U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1999
-----------------------------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from to
Commission file number 33-20111
Eat at Joe's Ltd.
(Exact name of small business issuer as
specified in its charter)
Delaware 75-2636283
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
670 White Plains Road, Suite 120, Scarsdale, New York, 10583
(Address of principal executive offices)
(914) 725-2700
Issuer's telephone number
(Former name, former address and former fiscal year, if changed since last
report.)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
<PAGE>
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDING DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practical date: September 30, 1999 31,080,505
Transitional Small Business Disclosure Format (check one). Yes ; No X
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
EAT AT JOE'S LTD., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, December 31,
1999 1998
----------- -----------
ASSETS:
Current Assets:
Cash and Cash Equivalents ................. $ 11,790 $ 133,957
Receivables ............................... 36,737 25,861
Inventory ................................. 440,839 184,115
Other ..................................... 15,400 21,310
Prepaid Expense ........................... 69,140 8,333
----------- -----------
Total Current Assets ................... 573,906 373,576
----------- -----------
Property and Equipment:
Equipment ................................. 1,352,769 1,632,055
Office Furniture .......................... 65,881 76,255
Leasehold Improvements .................... 4,330,111 4,767,308
----------- -----------
5,748,761 6,475,618
Less Accumulated Depreciation ............. (573,886) (303,316)
----------- -----------
5,174,875 6,172,302
----------- -----------
Other Assets:
Investments ............................... 100,000 --
Intangible and Other Assets, Net .......... 142,644 182,483
----------- -----------
Total Assets ........................... $ 5,991,425 $ 6,728,361
=========== ===========
<PAGE>
EAT AT JOE'S LTD., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)
(Unaudited)
September 30, December 31,
1999 1998
----------- -----------
LIABILITIES:
Current Liabilities:
Accounts Payable and Accrued Liabilities .. 632,951 $ 488,632
Short-Term Notes Payable .................. 335,463 635,000
Shareholder Loans ......................... 619,200 452,455
----------- -----------
Total Current Liabilities .............. 1,587,614 1,576,087
----------- -----------
Convertible Debenture, net of issue costs .. 1,223,449 1,343,449
----------- -----------
Total Liabilities ...................... 2,811,063 2,919,536
----------- -----------
Stockholders' Equity:
Preferred Stock - $.0001 par value,
10,000,000 shares authorized; 28
and 113 shares issued and outstanding
September 30, 1999 and December 31, 1998,
respectively ........................... -- --
Common Stock - $.0001 par value,
50,000,000 shares authorized,
31,080,505 and 16,440,755 issued and
outstanding September 30, 1999 and
December 31, 1998, respectively ......... 3,108 1,644
Common Stock to be Issued ................. -- 131
Additional Paid-In Capital ................ 9,452,939 7,213,400
-----------
Retained Deficit .......................... (6,275,685) (3,406,350)
----------- -----------
Total Stockholders' Equity ............. 3,180,362 3,808,825
----------- -----------
Total Liabilities and Stockholders' Equity $ 5,991,425 $ 6,728,361
=========== ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
EAT AT JOE'S LTD., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1999 1998 1999 1998
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenues .................... $ 849,717 817,129 $ 2,788,033 1,280,873
Cost of Revenues ............ 475,045 534,769 1,162,965 865,871
------------ ------------ ------------ ------------
Gross Margin ................ 374,672 282,360 1,625,068 415,002
Expenses
Labor and Related Expenses 440,596 -- 1,410,334 --
Rent ..................... 102,448 -- 379,930 --
Other General &
Administrative ......... 275,934 273,043 670,306 1,065,652
Depreciation and
Amortization ........... 172,631 57,175 502,824 120,835
------------ ------------ ------------ ------------
Net loss from Operations .... (616,937) (47,858) (1,338,326) (771,485)
Other Income (Expense) Net (1,430,322) (78,235) (1,531,009) (92,107)
------------ ------------ ------------ ------------
Net Loss Before Income Taxes (2,047,259) (126,093) (2,869,335) (863,592)
Income Tax Expense (Benefit) -- -- -- --
------------ ------------ ------------ ------------
Net Loss Before Cumulative
effects of Accounting Change (2,047,259) (126,093) (2,869,335) (863,592)
Cumulative effect of
Accounting Change on Years
Prior to1998, Net of Taxes .. -- -- -- (84,732)
Net Loss .................... $(2,047,259) $ (126,093) $ (2,869,335) (948,324)
============ ============ ============ ============
Preferred Dividends ......... -- (129,647) -- (721,302)
Net Loss Per Common Share-
Basic and Diluted:
Net Loss Before Cumulative
effects of Accounting Change (0.07) (0.02) (0.12) (0.12)
Cumulative effect of
Accounting Change ........... -- -- -- (0.01)
------------ ------------ ------------ ------------
Net Loss Per Common Share-
Basic and Diluted ........... $ (0.07) $ (0.02) $ (0.12) $ (0.13)
============ ============ ============ ============
Weighted Average Shares
Outstanding ................. 27,349,269 12,823,854 23,053,130 12,740,769
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
EAT AT JOE'S LTD., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
1999 1998
----------- -----------
Cash Flows from Operating Activities:
Net loss for the period before cumulative effects of
<S> <C> <C>
accounting change ................................. $(2,869,335) $ (863,592)
Adjustments to Reconcile net loss to net cash
provided by operating activities
Depreciation and amortization ............. 502,824 140,814
Stock exchanged for goods & services ...... 139,548 87,025
Loss on disposition of assets ............. 1,400,307 --
(Increase) decrease in:
Receivables ............................ (10,876) --
Inventory .............................. (256,724) (80,758)
Prepaid expense ........................ (60,807) 22,660
Other assets ........................... (417,665) (134,495)
Increase (decrease) in:
Accounts payable and accrued liabilities 144,321 (33,532)
----------- -----------
Net Cash Used in Operating Activities: ............ (1,428,407) (861,878)
----------- -----------
Cash Flows From Investing Activities:
Purchase of property and equipment ............. (695,967) (3,775,168)
----------- -----------
Net Cash Used by Investing Activities: ............ (695,967) (3,775,168)
----------- -----------
Cash Flows From Financing Activities:
Issuance of convertible preferred stock ......... -- 1,945,837
Issuance of common stock ........................ -- --
Proceeds from short-term notes payable .......... 1,842,663 1,860,000
Proceeds from convertible debenture ............. -- 1,343,449
Principal payment on notes payable .............. (7,200) --
Advances to (from) majority stockholder ......... 166,744 (250,467)
----------- -----------
Net Cash Provided by Financing Activities ......... 2,002,207 4,898,819
----------- -----------
Increase in Cash .................................. (122,167) 261,773
Cash at Beginning of Period ....................... 133,957 232,601
----------- -----------
Cash at End of Period ............................. $ 11,790 $ 494,374
=========== ===========
</TABLE>
<PAGE>
EAT AT JOE'S LTD., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Continued)
For the Nine Months
Ended September 30,
1999 1998
----------- -----------
Supplemental Disclosure of
Noncash Investing and Financing Activities
Common Stock Issued For:
Property and Equipment ................... $ 198,500 $ 27,875
Debt converted to equity ................. $2,255,000 $ --
Supplemental Disclosure of
Interest and Income Taxes Paid
Interest paid for the period ................. $ -- $ --
Income taxes paid for the period ............. $ 225 $ --
The accompanying notes are an integral part of these financial statements.
<PAGE>
EAT AT JOE'S LTD., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE AND NINE MONTHS ENDED September 30, 1999
(Unaudited)
1. Interim Reporting
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles and with Form 10-QSB
requirements. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. Operating results for the
three and Nine month periods ended September 30, 1999, are not necessarily
indicative of the results that may be expected for the year ended December 31,
1999. For further information, refer to the financial statements and footnotes
thereto included in the Company's annual report on Form 10-KSB for the year
ended December 31, 1998.
2. 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.
3. Restaurant Closures
The unaudited Consolidated Statement of Operations reports "Other
Income (Expense), Net" for the 3RD quartet 1999 in the amount of $1,430,322. Of
this, approximately $1,400,000 is due to the closing, during the quarter, of
four restaurants, two in the U.S. and two in Canada.
Subsequent to September 30, 1999, one additional restaurant has been
closed.
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
General - This discussion should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations in the
Company's annual report on Form 10-KSB for the year ended December 31, 1998.
Results of Operations - From March 1, 1990 to December 12, 1995 the Company was
an inactive corporation. From December 12, 1995 to November 1997 the Company was
a development stage company and had not begun principal operations. During
November and December, 1997 two restaurants were opened and began operations.
Two restaurants were opened, during May 1998, and three restaurants were opened
during third quarter 1998 (1 per month) and one restaurant was opened began
operations during October 1998.
Total Revenues - For the three months ended September 30, 1999 and 1998, the
Company had total sales of approximately $850,000 and $817,000 respectively. For
the nine months ended September 30, 1999 and 1998, the Company had total sales
of approximately $2,788,000 and $1,281,000 respectively.
Costs and Expenses - For the three months ended September 30, 1999 and 1998, the
Company had a net loss from operations of approximately $990,000 and $48,000
respectively. For the nine months ended September 30, 1999 and 1998, the Company
had a net loss from operations of approximately $1,563,000 and $771,000
respectively. The net loss for 1999 and 1998 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. Given the limited operations which took place in 1998, any
discussion of operating expenses as a percentage of sales would not be
meaningful and might be misleading.
Other Income (Expense), Net - For the 3RD quartet 1999 the Company reported net
other expenses in the amount of $1,430,322. Of this, approximately $1,400,000 is
due to the closing, of four restaurants, two in the U.S. and two in Canada.
After its review of over one year of operating revenues from the two U.S. units,
management decided to cease operations and cut any negative cash drain from
these units. Also, in contemplating acquisitions, there would be an overlap of
use clauses in every center where these units were located. When management
carefully reviewed the two Canada locations, although high-profile, the economic
costs of occupancy made continuing operations unfeasible without expending
additional capital of which management felt would be utilized more prudently
within existing already cash-flow positive units. Management believes these
closings will strengthen cash flows position after the initial close down costs.
Subsequent to September 30, 1999, one additional restaurant has been closed.
LIQUIDITY AND CAPITAL RESOURCES
For the nine months ended September 30, 1999 and 1998, the Company used
$1,428,000 and $862,000 in cash flow from operating activities.
<PAGE>
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 the Nine months ended
September 30, 1999 and 1998 the company paid approximately $696,000 and
$3,775,000, respectively for property and equipment..
During the nine months ended September 30, 1999 and 1998 the Company
borrowed approximately $1,843,000 and $1,860,000, respectively, the majority of
which was subsequently converted into Common Stock of the Company. During the
Nine months ended September 30, 1998, the Company raised approximately
$3,289,000 (net of issuance costs) through the sale of preferred stock and
debentures which are convertible into Common Stock of the Company. The net
proceeds to the Company were used for additional unit development and working
capital.
After the completion of its expansion plans, the Company expects future
development and expansion will be financed through cash flow from operations and
other forms of financing such as the sale of additional equity and debt
securities, capital leases and other credit facilities. There are no assurances
that such financing will be available on terms acceptable or favorable to the
Company.
Government Regulations - The Company is subject to all pertinent Federal, State,
and Local laws governing its business. Each Eat at Joe's is subject to licensing
and regulation by a number of authorities in its State or municipality. These
may include health, safety, and fire regulations. The Company's operations are
also subject to Federal and State minimum wage laws governing such matters as
working conditions, overtime and tip credits.
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 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.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not engaged in any legal proceedings other than the ordinary
routine litigation incidental to its business operations, which the Company does
not believe, in the aggregate, will have a material adverse effect on the
Company, or its operations.
<PAGE>
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
The Company did not file a report on Form 8-K during the three months
ended September 30, 1999.
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
EAT AT JOE'S LTD.
(Registrant)
DATE: November 15, 1999 By: /s/ Joseph Fiore
------------------------- --------------------------------------
Joseph Fiore
C.E.O., Chairman, Secretary, Director
DATE: November 15, 1999 By: /s/ Gary Usling
------------------------- -------------------------------------
Gary Usling
C.F.O., Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET OF EAT AT JOE'S LTD. AS OF SEPTEMBER 30, 1999 AND THE RELATED
STATEMENTS OF OPERATIONS AND CASH FLOWS FOR THE NINE MONTHS THEN ENDED AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 12
<SECURITIES> 0
<RECEIVABLES> 37
<ALLOWANCES> 0
<INVENTORY> 441
<CURRENT-ASSETS> 574
<PP&E> 5749
<DEPRECIATION> 574
<TOTAL-ASSETS> 5991
<CURRENT-LIABILITIES> 1588
<BONDS> 1223
0
0
<COMMON> 3
<OTHER-SE> 3177
<TOTAL-LIABILITY-AND-EQUITY> 5991
<SALES> 2788
<TOTAL-REVENUES> 2788
<CGS> 1163
<TOTAL-COSTS> 1163
<OTHER-EXPENSES> 2963
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 136
<INCOME-PRETAX> (2869)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2869)
<EPS-BASIC> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
