional unit development and working capital.
For the yeay 1997 the Company provided $138,000 in cash flow for operating
activities and during the year 1998, the Company used $599,000 in cash flow for
operating activities.
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 1998 and 1997 the Company
paid approximately $4,628,000 and $1,795,000, respectively for property
and equipment.
During 1998, the Company has raised approximately $3,539,000 (net of
issuance costs) through the sale of preferred stock and debentures, both of
which are convertible into Common Stock of the Company (See "Description of
Securities", page 30). These securities were issued pursuant to an exemption
under the Securities Act of 1933, as amended. To induce investors to make an
equity investment in the Company, it was necessary to offer a security which
paid a dividend and enjoyed a priority over common shareholders in the event of
a liquidation of the Company. At the time of the sale of the preferred stock,
officers were not prepared to lend additional sums to the Company nor were other
lenders prepared to make loans to the Company.
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Also during 1998, the Company has borrowed $2,509,000 including $114,000
from Mr. Fiore. As of December 31, 1998, $452,000 remained due to Mr. Fiore. The
net proceeds to the Company were used for additional unit development and
working capital.
After the completion of these expansion plans, 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.
BUSINESS
OVERVIEW
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 Company presently owns
and operates eight restaurants; four are located in Philadephia and one each in
Cherry Hill, Moorestown and Vorhees, New Jersey and one in Baltimore. The
Company is planning to open 2 additional restaurants in the United States in the
third quarter of 1999. All these restaurants generally will be located within a
two hour drive of the Company's operation's center in Cherry Hill, New Jersey.
The approximate population of the target area is 5,000,000 people. In addition
to the indigenous population, the Company expects to benefit from tourists and
other travelers visiting the region. All restaurants will be located in high
traffic locations such as shopping malls, airports and densely populated
settings. The Company will utilize a cluster strategy- i.e. grouping sites
geographically in order to maximize both the chain's exposure, as well as
management and marketing efficiency. The restaurants will be modest priced
restaurants catering to the local working and residential population rather than
as a tourist destination.
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THE EAT AT JOE'S CONCEPT AND STRATEGY
Concept Development
The Company's theme is promoted with establishing restaurants which are
decorated with a 1950's style diner concept featuring a variety of popular
breakfast, lunch and dinner dishes. The restaurants will be three-meal a day
operations, emphasize fresh ingredients, affordable prices, consistent quality
and a fun and visually appealing atmosphere. The restaurants will seek to
attract patrons who live and work nearby and on a repeat basis, can comfortably
enjoy a wide variety of fresh foods at affordable prices.
Mr. Fiore previously established 9 restaurant locations ( 7 by franchise)
featuring a traditional American menu of full breakfasts, hamburgers, fries and
hot dogs and ice cream sundaes. In 1993 Mr. Fiore concluded that the Eat at
Joe's concept had potential for a regional or national chain. To regain control
of the name, concept and market territories, Mr. Firore negotiated the closing
of all franchise sites. At the time of the closings, all units were operating on
a profitable basis. Mr. Fiore also determined that the appeal of the Eat at
Joe's restaurants could be enhanced by expanding menu choices, refining the 50's
design theme and adding retail merchandising. The Eat at Joe's chain of
restaurants reflect the refinements to the concept inspired by the initial test
marketing and franchising expereince.
In identifying a potential market niche, Messrs. Fiore and Cosenza have
studied the development of certain restaurants that have capitalized on the
growing trend of home replacement meals taking the place of home cooked meals.
Through Cozco, Mr. Consenza has fifteen years experience in restaurant site
selection, lease negotiation and management. The Company hopes to capitalize on
this trend, both for dine-in and take-out meals. The Company believes that the
comfortable, appealing decor of its restaurants and the universal appeal of home
type cooking will be significant advantages in its attempts to penetrate this
niche market.
Competitive Differentiation
The Company seeks to establish a niche in between a fast food restaurant
and a traditional restaurant. The Company's restaurants provide a menu offering
fresh cooked food with rapid meal service at affordable prices. The Company
seeks to attract customers who are tired of standard fast food and desire a
quick, quality, modest priced meal not being served by existing casual
restaurants. While patrons will be served faster at a fast food franchise, Eat
at Joe's restaurants will serve a meal in food court in approximately 3 minutes
from the time of order. Further, the menu will not include items which requires
complicated preparation or lengthy cooking time.
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Currently there is no chain of restaurants in the Philadelphia area
offering the atmosphere and food selection at that of Eat at Joe's. On an
individual basis, traditional diners do offer similar atmosphere. The Company
will seek to expand penetration by multiple restaurant openings in a certain
area rather than on a one restaurant at a time expansion. Should competitors
emerge, the Company's believes its proposed market penetration will provide it
with a competitive advantage. Many of the Company's planned restaurants are to
be located in malls and other venues where most of the competition are not theme
restaurants.
The Menu
The restaurants' decor notwithstanding, the Company's primary focus is its
food where it seeks to attract repeat business. Breakfasts will include eggs,
waffles and cereal; lunches, soups, salads, burgers and sandwiches and dinner,
entrees including turkey, meat loaf and chicken. Most of the baked goods offered
for sale will have been baked on the premises. Generous portions will be
provided to diners. Lunch entrees range from $5.95 to $8.95 and dinner entrees
from $7.95 to $11.75. The average guest check for the Company's opened units is
approximately $6.00 at the present time. The breakfast meal generates
approximately 20 % of the Company's revenues, the lunch meal 52% and the dinner
meal 25 %. Approximately 3% of revenues are generated through the sale of snacks
and beverages resulting in average checks of approximately $3.00
The Company intends to obtain a beer and wine license for some of its
restaurants, with the intention that such beverages will be served along with
meals. The Company does not intend to emphasize sales of beer and wine apart
from meals in most of its restaurants, primarily because the Company feels that
it reduces the number of table turns and therefore profitability.
Food Preparation and Delivery
The Company believes that ease of food preparation and delivery will be one
key to its success. While some restaurants require highly compensated and
extensively trained chefs, the food served at each restaurant is prepared in a
basic process that requires minimal training time and which allows each menu
item to be served with minimal preparation. The Company views this efficient and
effective process as critical for its planned expansion as a chain.
The Company's units are supplied by major food distributors. The Company
has established a "national account" with these distributors which enables
pricing to be consistent regardless where the Company's units are located. In
the event the Company terminated a relationship with a distributor, other
distributors are available at comparable costs. In addition, soups, sauces,
toppings and certain entrees are prepared in a central commissary for delivery
to the units. The Company's agreement with the commissary, which is unaffiliated
with the Company, is on a month to month basis and could service up to 200
restaurant units. The units have the ability to prepare all food "in house"
without any meaningful increase in costs.
19
<PAGE>
PROPERTY AND UNIT LOCATIONS
The Eat at Joe's restaurant concept has been adapted for three versions
requiring difference space arrangements to allow flexibility in site selection
and maximum market penetration. These versions include mall food court units
requiring 350-500 square feet; sit down restaurant requiring 1,500-7,500 square
feet and sit down restaurant with a bar and liquor license requiring 2,500-7,500
square feet.
The following table sets forth certain information about the Company's
existing and planned restaurants:
Approx. Approx. nos. Date Opened or
Location Sq. Footage of seats Planned to Open
Shoppes at Penn 450 600(1) November 15, 1997
Philadelphia, PA (2)
Cherry Hill Mall 600 800(1) December 6, 1997
Cherry Hill, NJ (3)
Echelon Mall 470 600(1) May 9, 1997
Vorhees, NJ (4)
Philadelphia Airport 845 120(1) May 23 1998
Philadelphia, PA (5)
Eat at Joe's Univ. City 4000 160 July 14, 1998
Philadelphia, PA (6)
Gallery at Market East 2000 100 August 14, 1998
Philadelphia, PA (8)
Moorestown Mall 3680 150 October 7,1998
Moorestown, NJ (7)
Gallery at Harbor Pl. 2530 160 September 24, 1998
Baltimore, MD (9)
Shoppingtown Mall 2450 600(1) to be determined
DeWitt, NY (10)
Neshaminy Mall 4500 150 3rd quarter, 1999
Bensalom, PA (11)
Plymouth Meeting Mall 4540 160 3nd quarter, 1999
Plymouth Meeting, PA (12)
Danbury Fair Mall 3020 140 to be determined
Danbury, CT (13)
(1) Food Court
(2) Monthly rent $ 1,710; lease expiration date-December, 2008
(3) Monthly rent $ 4,400; lease expiration date-September, 2007
(4) Monthly rent $ 1,950; lease expiration date-January, 2006
(5) Monthly rent $ 7,100; lease expiration date-April, 2007
(6) Monthly rent $ 6,667; lease expiration date-December, 2008
(7) Monthly rent $ 6,250; lease expiration date-June, 2012
(8) Monthly rent $ 4,166; lease expiration date-December, 2007
(9) Monthly rent $ 8,333; lease expiration date-March, 2008
(10) Monthly rent $ 4,166; lease expiration date-December, 2012
(11) Monthly rent $ 7,500; lease expiration date-July 2013
(12) Monthly rent $12,500; lease expiration date-March, 2008
(13) Monthly rent $11,080; lease expiration date-December, 2013
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<PAGE>
The Company's leases are generally subject to periodic increases in base rent as
well as a percentage of sales during the term of the lease.
The Company's financial offices are located at 670 White Plains Road, Scarsdale,
New York in space leased by the Company's Chairman. The lease expires in April,
2003. The Company pays no rent for its space. The Company's operations office is
located at 1415 Route 70, Cherry Hill, New Jersey in space leased from a third
party on a month to month tenancy. In June, 1999, the Company intends to move
its financial and operations offices to 1506 Yonge Street, Toronto, Ontario,
Canada.
EXPANSION STRATEGY
The Company intends to identify sites to locate its restaurants based on a
variety of factors including local market demographics, site viability,
competition and projected economics of each unit. In addition to site selection
criteria, the Company has primarily focused on sites where management has
operating experience through other entities as well as a previous relationship
with the developer/management organization. Initial plans are to continue to
identify and finalize future site opportunities in the Philadelphia/Cherry Hill
area via leases. The Company believes the area can support up to approximately
12 units, and expects to open at least 2 additional units in the
Philadelphia/Cherry Hill area in 1999.
FUTURE ACQUISITIONS
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
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.
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<PAGE>
The following table sets forth certain information about the 3 existing Koo
Koo Roo restaurant locations being operated by Ontario in Toronto, Canada. All
are sit down restaurants.
Approx. Approx. nos.
Location Sq. Footage of seats
1506 Yonge Street (1) 5,200 125
2387 Yonge Street (2) 3,950 125
270 The Kingsway (3) 5,000 135
(1) Monthly rental $10,900 (includes office); lease expiration date April, 2009
(2) Monthly rental $11,000; lease expiration April, 2009
(3) Monthly rental $ 6,150; lease expiration April, 2009
The Company intends to target additional major metropolitan markets to
broaden and enhance the recognition value of the concept. Specific cities for
expansion will be identified and analyzed as to potential compatibility with the
concept. There is no assurance that the Company will be successful in targeting
new areas.
OPERATIONS, MANAGEMENT AND EMPLOYEES
The Company's ability to manage multi-location units will be central to its
overall success. See "Risk Factors -- Limited Management Experience/Need for
Additional Management." While the Company's Chairman and President have
extensive restaurant and multi-unit restaurant experience, the Company
acknowledges that its management must include skilled personnel at all levels.
The Company also intends to hire other corporate level and management employees
to help implement and operate its expansion plans, including a chief financial
officer, retail leasing specialist and construction coordinator. At the unit
level, the Company places specific emphasis on the position of general manager
("General Manager") and seeks employees with significant restaurant experience
and management expertise. The General Manager of each restaurant reports to a
district manager, who reports to a regional manager who reports directly to the
President. The Company strives to maintain quality and consistency in each of
its units through the careful training and supervision of personnel and the
establishment of, and adherence to, high standards relating to personnel
performance, food and beverage preparation, and maintenance of facilities. The
Company believes that it will be able to attract high quality, experienced
restaurant and retail management personnel by paying competitive compensation.
Staffing levels vary according to the time of day and size of the restaurant. In
general, each unit has between 8 and 25 employees.
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All managers must complete a training program, during which they are
instructed in areas such as food quality and preparation, customer service, and
employee relations. An "Opening Team" spends between 4 and 6 weeks at a new
location training personnel. Management strives to instill enthusiasm and
dedication in its employees, regularly solicits employee suggestions concerning
Company operations, and endeavors to be responsive to employees' concerns. In
addition, the Company has extensive and varied programs designed to recognize
and reward employees for superior performance. As of December 31, 1998, the
Company had approximately 165 employees, 40 of which were full-time. The Company
believes that its relationship with its employees is good.
PURCHASING
As of the date of this prospectus, only 8 of the Company's units are in
operation. Currently, food is prepared a centralized food commissary. As more
units are opened, each unit's management team will determine the daily
quantities of food items needed and order such quantities from major suppliers
at prices often negotiated directly with the Company's corporate office.
Suppliers for the Eat at Joe's chain will generally be companies with which
management has an ongoing relationship and which has been judged over time to be
reliable. The Company strives to obtain consistent quality items at competitive
prices from reliable sources. Any discontinuance of such favorable pricing could
negatively impact the Company's purchasing abilities. In order to maximize
operating efficiencies and to provide the freshest ingredients for its food
products while obtaining the lowest possible prices for the required quality,
food and supplies will be shipped directly to the restaurants. Perishable food
products will be purchased locally.
MARKETING AND PROMOTION; RETAIL MERCHANDISING
The Company may utilize a variety of marketing materials to inform the
public about the Company's restaurants. These may include:
* radio advertisements describing the Eat at Joe's dining and take out
experience;
* newspaper and local magazine advertisements which will emphasize Eat
at Joe's restaurant openings or site-specific promotional programs;
* retail product catalog featuring a variety of merchandise bearing the
Eat Joe's logo-which can be considered to be a "mobile advertising for
the chain;
* direct mail promotional literature for mailing to households within
driving or walking distance of an Eat at Joe's site;
* trade show booth for shows, conferences and seminars relating to the
food service industry and shopping malls;
* Public relations to promote the Company's individual restaurant sites.
In addition to press releases, management intends to initiate efforts
to develop and have published articles showcasing Eat at Joe's and its
theme, decor, menu and merchandise offerings.
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<PAGE>
The Company's units are located in very high traffic locations, such as
airports, college campuses and regional shopping centers. In regional shopping
centers, the Company participates in co-op advertising in both print and radio
campaigns. On college campuses, the Company participates in local print and
media mediums, as well s paid radio advertising. In airports, co-op advertising
is utilized by the Company as well as directory advertising. For 1998, the
Company estimates that $100,000 will be spent on marketing materials of which
$20,000 has been expended as of the date of this prospectus.
The Company may seek to capitalize on the nostalgia craze by offering 50s
style merchandise at its restaurants and through a catalog. Apparel such as
hats, jackets, T-shirts and sweatshirts bearing the Eat at Joe's logo; gifts and
collectibles, such as 50's music; printed matter and toys and games could be
offered for sale. As all retail merchandise to be sold by the Company would be
out-sourced on an as-needed basis, the initial investment would no more than
$25,000. As of the date of this prospectus, the Company has been offering 50's
style merchandise for sale at its 2 sit down restaurants. The contracts which
the Company has entered into with purveyors for the purchase and manufacture of
such merchandise are not material. The Company has no continuing obligation to
order merchandise from the purveyors.
TRADEMARKS
The Company's ability to successfully implement its Eat at Joe's concept
will depend in part upon its ability to protect its servicemark. The Company has
been granted a servicemark registration for the name Eat at Joe's. There is no
assurance that the Company will be able to prevent competitors from using the
same or similar marks, concepts or appearance.
LEGAL PROCEEDINGS
Except for routine litigation incidental to the Company's business, there
is no litigation pending or to the knowledge of the Company threatened, except
for the following: the Company has been ordered to turn over any property it is
holding or money it owes to a defendant in an action in an Ohio County court
where a judgment has been entered against such defendant; Company maintains it
owes no money or holds property belonging to such defendant.
COMPETITION
The food service industry is intensely competitive with respect to food
quality, concept, location, service and price. In addition, there are many
well-established food service competitors with substantially greater financial
and other resources than the Company and with substantially longer operating
histories. The Company believes that it competes with other full-service dine-in
restaurants, take-out food service companies, fast-food restaurants,
delicatessens, cafeteria-style buffets, and prepared food stores, as well as
with supermarkets and convenience stores. Competitors include national,
regional, and local restaurants, purveyors of carry-out food, and convenience
dining establishments.
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<PAGE>
Competition in the food service business is often affected by changes in
consumer tastes, national, regional, and local economic and real estate
conditions, demographic trends, traffic patterns, the cost and availability of
labor, purchasing power, availability of product, and local competitive factors.
The Company attempts to manage or adapt to these factors, but it should be
recognized that some or all of these factors could cause the Company to be
adversely affected.
The pricing policy of the Company is to canvas the area of other related
diner-type operations and maintain a pricing structure that is competitive after
factoring in labor, food and the Company's operating cost for that location. The
Company believes that its distinctive diner concept, attractive price-value
relationship and quality of food and service will enable it to differentiate
itself for its competitors. While the Company believes that its restaurants are
distinctive in design and operating concept, it is aware of restaurants that
operate with similar concepts.
REGULATION
Restaurants are subject to licensing and regulation by state and local
health, sanitation, safety, fire, and other authorities and are also subject to
state and local licensing and regulation of the sale of alcoholic beverages and
food. Difficulties in obtaining or failure to obtain required licenses and
approvals will result in delays in, or cancellation of, the opening of
restaurants. The food and alcoholic beverage licenses are also subject to
suspension or non-renewal if the granting authority determines that the conduct
of the holder does not meet the standards for initial grant or renewal. The
Company believes that it is in compliance with all licensing and other
regulations.
The federal Americans With Disabilities Act prohibits discrimination on the
basis of disability in public accommodations and employment. The Company could
be required to expend funds to modify its restaurants in order to provide
service to or make reasonable accommodations for disabled persons. The Company's
restaurants are currently designed to be accessible to the disabled. The Company
believes it is in substantial compliance with all current applicable regulations
relating to accommodations for the disabled.
YEAR 2000 Compliance
The Company utilizes software and related technologies which have been
programmed to recognize and properly process data fields containing a two digit
year and commonly referred to as a the Year 2000 Compliance issue. Management
has concluded that a material effect on the Company's financial condition is not
reasonably likely to occur as a result of Year 2000 issues. While the Company
has little communication with the systems of its vendors and suppliers, it
cannot measure the impact that the Year 2000 issue will have on such parties
with which it conducts business.
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PRICE RANGE OF COMMON STOCK
Since October, 1996 the Common Stock of the Company has been traded on the
OTC Bulletin Board under the symbol JOES. The following table sets forth the
closing high and low sales prices, and trading volume for each of the periods
indicated below for the Company's Common Stock:
Year Quarter High Low Volume
(shares)
1996 Fourth (Oct.7 to Dec. 31.) $2.53 $2.00 7,400
1997 First 5.63 4.00 188,300
Second 4.50 2.00 1,037,700
Third 3.50 1.50 1,725,800
Fourth 2.75 0.82 3,864,900
1998 First 2.04 1.06 6,459,000
Second 3.38 1.40 6,777,200
Third 1.78 0.72 3,018,700
Fourth 1.21 0.41 8,301,200
1999 First 1.88 0.50 13,808,500
On May ___, 1999, the closing bid price of the Common Stock on the OTC Bulletin
Board was $____. These quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual transactions. As
of June 30, 1998, there were approximately 371 shareholders of record and 1,500
beneficial owners of the Common Stock. The Company has never paid or declared
any dividends on its Common Stock and does not anticipate paying any cash
dividends in the foreseeable future. The Company currently intends to retain
future earnings to fund the development and growth of its business
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to each of
the directors and executive officers of the Company.
NAME AGE POSITION(S) HELD
- -------------------------------- --- ---------------------------------
Joseph Fiore................ 37 Chairman of the Board and Chief
Executive Officer, Secretary
Andrew Cosenza, Jr.......... 29 Director, Vice Chairman
James Mylock................ 31 Director
Tim Matula.................. 38 Director
Gino Naldini................ 47 President
Gary Usling................. 39 Chief Operating Officer
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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 1959's
theme restaurant concept offering a traditional American menu. Also in 1993 Mr.
Fiore acquired the Red Rooster Drive-In, a landmark 50's theme restaurant in
Brewster, New York.
Andrew Cosenza, Jr. was formerly the President and Chief Operating Officer
since October, 1996. Since 1990 he has been the owner of Cozco Management Corp.,
an operator of 35 mall food court restaurants in the Philadelphia area.
James Mylock 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
January, 1999. From 1967 through 1998, Mr. Naldini held various senior executive
positions with Toronto-based CARA Operations, operator or 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 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.
EXECUTIVE COMPENSATION
The following table sets forth all cash and non-cash compensation paid by
the Company during the fiscal year ended December 31, 1997 to all officers and
directors as a group.
Number in Group Capacities in Which Served Compensation
All officers and directors
as a group (4 persons).................................................$ 12,500
EMPLOYMENT AGREEMENTS
Effective January 1, 1997, both Joseph Fiore and Andrew Cosenza, Jr.
entered into employment agreements with the Company calling for a salary of
$50,000 per year. Given the limited cash available to the Company in 1997, Mr.
Fiore deferred his salary for the year. Mr. Fiore is to receive a salary of
$75,000 for 1998 which may be paid in restricted Common Stock of the Company.
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In 1997, Mr. Cosenza deferred $37,500 of his $50,000 salary. Mr. Cosenza is
to receive a salary of $75,000 for 1998. In addition, the Company will provide
Mr. Cosenza with the use of an automobile.
Messrs. Fiore and Cosenza were to 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 its
maintenance and operation paid by the Company. Both gentlemen deferred these
benefits until after 1997 except Mr. Cosenza did receive the use of an
automobile for ten months of 1997 at a cost to the Company of $16,000.
The employment agreements of Messrs. Fiore and Cosenza are performance
based and are contingent on the opening of units and the profitability of the
Company
The Company intends to retain other management employees pursuant to
employment and consulting agreements. The Company has no current plans to pay
cash compensation to its directors who are also officers of the Company.
For a one-year period following the Effective Date, the Company will not
grant options to promoters, employees or affiliates of the Company which,
together with options previously granted to such persons, would in the aggregate
exceed 15% of the then outstanding shares of Common Stock.
BOARD OF DIRECTORS
Each of the Company's directors has been elected to serve until the next
annual meeting of shareholders. The Company's executive officers are appointed
annually by the Company's directors. Each of the Company's directors continues
to serve until his or her successor has been designated and qualified. Directors
currently receive no fees.
PERSONAL LIABILITY AND INDEMNIFICATION OF DIRECTORS
The Company's By-laws contain provisions which reduce the potential
personal liability of directors for certain monetary damages and provide for
indemnity of directors and other persons. The Company is unaware of any pending
or threatened litigation against the Company or its directors that would result
in any liability for which such director would seek indemnification or similar
protection.
The provisions regarding indemnification provide, in essence, that the
Company will indemnify directors against expenses (including attorneys fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
in connection with any action, suit, or proceeding arising out of the director's
status as a director of the Company, including actions brought by or on behalf
of the Company (stockholder derivative actions). The provisions do not provide
indemnification for liability in proceedings arising out of personal benefit
improperly received or where a person is found liable to the Company. The
Company provides liability insurance to its officers and directors.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors and officers of the Company pursuant to the
foregoing provisions, or otherwise, the Company has been advised that such
indemnification , in the opinion of the Securities and Exchange Commission, is
against public policy as expressed in the Securities Act and is, therefor,
unenforceable
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CERTAIN TRANSACTIONS
During 1997, Cozco Management Corp., a corporation controlled by the
Company's President, received $546,574 as reimbursement of rent, telephone,
equipment, travel, automotive salaries and other shared expenses. During 1998
and 1997, Messrs. Fiore and Cosenza and/or companies controlled by them, paid
expenses and made advances to the Company aggregating $113,825 and $690,422,
respectively. During 1998 the Company repaid advances of $364,292. As of
December 31, 1998, $452,455 in advances was due to Mr. Fiore. Repayment of these
monies will be in the form of cash with interest at 6% per annum and/or
restricted Common Stock valued at a 25% discount from market price at the time
of the advance. These advances were made on short notice and the shares to be
issued to the lenders do not require a commitment by the Company to register
them for sale.
On April 1 , 1998, the Company entered into a 12 month agreement with The
Wall Street Group, Inc. ("Wall Street") calling for Wall Street to act as
financial public relations counsel to the Company. Mr. Donald Kirsch is the
owner of Wall Street and has no affiliation with the Company or its officers and
directors. The agreement calls for monthly payments of $5,000 for services
rendered and grants an five year option to Wall Street to acquire 61,350
restricted shares of the Company's Common Stock at the then market price of
$1.63 per share.
To obviate any conflicts of interest between the Company and Cozco, certain
policies have been adopted by the Company. These policies include a prohibition
against general contractors doing business with both companies and provides that
the company which first used a general contractor shall have the right to
continue such use (on occasions the parties have waived adherence to this policy
to the benefit of the Company); a verification statement to be signed by vendor
and service provider and the requirement that the officer authorizing a major
expenditure, not be the officer signing checks for the payment of the
expenditure.
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of April 20, 1999, by (i) each person
known by the Company to be the beneficial owner of more than 5% of the
outstanding Common Stock, (ii) each director of the Company, (iii) each
executive officer of the Company, (iv) by all executive officers and directors
of the Company as a group and (v) the Selling Shareholders. See "Description of
Securities". Unless otherwise indicated, each of the following persons has sole
voting and investment power with respect to the shares of Common Stock set forth
opposite their respective names.
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<PAGE>
Shares Beneficially Shares Shares Beneficially
Owned Before the Being Owned After the
Offering (1) Offered Offering
Beneficial Owner number percent number number percent
Joseph Fiore 2,879,384 10.4 0 2,879,384 10.4
Andrew Cosenza, Jr. 2,591,000(2) 9.4 0 2,591,000 9.4
Sandro Grimaldi 821,501 3.0 821,501 0 0
Zooley Services Ltd. 217,631 less than 1.5 217,631 0 0
Frutose Ltd 627,692 2.2 627,692 0 0
GPS America Fund Ltd. 111,440 less than 1.5 111,440 0 0
J.P. Carey Securities 130,000 less than 1.5 130,000 0 0
Jack Augsback & Assoc. 54,800 less than 1.5 54,800 0 0
LaRocque Trading Group
L.L.C 884,935 3.2 884,935 0 0
Aldo Nenzi 248,671 less than 1.5 248,671 0 0
Oscar Brito 198,937 less than 1.5 198,937 0 0
Excalibur Ltd.P'ship. 1,701,545 6.1 1,701,545 0 0
Zakeni Limited 5,289,000 19.1 5,289,000 0 0
Turf Holding, Ltd. 470,000 1.7 470,000 0 0
Sovereign Capital Adv. 75,600 less than 1.5 75,600 0 0
Blue Heron Venture
Fund, Ltd. 800,000 2.9 800,000 0 0
Executive Officers
and Directors as a 5,550,384 19.8 0 5,550,384 20.9
group (5)persons)
- ---------------------------
(1) The figures represented by this table assume full conversion and exercise
of Convertible Debentures, Convertible Preferred Stock and Warrants owned
by each individual or entity.
(2) including 50,000 shares held in trust for Anthony Cosenza,III.
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<PAGE>
The actual number of shares of Common Stock beneficially owned is subject to
adjustment and could be materially less or more than the stated amount being
offered for sale depending of factors which cannot be predicted by the Company
at this time. These factors include the market price for the Common Stock
prevailing at the actual date of conversion of Preferred Stock and/or Debentures
and whether or to what extent dividends and/or interest due the holders of the
securities are paid in Common Stock. The Selling Shareholders have advised the
Company that sales of the Selling Shareholder shares may be effected from time
to time in transactions (which may include block transactions) in the
over-the-counter market, in negotiated transactions, or a combination of such
methods of sale, at fixed prices which may be changed, at market prices
prevailing at a time of sale, or at negotiated prices. The Selling Shareholders
may effect such transactions by selling shares directly to purchasers or through
broker dealers who may act as agents or principals. The Selling Shareholders
have been advised that they may only effect sales of the Selling Shareholder
shares in certain jurisdictions through broker-dealers registered in those
states. Such broker-dealers may receive compensation in the form of discounts,
concession or commission from the Selling Shareholders and/or the purchasers of
Selling Shareholder shares for whom such broker-dealers may act as agents or to
whom they sell as principals, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions). The Selling
Shareholders and any broker-dealers that act in connection with the sale of the
Selling Shareholder shares may be deemed to be "underwriters" within the meaning
of Section 2(11) of the Securities Act and any commission received by them and
any profit on the resale of the Selling Shareholder shares as principals might
be deemed to be underwriting discounts and commissions under the Securities Act.
The Selling Shareholders may agree to indemnify any agent, dealer or
broker-dealer that participates in transactions involving sales of the Selling
Shareholder shares against certain liabilities, including liabilities arising
under the Securities Act.
In December of 1998, short term indebtedness due Blue Heron Venture Fund, Ltd.
("Blue Heron") in the amount of $2,010,000 was partially forgiven and the
balance converted into 3,500,000 shares of the Company's Common Stock. Blue
Heron is not affiliated with the Company or any of its officers or directors. In
addition, the Company has issued 800,000 warrants to Blue Heron, expiring
December 31, 1999. 200,000 of the warrants are exerciseable at $.50 per share;
200,000 warrants are exerciseable at $.625; 200,000 are exerciseaable at $.75
and 200,000 exerciseable at $1.00.
DESCRIPTION OF SECURITIES
CONVERTIBLE DEBENTURE
The material terms of the Company' convertible debentures provide for
the payment of interest at 8% per annum payable quarterly, mandatory redemption
after 3 years from the date of issuance at 130% of the principal amount. Subject
to adjustment, the debentures are convertible into Common Stock at the lower of
a fixed conversion price ($1.82 per share for $900,000 principal amount of
debentures; $1.61 per share for $588,980 principal amount of debentures) or 75%
of the average closing bid price for the Company's Common Stock for the 5
trading days preceding the date of the conversion notice. Repayment of the
indebtedness is secured by a general lien on the assets of the Company and
guarantee by 5 of the Company's operating subsidiaries.
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<PAGE>
CAPITAL STOCK
The Company's authorized capital stock consists of 10,000,000 shares of
Preferred Stock, issuable in one or more series and 50,000,000 shares of Common
Stock. The par value of each of said shares is $.0001. As of April 20, 1999
20,197,197 shares of Common Stock and 3 shares of Series A Convertible Preferred
Stock; 18 shares of Series B Convertible Preferred Stock; 14 shares of Series C
Convertible Preferred Stock and 20 shares of Series D Convertible Preferred
Stock are outstanding.
PREFERRED STOCK
The Board of Directors of the Company is authorized to issue, without
further stockholder approval, up to 10,000,000 shares of Preferred Stock from
time to time in one or more series and to fix such designations, powers,
preferences and relative voting, distribution, dividend, liquidation, transfer,
redemption, conversion and other rights, preferences, qualifications,
limitations or restrictions thereon..
The material terms of the Company's Series A, B, C and D Convertible
Preferred Stock are identical except as to conversion price. The Preferred Stock
pays a dividend of 3% per annum payable quarterly in cash or Common Stock. The
Preferred Stock is convertible into Common Stock at the lower of a fixed
conversion price or 75% (80% for the Series D Preferred Stock) of the average
closing bid price for the Company's Common Stock for the 5 trading days
preceding the date of the conversion notice ("Market Price"). The fixed
conversion prices for the Series A, B, C and D Preferred Stock are $2.19,
$1.7928, $1.545 and $1.65 respectively. .
Additional shares of Common Stock are to be issued to the holders of the Series
A, B, C and D Preferred Stock and Convertible Debentures in the event the
Registration Statement is not declared effective within 90 days from the
issuance of the Preferred Stock or Convertible Debentures ("Scheduled Effective
Date"). In the event of such late registration, the conversion percentage is
reduced by 3% for each month (prorated) the Registration Statement is declared
effective subsequent to the Schedule Effective Date. Further, the Fixed
Conversion Price for the Series A shares is reduced by an amount equal to the
product of (a) $.0657 and (b) the sum of (i) the number of months (prorated)
after the Scheduled Effective Date and prior to the date that the Registration
Statement is declared effective by the SEC and (ii) the number of months
(prorated) that sales cannot be made pursuant to the Registration Statement
after the Registration Statement has been declared effective. The Fixed
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<PAGE>
Conversion Price for the Series B shares is reduced by an amount equal to the
product of (a) $.054 and (b) the sum of (i) the number of months (prorated)
after the Scheduled Effective Date and prior to the date that the Registration
Statement is declared effective by the SEC and (ii) the number of months
(prorated) that sales cannot be made pursuant to the Registration Statement
after the Registration Statement has been declared effective. The Fixed
Conversion Price for the Series C shares is reduced by an amount equal to the
product of (a) $.062 and (b) the sum of (i) the number of months (prorated)
after the Scheduled Effective Date and prior to the date that the Registration
Statement is declared effective by the SEC and (ii) the number of months
(prorated) that sales cannot be made pursuant to the Registration Statement
after the Registration Statement has been declared effective. The Fixed
Conversion Price for the Series D shares is reduced by an amount equal to the
product of (a) $1.65 and (b) the sum of (i) the number of months (prorated)
after the Scheduled Effective Date and prior to the date that the Registration
Statement is declared effective by the SEC and (ii) the number of months
(prorated) that sales cannot be made pursuant to the Registration Statement
after the Registration Statement has been declared effective The Fixed
Conversion Price for the Convertible Debentures is reduced by an amount equal to
the product of (a) $1,500,000 and (b) the sum of (i) the number of months
(prorated) after the Scheduled Effective Date and prior to the date that the
Registration Statement is declared effective by the SEC and (ii) the number of
months (prorated) that sales cannot be made pursuant to the Registration
Statement after the Registration Statement has been declared effective.
Holders of the Company's convertible securities, can convert their
securities into common stock at a discount to the Market Price. Set forth below
is a table, which indicates, as of April 20, 1999, how the conversion price
adjusts for the changes in the Market Price.
Market Price
$1.00 $0.67 $.50 Conv. Discount
---------------------------------------------------
Series A Pfd. .425 .285 .21 57.5%
Series B Pfd. .485 .325 .24 51.5%
Series C Pfd. .615 .41 .31 38.5%
Series D Pfd. .67 .45 .34 33.0%
Debenture .595 .40 .30 40.5%
COMMON STOCK
There are no preemptive, subscription, conversion or redemption rights
pertaining to the Common Stock. The absence of preemptive rights could result in
a dilution of the interest of existing shareholders should additional shares of
Common Stock be issued. Holders of the Common Stock are entitled to receive such
dividends as may be declared by the Board of Directors out of assets legally
available therefor, and to share ratably in the assets of the Company available
upon liquidation.
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<PAGE>
Each share of Common Stock is entitled to one vote for all purposes and
cumulative voting is not permitted in the election of directors. Accordingly,
the holders of more than 50% of all of the outstanding shares of Common Stock
can elect all of the directors. Significant corporate transactions such as
amendments to the articles of incorporation, mergers, sales of assets and
dissolution or liquidation require approval by the affirmative vote of the
majority of the outstanding shares of Common Stock. Other matters to be voted
upon by the holders of Common Stock normally require the affirmative vote of a
majority of the shares present at the particular shareholders' meeting. The
Company's directors and officers as a group beneficially own approximately 39%
of the outstanding Common Stock of the Company. See "Principal and Selling
Shareholders." Accordingly, such persons will continue to be able to
substantially control the Company's affairs, including, without limitation, the
sale of equity or debt securities of the Company, the appointment of officers,
the determination of officers' compensation and the determination whether to
cause a registration statement to be filed.
The rights of holders of the shares of Common Stock may become subject in
the future to prior and superior rights and preferences in the event the Board
of Directors establishes one or more additional classes of Common Stock, or one
or more additional series of Preferred Stock.
WARRANTS
In connection with the private placement by J.P. Carey Securities, Inc.
("Carey") of 51 shares of the Company's Series A Convertible Preferred Stock on
March 20, 1998, Carey received warrants to purchase 102,000 shares of the
Company's Common Stock, subject to adjustment. The warrants are exercisable at
$1.49 per share and expire on March 20, 2003.
In connection with the private placements by Carey of 64 shares of the
Company's Series B Convertible Preferred Stock in May, 1998, Carey received
warrants to purchase 28,000 shares of the Company's Common Stock, and its
designees, 126,000 warrants, subject to adjustment The warrants are exercisable
at $1.79 per share; 120,000 warrants expire on May 5, 2003 and 34,000 on May 22,
2003. 19 shares of Series B Convertible Preferred Stock were subsequently
redeemed.
In connection with the private placements by Sovereign Capital Advisers
("Sovereign") of 14 shares of the Company's Series C Convertible Preferred Stock
in September, 1998, Sovereign received warrants to purchase 19,600 shares of the
Company's Common Stock, and its designees, 2,800 warrants, subject to
adjustment. 16,000 of the warrants are exercisable at $1.15 per share and 6,400
at $1.01. The warrants expire 5 years after their issuance.
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<PAGE>
In connection with the private placement by Sovereign of 20 shares of the
Company's Series D Convertible Preferred Stock in September, 1998, Excalibur
Limited Partnership received warrants to purchase 40,000 shares and Sovereign's
designee warrants to purchase 4,000 shares of the Company's Common Stock subject
to adjustment. 40,000 warrants are exercisable at $1.45 per share and 4,000 at
$1.65 per share. The Warrants expire 5 years after their issuance.
In connection with the private placements by Sovereign of $1,500,000
principal amount of the Company's convertible debentures on July 31 and
September 2, 1998, Sovereign received warrants to purchase 56,000 shares of the
Company's Common Stock, and its designees 8,000 warrants, subject to adjustment.
36,000 warrants are exercisable at $1.38 per share and 28,000 warrants are
exercisable at $1.05 per share. The warrants expire 5 years after their
issuance.
The Warrant Agreement provides for adjustment of the exercise price and the
number of shares of Common Stock purchasable upon exercise of the Warrants to
protect Warrant holders against dilution in certain events, including stock
dividends, stock splits, reclassification, and any combination of Common Stock,
or the merger, consolidation, or disposition of substantially all the assets of
the Company.
The Company has agreed to "piggy-back" registration rights for the
securities underlying the Warrants at the Company's expense during the during
the five years following the issuance of the Warrants. In addition, at any time
commencing 90 days after the issuance of the warrants, the Company has agreed to
register the securities underlying the Warrants at the Company's expense upon
notice from the holders.
Wall Street Management Group, Inc. holds 5 year options to acquire 61,350
restricted shares of the Company's Common Stock at a price of $1.63 per share.
See "Certain Transactions."
In connection with a Regulation D 504 offering completed in November, 1996,
the Company sold 6,000,000 shares of Common Stock and Warrants to purchase an
additional 2,000,000 shares at $1.00 per share. In October 1998, the remaining
outstanding warrants, 1,100,000, expired unexercised.
SHARES ELIGIBLE FOR FUTURE SALE
As of April 20, 1999 (assuming no exercise of options or warrants after
April 20, 1999 except for the underlying shares being registered on behalf of
the Selling Shareholders), there will be 27,586,835 shares of Common Stock
outstanding. Of these, including the shares sold in this Offering, 20,985,565
are freely tradable without restriction under the Securities Act. The remaining
6,601,270 shares of Common Stock will be "restricted securities" as that term is
defined in Rule 144 ("Restricted Shares") of the Securities Act. Restricted
Shares may be sold in the public market only if registered or if they qualify
for an exemption from registration under Rule 144 of the Securities Act.
Beginning 90 days after the date of this Prospectus, approximately 275,000
shares will become eligible for sale in compliance with Rule 144. As of December
31, 1998, options to purchase 61,350 shares of Common Stock were outstanding.
See "Warrants."
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In general, under Rule 144 as currently in effect, any person (or persons
whose shares are aggregated) including persons deemed to be affiliates, whose
restricted securities have been fully paid for and held for at least one year
from the later of the date of issuance by the Company or acquisition from an
affiliate, may sell such securities in broker's transactions or directly to
market makers, provided that the number of shares sold in any three month period
may not exceed the greater of 1% of the then-outstanding shares of Common Stock
or the average weekly trading volume of the shares of Common Stock in the
over-the-counter market during the four calendar weeks preceding the sale. Sales
under Rule 144 are also subject to certain notice requirements and the
availability of current public information about the Company. After two years
have elapsed from the later of the issuance of restricted securities by the
Company or their acquisition from an affiliate, such securities may be sold
without limitation by persons who are not affiliates under the rule.
Shares of substantial amount of Common Stock in the public amount, or the
perception that such sales could occur, could adversely affect prevailing market
prices of the Common Stock and could impair the Company's future ability to
raise capital through an offering of its equity securities.
In the event, that upon conversion of the Company's outstanding convertible
securities the holders are entitled to receive more registered shares than are
authorized, it would be necessary to call a special meeting of shareholders on
at least 10 days notice to seek approval to amend the Company's Certificate of
Incorporation to increase the number of authorized shares.
DELAWARE ANTI-TAKEOVER LAW
The Delaware General Corporation Law contains certain anti-takeover
provisions. Section 203 of the Delaware General Corporation Law provides, with
certain exceptions, that a Delaware corporation may not engage in any broad
range of business combinations with a person who owns 15% or more of the
corporation's outstanding voting stock (an "interested stockholder") for a
period of three years from the date that such person became an interested
stockholder unless: (i) the transaction resulting in a person's becoming an
interested stockholder, or the business combination is approved by the board of
directors of the corporation before the person becomes an interested
stockholder, (ii) the interested stockholder acquires 85% or more of the
outstanding voting stock of the corporation (excluding shares owned by persons
who are both officers and directors of the corporation, and shares held by
certain employee stock ownership plans); or (iii) the business combination is
approved by the corporation's board of directors of at least 66 2/3% of
corporation's outstanding voting stock at an annual meeting or special meeting,
excluding shares owned by the interested stockholder.
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TRANSFER AGENT AND REGISTRAR
Signature Transfer, Inc. Dallas, Texas, is the transfer agent and registrar
for the Common Stock of the Company.
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for the
Company by Beckman, Millman and Sanders, L.L.P. a Professional Limited Liability
Partnership, New York, New York. Members of the firm of Beckman, Millman &
Sanders own 115,000 shares of the Common Stock of the Company.
EXPERTS
The financial statements for the periods ended December 31, 1997 and 1998
included herein have been audited by Robison, Hill & Co., Certified Public
Accountants, as indicated in their report with respect thereto, and are included
herein in reliance upon the authority of said firm as experts in giving said
report.
ADDITIONAL INFORMATION
The Company is a reporting company under the Securities Exchange Act of
1934, as amended. The Company has filed with the Washington, D.C. Office of the
Securities and Exchange Commission (the "Commission") a Registration Statement
on Form SB-2 under the Act with respect to the Common Stock offered hereby. This
Prospectus filed as a part of the Registration Statement does not contain all of
the information contained in the Registration Statement and the exhibits
thereto, certain portions of which have been omitted in accordance with the
rules and regulations of the Commission. For further information with respect to
the Company and the securities offered hereby, reference is made to such
Registration Statement including the exhibits and schedules thereto. Statements
contained in this Prospectus as to the contents of any contract, agreement or
other documents are not necessarily complete, and in each instance, reference is
made to such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in all respects by such
reference. The Registration Statement and exhibits may be inspected without
charge and copied at the Washington office of the Commission, 450 Fifth Street,
N.W., Washington, DC 20549, and copies of such material may be obtained at
prescribed rates from the Commission's Public Reference Section at the same
address.
37
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Robison, Hill & Co., Independent Certified Public Accountants......F-1
Consolidated Balance Sheets as of December 31, 1998, and 1997................F-2
Consolidated Statements of Operations for the years ended
December 31, 1998, and 1997.............................................F-4
Consolidated Statement of Stockholders' Equity for the years ended
December 31, 1998, and 1997.............................................F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, and 1997.............................................F-8
Notes to consolidated Financial Statements..................................F-10
38
<PAGE>
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, 1998, and
1997 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, 1998, and 1997, 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 25, 1999
F - 1
<PAGE>
EAT AT JOE'S LTD., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
1998 1997
----------- -----------
ASSETS
Current Assets:
Cash and cash equivalents .................... $ 133,957 $ 232,601
Receivables .................................. 25,861 --
Inventory .................................... 184,115 7,488
Other ........................................ 21,310 400
Prepaid expense .............................. 8,333 30,993
Deposits ..................................... 41,046 12,701
----------- -----------
Total Current Assets .................... 414,622 284,183
----------- -----------
Property and equipment:
Equipment .................................... 1,632,055 279,667
Office furniture ............................. 76,255 1,000
Leasehold improvements ....................... 4,767,308 1,527,099
----------- -----------
6,475,618 1,807,766
Less accumulated depreciation ................ (303,316) (11,546)
----------- -----------
6,172,302 1,796,220
----------- -----------
Other Assets:
Intangible and other assets net of
amortization of $13,400 and $2,150 for
1998 and 1997, respectively .................. 141,437 234,569
----------- -----------
Total Assets ............................ $ 6,728,361 $ 2,314,972
=========== ===========
F - 2
<PAGE>
EAT AT JOE'S LTD., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
(Continued)
1998 1997
----------- -----------
LIABILITIES
Current Liabilities:
Accounts payable and accrued liabilities ....... $ 488,632 $ 474,795
Short-term notes payable ....................... 635,000 264,940
Shareholders loans ............................. 452,455 702,922
----------- -----------
Total Current Liabilities ................. 1,576,087 1,442,657
----------- -----------
Convertible Debentures, Net of Issue Costs ..... 1,343,449 --
----------- -----------
Total Liabilities ......................... 2,919,536 1,442,657
----------- -----------
STOCKHOLDERS EQUITY
Preferred stock - $0.0001 par value ............
10,000,000 shares authorized; 113
shares issued and outstanding ................ -- --
Common Stock - $0.0001 par value ...............
50,000,000 shares Authorized ................
16,440,755 and 12,733,805 issued
and Outstanding, respectively ............... 1,644 1,273
Common Stock To Be Issued ...................... 131 --
Additional paid-in capital ..................... 7,213,400 2,244,299
Retained deficit ............................... (3,406,350) (1,373,257)
----------- -----------
Total Stockholders' Equity ................ 3,808,825 872,315
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ..... $ 6,728,361 $ 2,314,972
=========== ===========
The accompanying notes are an integral part of these financial statements.
F - 3
<PAGE>
<TABLE>
<CAPTION>
EAT AT JOE'S LTD., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998, AND 1997
1998 1997
------------ ------------
<S> <C> <C>
Revenues ............................................... $ 2,519,255 $ 84,781
Cost of Revenues ....................................... 702,481 38,009
------------ ------------
Gross Margin ........................................... 1,816,774 46,772
Expenses
Labor and Related Expenses .......................... 1,168,225 106,346
Rent ................................................ 288,639 15,860
Other General and Administrative .................... 890,131 205,588
------------ ------------
Income (Loss) Before Depreciation and Amortization ..... (530,221) (281,022)
Depreciation and Amortization ....................... 305,170 13,696
------------ ------------
Net Loss from Continuing Operations .................... (835,391) (294,718)
------------ ------------
Other Income (Expense)
Interest income ..................................... 576 3,759
Interest expense .................................... (158,525) (7,311)
Loss on sale of assets .............................. -- (752)
------------ ------------
Net Other Income (Expense) ............................. (157,949) (4,304)
------------ ------------
Net Loss Before Income Taxes ........................... (993,340) (299,022)
Income Tax Expense (Benefit) ........................... 2,725 --
------------ ------------
Net Loss Before Cumulative Effects of Accounting Change (996,065) (299,022)
Cumulative Effect of Accounting Change on Years Prior to
1998, Net of Taxes
(84,732) --
Net Loss ............................................... (1,080,797) (299,022)
------------ ------------
Less: Preferred Dividends .............................. 952,296 --
------------ ------------
Net Loss To Common Stockholders ........................ $ (2,033,093) $ (299,022)
============ ============
Basic Loss Per Common Share: ........................... $ (0.16) $ (0.02)
============ ============
Weighted Average Number of Common Shares ............... 13,062,921 11,729,107
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F - 4
<PAGE>
<TABLE>
<CAPTION>
EAT AT JOE'S LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, AND 1997
Common Stock Additional
Preferred Stock To Be Issued Common Stock Paid-in Retained
----------------- ------------------------ -------------------------- ----------- ------------
Shares Amount Shares Amount Shares Amount Capital Deficit
-------- ------ ----------- ---------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at
December 31, 1996 -- $ -- -- $ -- 11,833,805 $ 1,183 $ 1,344,389 $(1,074,235)
March 1997, shares
issued on exercise
of warrants -- -- -- -- 400,000 40 399,960 --
April 1997, shares
issued on exercise
of warrants -- -- -- -- 300,000 30 299,970 --
November 1997 shares
issued on exercise
of warrants -- -- -- -- 200,000 20 199,980 --
Net loss for the year -- -- -- -- -- -- -- (299,022)
-------- ------ ----------- ----------- ----------- ----------- ----------- ------------
Balance at
December 31, 1997 -- -- -- -- 12,733,805 1,273 2,244,299 (1,373,257)
March 1998, Series A
Convertible Preferred
shares 51 -- -- -- -- -- 725,803 --
May 1998, Series B
Convertible Preferred
shares 64 -- -- -- -- -- 967,903 --
May 1998, Series B
Convertible Preferred
shares canceled (19) -- -- -- -- -- (450,000) --
</TABLE>
F - 5
<PAGE>
<TABLE>
<CAPTION>
Common Stock Additional
Preferred Stock To Be Issued Common Stock Paid-in Retained
----------------- ------------------------ -------------------------- ----------- ------------
Shares Amount Shares Amount Shares Amount Capital Deficit
-------- ------ ----------- ---------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
September 1998, Series C
Convertible Preferred
shares 14 -- -- -- -- -- 183,165 --
September 1998, Series B
Preferred shares
converted (7) -- -- -- 211,737 22 (22) --
September 1998, Series D
Convertible Preferred
shares 20 -- -- -- -- -- 293,625 --
December 1998, Series B
Preferred shares
converted (5) -- -- -- 330,782 33 (33) --
December 1998, Series A
Preferred shares
converted (5) -- -- -- 284,230 28 (28) --
December 1998, shares
issued in cancellation
of short-term debt and
associated interest -- -- -- -- 500,000 50 269,629 --
December 1998, shares
issued in cancellation
of short-term debt and
associated interest -- -- 1,312,500 131 2,187,500 219 1,822,568 --
</TABLE>
F - 6
<PAGE>
<TABLE>
<CAPTION>
Common Stock Additional
Preferred Stock To Be Issued Common Stock Paid-in Retained
----------------- ------------------------ -------------------------- ----------- ------------
Shares Amount Shares Amount Shares Amount Capital Deficit
-------- ------ ----------- ---------- ------------ ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
January through
December 1998, shares
issued in exchange
for Leasehold --
Improvements -- -- -- -- 38,200 4 40,184
January through
December 1998, shares
issued in exchange
for Services --
-- -- -- -- 154,501 15 164,011
Preferred dividend
due to discounted
conversion rates -- -- -- -- -- -- 952,296 (952,296)
Net loss for the year -- -- -- -- -- -- -- (1,080,797)
-------- ------ ----------- ----------- ----------- ----------- ----------- ------------
Balance at
December 31, 1998 113 -- 1,312,500 $ 131 16,440,755 $ 1,644 $ 7,213,400 $(3,406,350)
======== ====== =========== =========== =========== =========== =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F - 7
<PAGE>
<TABLE>
<CAPTION>
EAT AT JOE'S LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, AND 1997
1998 1997
----------- -----------
<S> <C> <C>
Cash Flows From Operating Activities
Net loss for the period .............................. $(1,080,797) $ (299,022)
Adjustments to reconcile net loss to net cash
Provided by operating activities
Loss from sale of marketable securities ............ -- 752
Depreciation and Amortization ...................... 305,170 13,696
Cumulative Effect of Accounting Change ............. 84,732 --
Stock issued for services and expenses ............. 246,623 --
Payment of organization costs ...................... -- (78,124)
Decrease (Increase) in Receivables ................. (25,861) 70,000
Increase in inventory .............................. (176,627) (7,488)
Increase in other assets ........................... (20,910) (400)
Increase in prepaid expense ........................ 22,660 (27,018)
Decrease (increase) in deposits .................... (28,345) (1,710)
Increase in accounts payable and accrued liabilities (1,103) 467,560
----------- -----------
Net Cash Provided by (Used in) Operating Activities ..... (674,458) 138,246
----------- -----------
Cash Flows From Investing Activities
Purchase of property and equipment ................... (4,627,664) (1,795,271)
Purchase of intangible assets ........................ (5,000) --
Proceeds from sale of marketable securities .......... -- 143,248
Purchase of marketable securities .................... -- (144,000)
----------- -----------
Net Cash Provided by Investing Activities ............... (4,632,664) (1,796,023)
----------- -----------
Cash Flows From Financing Activities
Issuance of common stock ............................. -- 900,000
Issuance of convertible preferred stock .............. 2,170,496 --
Purchase of convertible preferred stock .............. (450,000) --
Proceeds from convertible debenture .................. 1,343,449 --
Advances from majority stockholders .................. 113,825 690,422
Repayments of majority stockholders advances ......... (364,292) --
Proceeds from short-term notes payable ............... 2,395,000 264,940
----------- -----------
Net Cash Provided by Financing Activities ............... 5,208,478 1,855,362
----------- -----------
Increase (Decrease) in Cash ............................. (98,644) 197,585
Cash at beginning of period ............................. 232,601 35,016
----------- -----------
Cash at End of Period ................................... $ 133,957 $ 232,601
=========== ===========
</TABLE>
F - 8
<PAGE>
EAT AT JOE'S LTD. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, AND 1997
(Continued)
1998 1997
---------- --------
Supplemental Disclosure of Interest and
Income Taxes Paid
Interest paid during the period ................... $ 295 $ --
========== ========
Income taxes paid during the period ............... $ 4,225 $ --
========== ========
Supplemental Disclosure of Non-cash Investing
and Financing Activities
Leasehold Improvements Acquired with Issuance
of Common Stock ................................. $ 40,188 $ --
========== ========
Short-term Notes Settled with Issuance of
Common Stock ................................... $2,010,000 $ --
========== ========
Intangible Assets Acquired with Issuance of
Common Stock ................................... $ -- $149,832
========== ========
Organization Costs Acquired with Issuance
Common Stock ................................... $ -- $ 200
========== ========
The accompanying notes are an integral part of these financial statements.
F - 9
<PAGE>
EAT AT JOE'S LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, AND 1997
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 has had no operations, assets or
liabilities.
Principles of Consolidation
The consolidated financial statements include the accounts of Eat At Joe's,
LTD. And its wholly-owned subsidiary, E.A.J. Holding Corporation, a Delaware
corporation ("Holding"). Holding includes the accounts of its wholly-owned
subsidiaries, E.A.J. PHL Airport, Inc. a Pennsylvania corporation, Eat At Joe's
U. of P., Inc. a Pennsylvania corporation, E.A.J. Cherry Hill, Inc., a New
Jersey corporation, Eat At Joe's Harborplace, Inc., a Maryland corporation, Eat
At Joe's Neshaminy, Inc. a Pennsylvania corporation, Eat At Joe's Plymouth,
Inc., a Pennsylvania corporation, E.A.J. Echelon Mall, Inc., a New Jersey
corporation, E.A.J. Gallery, Inc., a Pennsylvania corporation, E.A.J.
Moorestown, Inc., a New Jersey corporation, E.A.J. Shoppingtown,Inc., a New York
corporation, Eat at Joe's U of P 40th Street, Inc., a Pennsylvania corporation,
and Eat at Joe's Owings Mills, Inc., a Maryland corporation. All significant
intercompany accounts and transactions have been eliminated.
F - 10
<PAGE>
EAT AT JOE'S LTD. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, AND 1997
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
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:
Office furniture 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 7 - 13 years.
F - 11
<PAGE>
EAT AT JOE'S LTD. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, AND 1997
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
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.
Recent Accounting Pronouncements
During 1998, the Company changed its method of accounting for costs of
start up activities to conform with new requirements of Statement of Position
98-5 "Reporting on the Costs of Start-Up Activities" (SOP 98-5). The effect of
this change was to increase net loss for the year ended December 31, 1998 by
$84,732. Financial Statements for 1997 have not been restated in accordance with
the provisions of SOP 98-5.
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.
F - 12
<PAGE>
EAT AT JOE'S LTD. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, AND 1997
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Reverse Stock Split
Effective May 3, 1997 the Stockholders approved a 50 to 1 reverse split of
the common stock and effective October 7, 1997 the Stockholders approved a 4 to
1 reverse split. The financial statements have been retroactively restated to
reflect the reverse stock split as if it had been effective prior to the
earliest date presented.
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.
Earnings (Loss) Per Share
In 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings per Share" (EPS). SFAS No. 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings 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 1998 and 1997 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 1998
----------------------------------------
Per Share
Income Shares Amount
----------- ----------- ------------
Basic EPS
Net Loss to common shareholders $(2,033,093) 13,062,921 $ (0.16)
=========== =========== ============
F - 13
<PAGE>
EAT AT JOE'S LTD. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, AND 1997
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Earnings (Loss) Per Share (continued)
For the Year Ended 1997
----------------------------------------
Per Share
Income Shares Amount
----------- ----------- ------------
Basic EPS
Net Loss to common shareholders $ (299,022) 11,729,107 $ (0.02)
=========== =========== ============
Reclassifications
Certain reclassifications have been made in the 1997 financial statements
to conform with the 1998 presentation.
NOTE 2 - SHORT-TERM NOTES PAYABLE
Short-Term Notes Payable consist of loans from unrelated entities as of
December 31, 1998 and 1997. 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 $349,000 and $71,000 for the years ended December
31, 1998 and 1997 respectively, are the result of net operating losses.
The Company has recorded net deferred income taxes in the accompany
consolidated balance sheets as follows:
F - 14
<PAGE>
EAT AT JOE'S LTD. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, AND 1997
(Continued)
NOTE 3 - INCOME TAXES (Continued)
As at December 31,
--------- ---------
1998 1997
--------- ---------
Future deductible temporary differences related to
Reserves, accruals, and net operating losses $ 736,000 $ 387,000
Valuation allowance (736,000) (387,000)
--------- ---------
Net Deferred Income Tax $ -- $ --
========= =========
As of December 31, 1998, the Company had a net operating loss ("NOL") carry
forward for income tax reporting purposes of approximately $2,165,000 available
to offset future taxable income. This net operating loss carry forward expires
at various dates between December 31, 2003 and 2013. A loss generated in a
particular year will expire for federal tax purposes if not utilized within 15
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 $736,000 as of December 31, 1998. 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,
--------- ---------
1998 1997
--------- ---------
Benefit at the federal statutory rate of 34% $ 349,000 $ 71,000
Nondeductible expenses -- (1,000)
--------- ---------
Utilization of net operating loss carryforward $(349,000) $ (70,000)
--------- ---------
$ -- $ --
========= =========
F - 15
<PAGE>
EAT AT JOE'S LTD. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, AND 1997
(Continued)
NOTE 4 - PURCHASE OF SUBSIDIARIES
On January 1, 1997 the shareholders of the Company approved an agreement
whereby 5,505,000 shares of the Company's common stock was exchanged for a 100%
interest in E.A.J. Holding Corporation, Inc. ("Holding"), a Delaware
corporation. Holding, which was organized on February 14, 1997, had total assets
with a historical cost value of $150,037, consisting of the Eat at Joe's trade
mark, business plan, graphics, illustrations/renderings, corporate brochure and
website with a historical value of $149,837, organization costs of $200 and no
liabilities on the date of the exchange.
During March, 1997 Holding acquired 100% of the issued and outstanding
stock of E.A.J.: PHL, Airport Inc. ("PHL Airport"), a Pennsylvania corporation
organized August 19, 1996 for $25,000. At the time of the acquisition PHL
Airport had assets with a historical cost value of $37,500, consisting of
developmental costs and organizational costs and liabilities of $12,500.
These transactions have been accounted for as a reorganization of ownership
interests between related parties as if it were a "Pooling of Interest."
Accordingly, assets and liabilities are reflected at their historical values.
The accompanying financial statements for 1997 are based on the assumption that
the companies were combined for the full year.
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
---------------------------------- ------------- --------
1999 $ 486,912 $ --
2000 486,912 --
2001 486,912 --
2002 486,912 --
2003 486,912 --
Thereafter 2,338,721 --
---------- --------
Total minimum future lease payments $4,773,281 $ --
========== ========
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.
F - 16
<PAGE>
EAT AT JOE'S LTD. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, AND 1997
(Continued)
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company utilized office space that is shared with companies controlled
by two officers of the Company. During 1998 and 1997 Cozco Management received
$36,387 and $546,574 as reimbursement for rent, telephone, equipment, travel,
automotive salaries and other shared expenses. During 1998 and 1997 the two
officers and/or companies controlled by the two officers paid expenses and made
advances to the Company totaling $113,825 and $690,422 respectively. During 1998
the Company repaid advances of $364,292. As of December 31, 1998, $452,455 in
advances was due to Mr. Fiore.
NOTE 7 - CONVERTIBLE PREFERRED STOCK, DEBENTURES, WARRANTS & OPTIONS
In January, 1997 the shareholders of the Company adopted an agreement
whereby 5,505,000 shares of the Company's Common Stock was exchanged for a 100%
interest in E.A.J. Holding Corporation, Inc. Messrs. Joseph Fiore and Andrew
Cosenza, Jr., the Company's Chairman and President, were the owners of all the
outstanding shares of E.A.J. Holding Corporation, Inc. The Company issued its
shares upon an exemption from registration under Section 4(2) of the Securities
Act.
In March, 1998, the Company sold 51 shares of its Series A Convertible
Preferred Stock to a total of 8 accredited investors pursuant to an exemption
from registration under the Section 4(2) and/or Regulation D or as an
alternative, Regulation S of the Act. The Company received proceeds of
approximately $797,000 from the sale of the securities. The shares are
convertible and warrants (issued in connection with the offering) exercisable
into shares of Common Stock of the Company at a discount based on the conversion
formula set forth in the offering documentation.
On April 1, 1998, pursuant to a consulting agreement, the Company granted
options to purchase 61,350 shares of Common Stock of the Company at an exercise
price of $1.63. The options expire on March 31, 2003.
On May 5 1998, the Company sold 30 shares of its Series B Convertible
Preferred Stock to a total of 3 accredited investors pursuant to an exemption
from registration under the Section 4(2) and/or Regulation D. The Company
received proceeds of approximately $484,,000 from the sale of the securities.
The shares are convertible and warrants (issued in connection with the offering)
exercisable into shares of Common Stock of the Company at a discount based on
the conversion formula set forth in the offering documentation.
On May 21, 1998, the Company sold 34 shares of its Series B Convertible
Preferred Stock to a total of 2 accredited investors pursuant to an exemption
from registration under the Section 4(2) and/or Regulation D. The Company
received proceeds of approximately $549,000 from the
F - 17
<PAGE>
EAT AT JOE'S LTD. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, AND 1997
(Continued)
NOTE 7 - CONVERTIBLE PREFERRED STOCK, DEBENTURES , WARRANTS, & OPTIONS
Continued)
sale of the securities. The shares are convertible and warrants (issued in
connection with the offering) exercisable into shares of Common Stock of the
Company at a discount based on the conversion formula set forth in the offering
documentation.
In September, 1998, the Company sold 14 shares of its Series C Convertible
Preferred Stock to 2 accredited investors pursuant to an exemption from
registration under the Section 4(2) and/or Regulation D. The Company received
proceeds of approximately $239,000 from the sale of the securities. The shares
are convertible and warrants (issued in connection with the offering)
exercisable into shares of Common Stock of the Company at a discount based on
the conversion formula set forth in the offering documentation.
On July 31, and September 2, 1998, the Company sold its 8% convertible
debenture in the aggregate principal amount of $1,500,000 to an accredited
investor pursuant to an exemption from registration under Section 4(2) and/or
Regulation D. The Company retained proceeds of approximately $933,000 from the
sale of the securities and $450,000 was applied to the repurchase of 19 shares
of Series B Convertible Preferred Stock sold to an investor on May 21, 1998. The
debentures are convertible and warrants (issued in connection with the offering)
exercisable into shares of Common Stock of the Company at a discount based on
the conversion formula set forth in the offering documentation.
In September, 1998, the Company sold 20 shares of its Series D Convertible
Preferred Stock to an accredited investors pursuant to an exemption from
registration under the Section 4(2) and/or Regulation D. The Company received
proceeds of approximately $350,000 from the sale of the securities. The shares
are convertible and warrants (issued in connection with the offering)
exercisable into shares of Common Stock of the Company at a discount based on
the conversion formula set forth in the offering documentation.
The following table sets forth the options and warrants outstanding as of
December 31, 1998 and 1997.
1998 1997
---------- ----------
Options & warrants outstanding, beginning of year 1,100,000 2,000,000
Granted 1,247,750 --
Expired (1,060,000) --
Exercised (40,000) (900,000)
---------- ----------
Options & warrants outstanding, end of year 1,247,750 1,100,000
========== ==========
Exercise price for options & warrants outstanding,
end of year $0.50 to $1.79 $ 1.00
============== ==========
F - 18
<PAGE>
EAT AT JOE'S LTD. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, AND 1997
(Continued)
NOTE 8 - SELECTED FINANCIAL DATA (Unaudited)
The following table set forth certain unaudited quarterly financial
information:
<TABLE>
<CAPTION>
1998 Quarters Ended
------------------------------------------------------------------------------
Mar 31 Jun 30 Sep 30 Dec 31
------------------ ------------------ ------------------- -------------------
<S> <C> <C> <C> <C>
Income statement data:
Net sales $147,347 $316,397 $817,129 $1,238,382
Gross profit 85,312 157,461 613,654 960,347
Income (loss) from
operations before
depreciation & amortization (372,638) (289,480) 31,447 100,450
Loss from operations (394,589) (329,038) (47,858) (63,906)
Other income (8,931) (4,941) (78,235) (65,842)
Loss before taxes (403,520) (333,979) (126,093) (129,748)
Income tax (provision) benefit (682) (681) (681) (681)
Net Income (Loss) $(488,934) $(334,660) $(126,774) $(130,429)
================== ================== =================== ===================
1997 Quarters Ended
------------------------------------------------------------------------------
Mar 31 Jun 30 Sep 30 Dec 31
------------------ ------------------ ------------------- -------------------
Income statement data:
Net sales $ - $ - $ - $84,781
Gross profit - - - 46,772
Income (loss) from
operations before
depreciation & amortization (60,733) (152,046) (68,971) 728
Loss from operations (60,733) (152,046) (68,971) (12,968)
Other income 6 1,926 1,075 (7,311)
------------------ ------------------ ------------------- -------------------
Loss before taxes (60,727) (150,120) (67,896) (20,279)
Income tax (provision) benefit - - - -
------------------ ------------------ ------------------- -------------------
Net Income (Loss) $(60,727) $(150,120) $(67,896) $(20,279)
================== ================== =================== ===================
</TABLE>
F - 19
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITER. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE
THE DATE HEREOF. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY
ANYONE IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED
OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO
SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
---------------------------
TABLE OF CONTENTS
PAGE
Prospectus Summary..................... 3
Risk Factors........................... 6
Dividend Policy........................ 11
Capitalization......................... 13
Management's Discussion and Analysis of
Financial Condition and Results of
Operations........................... 15
Business............................... 17
Management............................. 26
Certain Transactions................... 29
Principal Shareholders................. 29
Description of Securities.............. 31
Legal Matters.......................... 37
Experts................................ 37
Additional Information................. 37
Index to Consolidated Financial
Statements........................... 38
----------------------------
UNTIL , 1999 (25 DAYS AFTER THE DATE OF THE PROSPECTUS), ALL DEALERS EFFECTING
TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS
DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO
THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS.
<PAGE>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
EAT AT JOE'S, LTD.
.
12,842,004 SHARES
------------------------------
PROSPECTUS
------------------------------
May ____, 1999
------------------------------------------------------
------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
See "Management - Personal Liability and Indemnification of Directors."
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses in connection with the distribution of the shares
registered hereby, are set forth in the following table:
SEC registration fee........................................ $ 2,500
Legal fees and expenses..................................... 105,000
Accounting fees and expenses................................ 17,500
Blue Sky fees and expenses.................................. 7,500
Transfer agent fees and expenses............................ 1,000
Printing and engraving expenses............................. 2,000
Miscellaneous............................................... 2,000
-----
Total.....................................................$137,500
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES.
In November 1996, the Company raised $60,000 through the issuance 600,000
shares of its Common Stock and warrants to acquire 2,000,000 shares at an excise
price of $1.00 per share. The offering was exempt from registration pursuant to
Regulation D Section 504. In 1997, 900,000 warrants were exercised against
payment of $900,000.
In January, 1997 the shareholders of the Company adopted an agreement
whereby 5,505,000 shares of the Company's Common Stock was exchanged for a 100%
interest in E.A.J. Holding Corporation, Inc. Messrs. Joseph Fiore and Andrew
Cosenza, Jr., the Company's Chairman and President, were the owners of all the
outstanding shares of E.A.J. Holding Corporation, Inc. The Company issued its
shares upon an exemption from registration under Section 4(2) of the Securities
Act.
<PAGE>
In March, 1998, the Company sold 51 shares of its Series A Convertible
Preferred Stock to a total of 8 accredited investors pursuant to an exemption
from registration under the Section 4(2) and/or Regulation D or as an
alternative, Regulation S of the Act. The Company received proceeds of
approximately $797,000 from the sale of the securities. As of the date of this
prospectus the outstanding shares are convertible into 217,631 shares of Common
Stock of the Company.
On May 5 1998, the Company sold 30 shares of its Series B Convertible
Preferred Stock to a total of 3 accredited investors pursuant to an exemption
from registration under the Section 4(2) and/or Regulation D. The Company
received proceeds of approximately $484,000 from the sale of the securities. As
of the date of this prospectus the outstanding shares are convertible into
1,129,845 shares of Common Stock of the Company.
On May 21, 1998, the Company sold 34 shares of its Series B Convertible
Preferred Stock to a total of 2 accredited investors pursuant to an exemption
from registration under the Section 4(2) and/or Regulation D. The Company
received proceeds of approximately $549,000 from the sale of the securities. As
of the date of this prospectus all shares have been redeemed or converted into
of Common Stock of the Company.
In September, 1998, the Company sold 14 shares of its Series C Convertible
Preferred Stock to 2 accredited investors pursuant to an exemption from
registration under the Section 4(2) and/or Regulation D. The Company received
proceeds of approximately $239,000 from the sale of the securities. As of the
date of this prospectus the shares are convertible into 696,280 shares of Common
Stock of the Company.
On July 31, and September 2, 1998, the Company sold its 8% convertible
debentures in the aggregate principal amount of $1,500,000 to an accredited
investor pursuant to an exemption from registration under Section 4(2) and/or
Regulation D. The Company retained proceeds of approximately $ 993,000 from the
sale of the securities and $450,000 was applied to the repurchase of 19 shares
of Series B Convertible Preferred Stock sold to an investor on May 21, 1998. As
of the date of this prospectus, the debentures are convertible into
5,272,222 shares of Common Stock of the Company.
In September, 1998, the Company sold 20 shares of its Series D Convertible
Preferred Stock to an accredited investors pursuant to an exemption from
registration under the Section 4(2) and/or Regulation D. The Company received
proceeds of approximately $350,000 from the sale of the securities. As of the
date of this prospectus the shares are convertible into 887,260 shares of Common
Stock of the Company.
<PAGE>
INDEX TO EXHIBITS
ITEM 27. EXHIBITS.
PAGE
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- -------------------------------------------------------------------------------
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)
4.4 Certificate of Designations-Series C Convertible Preferred Stock(1)
4.5 Certificate of Designations-Series D Convertible Preferred Stock(1)
5.1 Opinion of Beckman, Millman & Sanders, L.L.P.(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.
23.1 Consent of Robison, Hill & Co.
24.2 Consent of Beckman, Millman & Sanders, L.L.P. (included in Exhibit 5).
27.1 Financial Data Schedule
(1) Previously filed.
<PAGE>
ITEM 28. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the small business
issuer pursuant to the foregoing provisions or otherwise, the small business
issuer has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the small
business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
The undersigned small business issuer hereby undertakes that it will:
(1) File, during any period in which it offers or sells securities, a
post-effective amendment to this registration statement to (i) include any
prospectus required by Section 10(a)(3) of the Securities Act; (ii)reflect
in the prospectus any facts or events which, individually or together,
represent a fundamental change in the information in the registration
statement; and (iii) include any additional or changed material information
on the plan of distribution.
(2) For determining any liability under the Securities Act, treat the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the small business issuer under Rule 424(b)(1) or
(4) or Rule 497(h) under the Securities Act as part of this registration
statement as of the time the Commission declared it effective.
(3) For determining any liability under the Securities Act, treat each
post-effective amendment that contains a form of prospectus as a new
registration statement for the securities offered in the registration
statement, and that offering of the securities at that time as the initial
bona fide offering of those securities.
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form SB-2 and has authorized this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the Town of Scarsdale, State of New York, on May 05, 1999.
EAT AT JOE'S, LTD
By /s/ Joseph Fiore
------------------------------------
Joseph Fiore
Chairman of the Board and
Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates stated.
SIGNATURE TITLE DATE
/s/ JOSEPH FIORE Chairman of the Board,
Chief Executive Officer May 05, 1999
and Principal Financial
- ------------------------------ Officer
Joseph Fiore
/s/ JAMES MYLOCK Director May 05, 1999
- ------------------------------
James Mylock
/s/ TIM MATULA Director May 05, 1999
- ------------------------------
Tim Matula
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
Eat Joe's U of P., Inc.
E. A. J. Phl, Airport, Inc.
Eat at Joe's Gallery, Inc.
E. A. J. Enterprises, Inc.
Eat at Joe's Harborplace, Inc.
E. A. J. Shoppington, Inc.
Eat at Joe's Neshaminy, Inc.
Eat at Joe's Plymouth Incorporated
E. A. J. Danbury, Inc.
1337855 Ontario, Inc.
Exhibit 5.1
BECKMAN, MILLMAN & SANDERS, LLP
116 John Street
New York, New York 10038
May___ , 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: East at Joe's, Ltd. Registration Statement on Form SB-2
(File nos. 333-55679)
Gentlemen:
We have acted as counsel to Eat at Joe's, Ltd. a Delaware corporation (the
"Company"), in connection with the registration by the Company under the
Securities Act of 1933 (the "Act") pursuant to the Company's Registration
Statement on Form SB-2 (File nos. 333-55679) to be filed with the Securities and
Exchange Commission (the "Commission") on or about the date of this letter (the
"Registration Statement") of up to 17,500,000 shares of the Company's common
stock, par value $.0001 to be issued under certain circumstances (the "Issuable
Shares" pursuant to certain Securities Purchase Agreements dated March 20, May
5, May 20, August 31 and September 23, 1998 and Debenture and Warrant Purchase
Agreement dated July 31, 1998.
In connection with this opinion, we have examined originals or copies,
certified or otherwise to our satisfaction, of the Certificate of Incorporation
of the Company, as amended to date, Certificates of Designations, Preferences
and Rights, Certificates of Good Standing of a recent date, and certificates of
certain officers of the Company, and such other documents, instruments and
records; and have made such other investigations, as we have deemed necessary or
appropriate as a basis for the opinions set forth herein.
We have assumed the legal capacity of all natural persons, the genuineness
of all signatures, the authenticity of all documents submitted to us as
originals, the conformity to original documents of all documents submitted to us
as certified or photostatic copies and the authenticity of the originals of such
latter documents. In making our examination of documents executed by parties
other than the Company, we have assumed that such parties had the power,
corporate or otherwise to enter into and perform their respective obligations
thereunder and have also assumed the due authorization by all requisite action,
corporate or otherwise, and the execution and delivery by such parties of such
documents and the validity and binding effect thereof. As to any facts material
to the opinions expressed herein, we have relied upon oral or written statements
and representations of officers and other representatives of the Company and
others.
Based upon and subject to the foregoing, we are of the opinion that the
Issuable Shares, when issued, sold and delivered in the manner and or the
consideration stated in the Prospectus included in the Registration Statement,
will be duly authorized and validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion with the Commission as
Exhibit 5.1 to the Registration Statement. We also consent to the reference to
our firm under the caption "Legal Matters" in the Prospectus included in the
Registration Statement.
Very truly yours,
BECKMAN, MILLMAN & SANDERS, LLP
by: /Steven A. Sanders
Steven A. Sanders
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement
of Eat at Joe's, Ltd. on Form SB-2 of our reports dated March 25, 1999, and to
reference to us under the heading "Experts" in the Prospectus, which is part of
this Registration Statement.
ROBISON, HILL & CO.
/s/ Robison, Hill & Co.
Salt Lake City, Utah
May 05, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE OF EAT AT JOE'S LTD. AS OF DECEMBER 31, 1998 AND THE RELATED STATEMENTS
OF OPERATIONS AND CASH FLOWS FOR THE YEAR THEN ENDED AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 134
<SECURITIES> 0
<RECEIVABLES> 184
<ALLOWANCES> 0
<INVENTORY> 21
<CURRENT-ASSETS> 415
<PP&E> 6476
<DEPRECIATION> 303
<TOTAL-ASSETS> 6728
<CURRENT-LIABILITIES> 1576
<BONDS> 1343
0
0
<COMMON> 2
<OTHER-SE> 3806
<TOTAL-LIABILITY-AND-EQUITY> 6728
<SALES> 2519
<TOTAL-REVENUES> 2519
<CGS> 702
<TOTAL-COSTS> 702
<OTHER-EXPENSES> 982
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 158
<INCOME-PRETAX> (993)
<INCOME-TAX> (3)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (996)
<EPS-PRIMARY> (0.16)
<EPS-DILUTED> (0.16)
</TABLE>
