U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(MARK ONE)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED: DECEMBER 31, 1999
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _________ To __________
COMMISSION FILE NUMBER 33-20111
EAT AT JOE'S LTD.
(Name of small business issuer in its charter)
DELAWARE 75-2636283
State or other jurisdiction of (I.R.S. Employer
incorporation or organization Identification No.)
670 WHITE PLAINS ROAD, SUITE 120, SCARSDALE, NEW YORK 10583
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
ISSUER'S TELEPHONE NUMBER (914) 725-2700
---------------
Securities registered under Section 12(b) of the Act: NONE
Securities registered under Section 12(g) of the Act:
COMMON STOCK PAR VALUE $0.0001
(Title of class)
<PAGE>
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such REPORTS), AND (2)
HAS BEEN SUBJECT TO SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X No
TOTAL PAGES: 20
---
EXHIBIT INDEX PAGE: 17
---
Check if there is no disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this form 10-KSB. [ ]
STATE ISSUER'S REVENUES FOR ITS MOST RECENT FISCAL YEAR. $3,461,176
----------
As of December 31, 1999, there were 41,874,650 shares of the
Registrant's common stock, par value $0.0001, issued and outstanding and
1,186,400 warrants and 61,350 options to purchase common stock at $0.50 to $1.79
per share. The aggregate market value of the Registrant's voting stock held by
non-affiliates of the Registrant was approximately $9,132,961 computed at the
average bid and asked price as of December 31, 1999.
DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly
describe them and identify the part of the Form 10-KSB (e.g., Part I, Part II,
etc.) into which the document is incorporated: (1) any annual report to security
holders; (2) any proxy or information statement; and (3) any prospectus filed
pursuant to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"):
NONE
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE): YES ; NO X
-- --
2
<PAGE>
TABLE OF CONTENTS
Item Number and Caption Page
- -------------------------------------------------------------------------------
PART I
Item 1. Description of Business..............................................4
Item 2. Description of Property..............................................8
Item 3. Legal Proceedings....................................................8
Item 4. Submission of Matters to a Vote of Security Holders..................9
PART II
Item 5. Market for Common Equity and Related Stockholder Matters............ 9
Item 6. Management's Discussion and Analysis or Plan of Operations..........11
Item 7. Financial Statements................................................13
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.......................................13
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act..........13
Item 10. Executive Compensation..............................................16
Item 11. Security Ownership of Certain Beneficial Owners and Management......16
Item 12. Certain Relationships and Related Transactions......................17
Item 13. Exhibits and Reports on Form 8-K....................................17
3
<PAGE>
PART I
ITEM 1 DESCRIPTION OF BUSINESS
GENERAL
The business of Eat at Joe's, Ltd. ( the "Company") is to develop, own
and operate theme restaurants called "Eat at Joe's (R)." The theme for the
restaurants is an "American Diner" atmosphere where families can eat wholesome,
home-cooked food in a safe friendly atmosphere. Eat at Joe's, the classic
American grill, is a restaurant concept that takes you back to eating in the era
when favorite old rockers were playing on chrome-spangled jukeboxes and neon
signs reflected on shiny tabletops of the 1950's.
The Company presently owns and operates five theme restaurants: three
restaurants located in Philadelphia, Pennsylvania; one in Moorestown, New Jersey
and one in Etobicoke, Ontario, Canada. The Company is planning at least four
acquisitions during 2000, subject to the availability of funding. All
restaurants will be located in high traffic locations. The restaurants will be
modest priced restaurants catering to the local working and residential
population rather than as a tourist destination.
In March of 1999, 1337855 Ontario, Inc. ("Ontario"), wholly owned
subsidiary of the Company entered into a purchase agreement with Koo Koo Roo
Canada Limited (Koo Koo Roo) to acquire certain assets and assume certain
liabilities of that company. Koo Koo Roo is a California-based casual dining,
quick service restaurant chain featuring skinless flame broiled chicken, roasted
hand-carved turkey and made-to-order tossed salads and specialty sandwiches.
Ontario acquired a 20 year exclusive license agreement in Canada with a 20 year
renewal term to operate Koo Koo Roo restaurants.
The Company's common stock is traded on the National Association of
Security Dealers, Inc. (the "NASD's") OTC Bulletin Board Under the symbol
"JOES."
HISTORY
The company was incorporated as Conceptualistics, Inc. on January 6,
1988 in Delaware as a wholly owned subsidiary of Halter Venture Corporation
("HVC"), a publicly-owned corporation (now known as Debbie Reynolds Hotel and
Casino, Inc.) In 1988, HVC divested itself of approximately 14% of its holdings
in the Company by distributing 1,777,000 shares of the issued and outstanding
stock of the Company to its shareholders. The then majority shareholder of HVC
became the majority shareholder of the Company. Its authorized capital stock is
50,000,000 shares of common stock, par value $0.0001 per share and 10,000,000
4
<PAGE>
shares of preferred stock, par value $0.0001 per share.
During the period from September 30, 1988 to March 1, 1990, the company
remained in the development stage while attempting to enter the mining industry.
The Company acquired certain unpatented mining claims and related equipment
necessary to mine, extract, process and otherwise explore for kaolin clay,
silica, feldspar, precious metals, antimony and other commercial minerals from
its majority stockholder and unrelated third parties. The Company was
unsuccessful in these start up efforts and all activity ceased during 1992 as a
result of foreclosure on various loans in default and/or abandonment of all
assets.
From March 1, 1990 to January 1 , 1997, the Company did not engaged in
any business activities.
On January 1 , 1997, the Shareholders adopted a plan or reorganization
and merger between the Company and E. A. J. Holding Corp. Inc. ("Hold") to be
effective on or before January 31, 1997. Under the plan, the Company acquired
all the issued and outstanding shares of "Hold", a Delaware corporation making
"Hold" a wholly owned subsidiary of the Company for 5,505,000 common shares of
the Company.
In addition to its wholly owned subsidiary, Hold, the Company has
eleven wholly owned subsidiaries:
- E.A.J. PHL Airport, Inc. a Pennsylvania corporation,
- 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,
- Eat at Joe's Owings Mills, Inc., a Maryland corporation.
- 1337855 Ontario, an Ontario corporation.
Each of the subsidiaries will operate a single restaurant. Two
restaurants, E.A.J. Cherry Hill and Eat At Joe's U. of P. were opened November
and December 1997, two additional restaurants, E.A.J. Echelon Mall and E.A.J.
PHL AIRPORT WERE OPENED MAY 1998, EAT AT JOE'S U OF P 40TH Street opened July
1998, E.A.J. Gallery opened August 1998, Eat At Joe's Harborplace opened
September 1998, E.A.J. Moorestown opened October 1998 and 1337855 Ontario
acquired March 1999 with three existing restaurants in operation.
5
<PAGE>
During 1999, E.A.J. Cherry Hill, Inc., E.A.J. Gallery, Inc., Eat At
Joe's Harborplace, Inc., E.A.J. Echelon Mall, Inc., and two of the 1337855
Ontario restaurants were closed and substantially all assets and leasehold
improvements abandoned.
The principal executive offices of the Company are located at 670 White
Plains Road, Suite 120, Scarsdale, NY 10583.
The Company's wholly-owned subsidiary 1337855 Ontario shares office
space of approximately 1,000 square feet in Ontario with an officer of the
Company.
OPERATING LOSSES
The Company has incurred net losses of approximately $6,452,000 and
$1,081,000 for the fiscal years ended December 31, 1999 and December 31, 1998,
respectively. Such operating losses reflect developmental and other start-up
activities for 1999 and 1998 and the loss on abandonment assets during 1999. The
Company expects to incur losses in the near future until profitability is
achieved. The Company's operations are subject to numerous risks associated with
establishing any new business, including unforeseen expenses, delays and
complications. There can be no assurance that the Company will achieve or
sustain profitable operations or that it will be able to remain in business.
FUTURE CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FUNDING
The Company was not in full operations during 1999 and 1998 and thus,
the revenues generated are not representative of those that will be generated
once all units are operating. Revenues are not yet sufficient to support the
Company's operating expenses and are not expected to reach such levels until the
first or second quarter of 2001. Since the Company's formation, it has funded
its operations and capital expenditures primarily through private placements of
debt and equity securities. See "Recent Sales of Unregistered Securities." The
Company expects that it will be required to seek additional financing in the
future. There can be no assurance that such financing will be available at all
or available on terms acceptable to the Company.
GOVERNMENT REGULATION
The Company is subject to all pertinent Federal, State, and Local laws
governing its business. Each Eat at Joe's is subject to licensing and regulation
by a number of authorities in its State or municipality. These may include
health, safety, and fire regulations. The Company's operations are also subject
to Federal and State minimum wage laws governing such matters as working
conditions, overtime and tip credits.
RISK OF LOW-PRICED STOCKS
Rules 15g-1 through 15g-9 promulgated under the Securities Exchange Act
6
<PAGE>
of 1934 (the "Exchange Act") impose sales practice and disclosure requirements
on certain brokers and dealers who engage in certain transactions involving "a
penny stock."
Currently, the Company's Common Stock is considered a penny stock for
purposes of the Exchange Act. The additional sales practice and disclosure
requirements imposed on certain brokers and dealers could impede the sale of the
Company's Common Stock in the secondary market. In addition, the market
liquidity for the Company's securities may be severely adversely affected, with
concomitant adverse effects on the price of the Company's securities.
Under the penny stock regulations, a broker or dealer selling penny
stock to anyone other than an established customer or "accredited investor"
(generally, an individual with net worth in excess of $1,000,000 or annual
incomes exceeding $200,000, or $300,000 together with his or her spouse) must
make a special suitability determination for the purchaser and must receive the
purchaser's written consent to the transaction prior to sale, unless the broker
or dealer or the transaction is otherwise exempt. In addition, the penny stock
regulations require the broker or dealer to deliver, prior to any transaction
involving a penny stock, a disclosure schedule prepared by the Securities and
Exchange Commission (the "SEC") relating to the penny stock market, unless the
broker or dealer or the transaction is otherwise exempt. A broker or dealer is
also required to disclose commissions payable to the broker or dealer and the
registered representative and current quotations for the Securities. In
addition, a broker or dealer is required to send monthly statements disclosing
recent price information with respect to the penny stock held in a customer's
account and information with respect to the limited market in penny stocks.
LACK OF TRADEMARK AND PATENT PROTECTION
The Company relies on a combination of trade secret, copyright and
trademark law, nondisclosure agreements and technical security measures to
protect its products. Notwithstanding these safeguards, it is possible for
competitors of the company to obtain its trade secrets and to imitate its
products. Furthermore, others may independently develop products similar or
superior to those developed or planned by the Company.
COMPETITION
The Company faces competition from a wide variety of food distributors,
many of which have substantially greater financial, marketing and technological
resources than the Company.
EMPLOYEES
As of March 25, 2000, the Company had approximately 65 employees, none
of whom is represented by a labor union.
7
<PAGE>
ITEM 2 DESCRIPTION OF PROPERTY
Since 1997 all administrative activities of the Company have been
conducted by corporate officers from either their home or business offices.
Currently, there are no outstanding debts owed by the Company for the use of
these facilities and there are no commitments for future use of the facilities.
The Company's wholly-owned subsidiary, E.A.J. Moorestown, Inc. leases
approximately 3,683 square feet in the Moorestown Mall, Moorestown, New Jersey
pursuant to a shopping center lease dated July 1, 1997. The Company pays $6,250
per month rent under the lease which expires June 30, 2012.
The Company's wholly-owned subsidiary Eat At Joe's U. of P., Inc.
leases approximately 456 square feet in the Shoppes at Penn, Philadelphia,
Pennsylvania pursuant to a prime lease dated October 30, 1997. Eat at Joe's U.
of P. pays $1,710 per month rent under the lease which expires December 31,
2008.
The Company's wholly-owned subsidiary E.A.J. PHL Airport, Inc. leases
approximately 845 square feet in the Philadelphia Airport, Philadelphia,
Pennsylvania pursuant to a lease dated April 30, 1997. E.A.J. PHL Airport pays
$7,100 per month rent under the lease which expires April 2007.
The Company's wholly-owned subsidiary Eat at Joe's U OF P 40TH Street,
Inc. leases approximately 4,000 square feet in the Eat at Joe's University City
Diner, Philadelphia, Pennsylvania pursuant to a lease dated APRIL 21, 1998. EAT
AT JOE'S U OF P 40TH Street pays $6,667 per month rent under the lease which
expires December 2008.
The Company's wholly-owned subsidiary 1337855 Ontario leases an
approximately 5,200 square feet Koo Koo Roo restaurant in the Humbertown Shoping
Center located in Etobicoke, Ontario, Canada. 1337855 Ontario pays $14,500
Canadian Dollars per month rent under the lease which expires in the year 2015,
with an additional five year option.
ITEM 3 LEGAL PROCEEDINGS
Summary of Litigation Between Various Eat At Joe's Entities and Various Rouse
Corporation Entities.
Litigation was instituted by Cherry Hill Center, Inc., Echelon Mall
8
<PAGE>
Joint Venture, Owings Mills Limited Partnership and Plymouth Meeting Mall, Inc.
against Eat At Joe's, Cherry Hill, Inc. t/a Eat At Joe's, E.A.J. Holding
Corporation, E.A.J. Echelon Mall, Inc. t/a Eat At Joe's Express, Eat At Joe's
Limited, Eat At Joe's Owings Mills, Inc. t/a Eat At Joe's and Eat At Joe's
Plymouth Meeting, Inc. t/a Eat At Joe's. Each of the Plaintiffs is the Landlord
for the corresponding Eat At Joe's entity, each of which Eat At Joe's Entities
are single purpose entities. E.A.J. Holding Corporation was named as a party
because it is a Guarantor of the leases. To the best of my knowledge, none of
the Eat At Joe's Defendants have any assets or are currently engaged in any
actively ongoing business activity. Therefore, any potential judgment against
them in the action will be uncollectible.
In response to the Complaint of the Plaintiffs, the Defendants asserted
various defenses and Counterclaims against the Plaintiffs and certain additional
Rouse-related Third-Party Defendants based upon fraud, consumer fraud, tortuous
interference with prospective economic advantage, negligent misrepresentation
and breach of the duty of good faith and fair dealing. Eat At Joe's Moorestown,
Inc. joined in the case as a Third-Party Plaintiff to assert similar claims
against certain of the Rouse-related entities. It is very difficult to predict
the outcome of this case. Plaintiffs' claims totaled approximately $830,000.00
as of the date of the filing of the Complaint. Additionally, Plaintiffs are
seeking judgment for additional rent which comes due under the leases between
the time of the filing of the Complaint and the entry of the judgment together
with their costs and attorney's fees. The Eat At Joe's Defendants and
Third-Party Plaintiffs seek damages in the form of recovery of Eat At Joe's
improvements to the various leaseholds totaling in excess of $4,000,000.00.
Counsel is presently attempting to negotiate a settlement of the entire
litigation without adverse consequence to Eat At Joe's.
ITEM 4 SUBMISSION OF MATTERS TO A
VOTE OF SECURITY HOLDERS
No matters were subject to a vote of security holders during the year
1999.
PART II
ITEM 5 MARKET FOR COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
9
<PAGE>
MARKET INFORMATION
The Company's Common Stock is traded on the NASD's OTC Bulletin Board
under the symbol "JOES." The following table presents the high and low bid
quotations for the Common Stock as reported by the NASD for each quarter during
the last two years. Such prices reflect inter-dealer quotations without
adjustments for retail markup, markdown or commission, and do not necessarily
represent actual transactions.
1998: HIGH LOW
First Quarter $2.04 $1.06
Second Quarter $3.38 $1.40
Third Quarter $1.78 $0.72
Fourth Quarter $1.21 $0.41
1999:
First Quarter $1.88 $0.50
Second Quarter $0.77 $0.38
Third Quarter $0.52 $0.13
Fourth Quarter $0.54 $0.10
DIVIDENDS
The Company has never declared or paid any cash dividends. It is the
present policy of the Company to retain earnings to finance the growth and
development of the business and, therefore, the Company does not anticipate
paying dividends on its Common Stock in the foreseeable future.
The number of shareholders of record of the Company's Common Stock as
of February 15, 2000 was approximately 3,342.
RECENT SALES OF UNREGISTERED SECURITIES
Holders of Convertible Preferred Stock received 18,444,018 shares of
the Company's Common stock in conversion of 46 shares of Series A, 33 (including
2 shares converted subsequent to December 31, 1999) shares of Series B, 14
shares of Series C and 20 Shares of Series D Convertible Preferred Stock.
During 1999, holders of $130,450 of Convertible debentures received
700,320 shares of Common Stock on conversion of debentures.
During 1999, the Company issued 4,240,000 shares of its common stock in
settlement of $2,194,897 in short-term debt., and exchanged 1,824,044 shares of
its Common Stock for property, equipment goods and services valued at $281,043.
10
<PAGE>
ITEM 6 MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATIONS
PLAN OF OPERATIONS - Eat at Joe's Ltd. Intends to open and operate theme
restaurants styled in an "American Diner" atmosphere where families can eat
wholesome, home cooked food in a safe friendly atmosphere. Eat at Joe's, the
classic American grill, is a restaurant concept that takes you back to eating in
the era when favorite old rockers were playing on chrome-spangled jukeboxes and
neon signs reflected on shiny tabletops of the 1950's. Eat at Joe's fulfills the
diner dream with homey ambiance that's affordable while providing food whose
quality and variety is such you can eat there over and over, meal after meal. To
build on the diner experience, a retail section in each Eat at Joe's would allow
customers to take the good feelings home with them, in the form of 50's
memorabilia.
The Company's expansion strategy is to open restaurants either through
Joint Venture agreements or Company owned units. Units may consist of a
combination of full service restaurants or food court locations. Restaurant
construction will take from 90-150 days to complete on a leased site.
In considering site locations, the Company concentrates on trade
demographics, such as traffic volume, accessibility and visibility. High
Visibility Malls and Strip Malls in densely populated suburbs are the preferred
locations. The Company also scrutinizes the potential competition and the
profitability of national restaurant chains in the target market area. As part
of the expansion program, the Company will inspect and approve each site before
approval of any joint venture or partnership.
A typical food court unit is approximately 500 square feet, whereas for
a full service operation it is approximately 3,500 square feet. Food court
operation consists of a limited menu. A full service restaurant consists of
30-35 tables seating about 140- 150 people. The bar area will hold 6-8 tables
and seats 30-35 people.
The restaurant industry is an intensely competitive one, where price,
service, location, and food quality are critical factors. The Company has many
established competitors, ranging from similar casual-style chains to local
single unit operations. Some of these competitors have substantially greater
financial resources and may be established or indeed become established in areas
where the Eat at Joe's Company operates. The restaurant industry may be affected
by changes in customer tastes, economic, demographic trends, and traffic
patterns. Factors such as inflation, increased supplies costs and the
availability of suitable employees may adversely affect the restaurant industry
in general and the Eat at Joe's Company Restaurant in particular. Significant
numbers of the Eat at Joe's personnel are paid at rates related to the federal
minimum wage and accordingly, any changes in this would affect the Company's
labor costs.
11
<PAGE>
RESULTS OF OPERATIONS - From March 1, 1990 to December 12, 1995 the Company was
an inactive corporation. From December 12, 1995 to November 1997 the Company was
a development stage company and had not begun principal operations. During
November and December, 1997 two restaurants were opened and began operations,
two restaurants opened during May 1998, three restaurants opened during third
quarter 1998, two restaurants opened during fourth quarter 1998, and three
restaurants were acquired during March 1999. Additionally, 4 restaurants were
closed during second quarter 1999 and two were closed during fourth quarter
1999. Accordingly, comparisons with prior periods are not meaningful.
Total Revenues - For the years ended December 31, 1999 and 1998, the Company had
total sales of approximately $3,461,000 and $2,519,000 respectively.
Costs and Expenses - For the years ended December 31, 1999 and 1998, the Company
had a net loss of approximately $6,4512,000 and $1,081,000 respectively. The net
loss for 1999 is largely attributable to a loss on abandonment of assets from
the closure of restaurants of approximately $4,359,000. The remaining loss from
1999 and the loss from1998 is largely attributable to additional expenses
incurred as the Company increases its Corporate overhead structure for the
development of additional locations. Given the increases and decreases in number
of restaurants during 1999 and 1998, any discussion of operating expenses as a
percentage of sales would not be meaningful and might be misleading.
LIQUIDITY AND CAPITAL RESOURCES
The Company has met its capital requirements through the sale of its
Common Stock, Convertible Preferred Stock, Convertible Debentures and Notes
Payable. .
Since the Company's re-activation in January, 1997, the Company's
principal capital requirements have been the funding of (i) the development of
the Company and its 1950's diner style concept, (ii) the construction of its
existing units and the acquisition of the furniture, fixtures and equipment
therein and (iii) towards the development of additional units. During 1999 and
1998 the company paid approximately $696,000 and $4,628,000, respectively for
property and equipment..
During 1999 and 1998, the Company has raised approximately $2,010,000
and $2,509,000 through short-term notes payable and advances from majority
stockholders, and $3,513,000 (net of issuance costs) during 1998 through the
sale of preferred stock and debentures, both of which are convertible into
Common Stock of the Company. The net proceeds to the Company were used for
additional unit development and working capital.
For the years 1999 and 1998, the Company used approximately $1,341,000
and $674,000 in cash flow for operating activities.
After the completion of its expansion plans, the Company expects future
12
<PAGE>
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.
ITEM 7 FINANCIAL STATEMENTS
The financial statements of the Company and supplementary data are
included beginning immediately following the signature page to this report. See
Item 13 for a list of the financial statements and financial statement schedules
included.
ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
There are not and have not been any disagreements between the Company
and its accountants on any matter of accounting principles, practices or
financial statements disclosure.
PART III
ITEM 9 DIRECTORS EXECUTIVE OFFICERS, PROMOTERS AND
CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF
THE EXCHANGE ACT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the name, age, and position of each
13
<PAGE>
executive officer and director of the Company:
DIRECTOR'S NAME AGE OFFICE TERM EXPIRES
Joseph Fiore 39 Chief Executive officer, Next
Chairman of the Board of Annual
Directors/Secretary Meeting
James Mylock, Jr. 33 Director Next
Annual
Meeting
Andrew Cosenza, Jr. 31 Director, Vice Chairman Resigned
October 1, 1999
Tim Matula 39 Director Next
Annual
Meeting
Gino Naldini 48 President and Chief Operating Next
Officer Annual
Meeting
Gary Usling 40 Chief Financial Officer Next
Annual
Meeting
JOSEPH FIORE has been Chairman and Chief Executive Officer since
October, 1996. In 1982, Mr. Fiore formed East Coast Equipment and Supply Co.,
Inc., a restaurant supply company that he still owns. Between 1982 and 1993, Mr.
Fiore established 9 restaurants (2 owned and 7 franchised) which featured a
1959's theme restaurant concept offering a traditional American menu.
JAMES MYLOCK, JR. has worked with Joseph Fiore in marketing and
business development since graduating from the State University of New York at
Buffalo in 1990.
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. Mr. Cosenza tendered his resignation as of October 1, 1999.
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.
14
<PAGE>
GINO NALDINI became President and Chief Operating Officer of the
Company in December, 1998. From 1967 through 1998, Mr. Naldini held various
senior executive positions with Toronto-based CARA Operations, operator 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.
The Company's Certificate of Incorporation provides that the board of
directors shall consist of from one to nine members as elected by the
shareholders. Each director shall hold office until the next annual meeting of
stockholders and until his successor shall have been elected and qualified.
BOARD MEETINGS AND COMMITTEES
The Directors and Officers will not receive remuneration from the
Company until a subsequent offering has been successfully completed, or cash
flow from operating permits, all in the discretion of the Board of Directors.
Directors may be paid their expenses, if any, of attendance at such meeting of
the Board of Directors, and may be paid a fixed sum for attendance at each
meeting of the Board of Directors or a stated salary as Director. No such
payment shall preclude any Director from serving the Corporation in any other
capacity and receiving compensation therefor. No compensation has been paid to
the Directors. The Board of Directors may designate from among its members an
executive committee and one or more other committees. No such committees have
been appointed.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based solely upon a review of forms 3, 4, and 5 and amendments thereto,
furnished to the Company during or respecting its last fiscal year, no director,
officer, beneficial owner of more than 10% of any class of equity securities of
the Company or any other person known to be subject to Section 16 of the
Exchange Act of 1934, as amended, failed to file on a timely basis reports
required by Section 16(a) of the Exchange Act for the last fiscal year.
15
<PAGE>
ITEM 10 EXECUTIVE COMPENSATION
None of the executive officer's salary and bonus exceeded $100,000
during any of the Company's last two fiscal years.
EMPLOYMENT AGREEMENTS
Effective January 1, 1997, the Company entered into an employment
Agreement with Joseph Fiore (the "Fiore Employment Agreement") under which
Joseph Fiore serves as chairman of the board and chief executive officer of the
Company. Pursuant to the Fiore Employment Agreement, Mr. Fiore was to be paid
$50,000 in 1997 and $75,000 in 1998. In addition, Mr. Fiore will receive family
health insurance coverage until age 70 and life insurance coverage until age 70
with a death benefit of $1,000,000 and the use of an automobile, with all
expenses associated with the maintenance and operation of the automobile paid by
the Corporation. Mr. Fiore deferred all salaries and benefits under this
agreement until the Company reaches profitability.
Effective January 1, 1997, the Company entered into an employment
agreement with Andrew A. Cosenza, Jr. (The"Cosenza Employment Agreement") under
which Andrew A. Cosenza, Jr. serves as president and chief operating office of
the Company as well as serve as a member of the Corporation's board of
directors. Pursuant to the Cosenza Employment Agreement, Mr. Cosenza was paid
$12,500. He deferred $37,500 of his salary for the year 1997. Mr. Cosenza was be
paid a salary of $75,000 in 1998. In addition, Mr. Cosenza will receive the use
of an automobile, with all expenses associated with the maintenance and
operation of the automobile paid by the Corporation, family health insurance
coverage to age 70 and life insurance coverage until age 70 with a death benefit
of $1,000,000. Mr. Cosenza received the use of the automobile for part of the
year 1997 at a cost to the Company of approximately $16,000 . Mr. Cosenza has
deferred all other salaries and benefits under this agreement until the Company
reaches profitability.
ITEM 11 SECURITY OWNERSHIP OF BENEFICIAL OWNERS
AND MANAGEMENT
PRINCIPAL SHAREHOLDERS
The table below sets forth information as to each person owning of
record or who was known by the Company to own beneficially more than 5% of the
41,874,680 shares of issued and outstanding Common Stock of the Company as of
16
<PAGE>
December 31, 1999 and information as to the ownership of the Company's Stock by
each of its directors and executive officers and by the directors and executive
officers as a group. Except as otherwise indicated, all shares are owned
directly, and the persons named in the table have sole voting and investment
power with respect to shares shown as beneficially owned by them.
# OF
NAME AND ADDRESS NATURE OF SHARES
OF BENEFICIAL OWNERS OWNERSHIP OWNED PERCENT
DIRECTORS
Joseph Fiore Common Stock 4,094,974 10%
All Executive Officers Common Stock 5,342,837 13%
and Directors as a Group
(3 persons)
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company utilized office space that is shared with companies
controlled by two officers of the Company. During 1998 Cozco Management received
$36,387, as reimbursement for rent, telephone, equipment, travel, automotive
salaries and other shared expenses. During 1999 and 1998 the two officers and/or
companies controlled by the two officers paid expenses and made advances to the
Company. As of December 31, 1999, $724,760 in advances was due to officers and
directors of the Company.
ITEM 13. EXHIBITS, AND REPORTS ON FORM 8-K
(a)ab The following documents are filed as part of this report.
1.ABFINANCIAL STATEMENTS PAGE
Report of Robison, Hill & Co., Independent Certified Public Accountants......F-1
Consolidated Balance Sheets as of December 31, 1999, and 1998................F-2
17
<PAGE>
Consolidated Statements of Operations for the years ended
December 31, 1999, and 1998.............................................F-4
Consolidated Statement of Stockholders' Equity for the years ended
December 31, 1999, and 1998.............................................F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, and 1998.............................................F-9
Notes to consolidated Financial Statements..................................F-11
2.ABFINANCIAL STATEMENT SCHEDULES
The following financial statement schedules required by Regulation S-X
are included herein.
All schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
3.ABEXHIBITS
The following exhibits are included as part of this report:
Exhibit
Number Title of Document
3.1 Articles of Incorporation(1)
3.2 By-laws(1)
4.1 Certificate of Designations-Series A Convertible Preferred Stock(1)
4.2 Certificate of Designations-Series B Convertible Preferred Stock(1)
4.3 Form of Warrant Agreement(1)
4.4 Certificate of Designations-Series C Convertible Preferred Stock(1)
4.5 Certificate of Designations-Series D Convertible Preferred Stock(1)
10.1 Consulting Agreement-Wall Street Group, Ltd.(1)
10.2 Indenture of Lease between University of Pennsylvania and Eat at Joe's
U. of P., Inc.(1)
10.3 Lease Abstract between Cherry Hill Center, Inc.and Eat at Joe's Cherry
Hill, Inc.(1)
10.4 Lease Abstract between Echelon Mall, Inc. and E.A.J. Eachelon Mall,
Inc.(1)
10.5 Lease Information Form between E.A.J. PHL, Airport, Inc. and
Marketplace Redwood Limited Partnership(1)
10.6 Lease Abstract between Eat at Joe's U. of P., Inc. and UCA Realty
Group, Inc.(1)
10.7 Lease Abstract between Rouse Philadelphia, Inc. and Eat at Joe's
Gallery, Inc.(1)
10.8 Lease Information Form between E.A.J. Enterprises, Inc. and First
18
<PAGE>
Fidelity Bank, N.A(1)
10.9 Lease Abstract between Eat at Joe's Harbor Place, Inc. and Baltimore
Center, Inc.(1)
10.10 Lease Abstract between E.A.J. Shoppington, Inc. and Wilmorite, Inc.(1)
10.11 Lease Abstract between Eat at Joe's Neshaminy, Inc. and General Growth
Properties, Inc.(1)
10.12 Lease Abstract between Eat at Joe's Plymouth Incorporate and Plymouth
Meeting, Inc.(1)
10.13 Lease Abstract between E.A.J. Danbury, Inc. and Wilmorite, Inc.(1)
10.14 Registration of trade name for Eat at Joe's(1)
10.15 Registration Rights Agreement(1)
21 Subsidiaries of the Company(1)
23.1 Consent of Robison, Hill & Co.(1)
27.1 Financial Data Schedule
(1) Incorporated by reference.
(b) No reports on Form 8-K were filed.
19
<PAGE>
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on it behalf by the undersigned, thereunto duly authorized.
EAT AT JOE'S LTD.
DATED: MARCH 29, 2000 BY /S/ JOSEPH FIORE
------------------------
Joseph Fiore,
C.E.O., Chairman, Secretary, Director
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on this 29th day of March 2000.
Signatures Title
/S/ JOSEPH FIORE
- -----------------------------
Joseph Fiore C.E.O., Chairman, Secretary, Director
(Principal Executive, Financial
and Accounting Officer)
/S/ JAMES MYLOCK, JR.
- -----------------------------
James Mylock, Jr. Director
/S/ TIM MATULA
- -----------------------------
Tim Matula Director
/S/ GINO NALDINI
- -----------------------------
Gino Naldini President, Chief Operating Officer and
Director
/S/ GARY USLING
- -----------------------------
Gary Usling Chief Financial Officer and Director
20
<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, 1999, and
1998 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, 1999, and 1998, 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 27, 2000
F - 1
<PAGE>
EAT AT JOE'S LTD., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
1999 1998
----------- -----------
ASSETS
Current Assets:
Cash and cash equivalents .................... $ -- $ 133,957
Receivables .................................. 10,439 25,861
Inventory .................................... 46,050 184,115
Other ........................................ -- 21,310
Prepaid expense .............................. 76,442 8,333
Deposits ..................................... 1,710 41,046
----------- -----------
Total Current Assets .................... 134,641 414,622
----------- -----------
Property and equipment:
Equipment .................................... 879,441 1,632,055
Furniture & Fixtures ......................... 47,239 76,255
Leasehold improvements ....................... 2,212,291 4,767,308
----------- -----------
3,138,971 6,475,618
Less accumulated depreciation ................ (547,669) (303,316)
----------- -----------
2,591,302 6,172,302
----------- -----------
Other Assets:
Investments .................................. 100,000 --
Intangible and other assets net of
amortization of $28,884 and $13,400
for 1999 and 1998, respectively ............. 125,954 141,437
----------- -----------
Total Assets ............................ $ 2,951,897 $ 6,728,361
=========== ===========
F - 2
<PAGE>
EAT AT JOE'S LTD., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
(Continued)
<TABLE>
<CAPTION>
1999 1998
----------- -----------
LIABILITIES
Current Liabilities:
<S> <C> <C>
Accounts payable and accrued liabilities .............. $ 735,775 $ 488,632
Short-term notes payable .............................. 342,926 635,000
Shareholders loans .................................... 724,760 452,455
----------- -----------
Total Current Liabilities ........................ 1,803,461 1,576,087
----------- -----------
Convertible Debentures, Net of Issue Costs ............ 1,383,290 1,343,449
----------- -----------
Total Liabilities ................................ 3,186,751 2,919,536
----------- -----------
STOCKHOLDERS EQUITY
Preferred stock - $0.0001 par value. 10,000,000 shares
authorized; 2 and 113 shares issued and outstanding -- --
Common Stock - $0.0001 par value. 50,000,000 shares
Authorized.41,874,680 and 16,440,755 issued and
Outstanding, respectively .......................... 4,187 1,644
Common Stock To Be Issued ............................. -- 131
Additional paid-in capital ............................ 9,619,060 7,213,400
Retained deficit ...................................... (9,858,101) (3,406,350)
----------- -----------
Total Stockholders' Equity ....................... (234,854) 3,808,825
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ............ $ 2,951,897 $ 6,728,361
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F - 3
<PAGE>
EAT AT JOE'S LTD., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1999, AND 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Revenues ............................................... $ 3,461,176 $ 2,519,255
Cost of Revenues ....................................... 1,465,217 702,481
------------ ------------
Gross Margin ........................................... 1,995,959 1,816,774
Expenses
Labor and Related Expenses .......................... 1,730,251 1,168,225
Rent ................................................ 495,043 288,639
Other General and Administrative .................... 1,054,756 890,131
------------ ------------
Income (Loss) Before Depreciation and Amortization ..... (1,284,091) (530,221)
Depreciation and Amortization ....................... 609,615 305,170
------------ ------------
Net Loss from Continuing Operations .................... (1,893,706) (835,391)
------------ ------------
Other Income (Expense)
Interest income ..................................... 2,936 576
Interest expense .................................... (198,879) (158,525)
Loss on sale of assets .............................. (4,359,377) --
------------ ------------
Net Other Income (Expense) ............................. (4,555,320) (157,949)
------------ ------------
Net Loss Before Income Taxes ........................... (6,449,026) (993,340)
Income Tax Expense (Benefit) ........................... 2,725 2,725
------------ ------------
Net Loss Before Cumulative Effects of Accounting Change (6,451,751) (996,065)
Cumulative Effect of Accounting Change on Years Prior to
1998, Net of Taxes
-- (84,732)
Net Loss ............................................... (6,451,751) (1,080,797)
------------ ------------
Less: Preferred Dividends .............................. -- 952,296
------------ ------------
Net Loss To Common Stockholders ........................ $ (6,451,751) $ (2,033,093)
============ ============
Basic Loss Per Common Share: ........................... $ (0.24) $ (0.16)
============ ============
Weighted Average Number of Common Shares ............... 26,406,856 13,062,921
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
F - 4
<PAGE>
EAT AT JOE'S LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999, AND 1998
<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>
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) --
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 --
</TABLE>
F - 5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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, share issued in
cancellation of short-term debt and
associated interest ................. -- -- -- -- 500,000 50 269,629 --
December 1998, share issued in
cancellation of short-term debt ..... -- -- 1,312,500 131 2,187,500 219 1,822,568 --
January through December 1998, share
issued in exchange for Leasehold .... --
Improvements ........................ -- -- -- -- 38,200 4 40,184
January through December 1998, share
issued in exchange for Services ..... --
-- -- -- -- 154,501 15 164,011
Preferred dividend due to discounted
conversion rates .................... -- -- -- -- -- -- 952,296 (952,296)
</TABLE>
F - 6
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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)
Shares issued ....................... (1,312,500) (131) 1,312,500 131 (198,500) --
Share issued in exchange for Property ,
Equipment, Goods and Services ....... -- -- -- -- 1,824,044 182 281,043 --
Shares issued in cancellation of
short-term debt and associated interest -- -- -- -- 4,240,000 424 2,194,473 --
Series A Preferred shares converted (46) -- -- -- 2,760,288 276 (276) --
Series B Preferred shares converted (31) -- -- -- 5,027,718 503 (503) --
</TABLE>
F - 7
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Series C Preferred shares converted (14) -- -- -- 3,967,510 397 (397) --
Series D Preferred shares converted (20) -- -- -- 5,601,545 560 (560) --
Convertible Debentures converted .... -- -- -- -- 700,320 70 130,380 --
Net loss for the year ............... -- -- -- -- -- -- -- (6,451,751)
-------- -------- ---------- -------- ---------- -------- ---------- ----------
Balance at December 31, 1999 ........ 2 $ -- $ -- $ -- 41,874,680 $ 4,187 $9,619,060 $(9,858,101)
======== ======== ========== ======== ========== ======== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
F - 8
<PAGE>
EAT AT JOE'S LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
Cash Flows From Operating Activities
<S> <C> <C>
Net loss for the period .............................. $(6,451,751) $(1,080,797)
Adjustments to reconcile net loss to net cash
Provided by operating activities
Depreciation and Amortization ...................... 336,531 305,170
Cumulative Effect of Accounting Change ............. -- 84,732
Stock issued for services and expenses ............. 82,725 246,623
Loss on sake of assets ............................. 4,359,377 --
Decrease (Increase) in Receivables ................. 15,422 (25,861)
Decrease (Increase) in inventory ................... 138,065 (176,627)
Decrease (Increase) in other assets ................ -- (20,910)
Decrease (Increase) in prepaid expense ............. (68,109) 22,660
Decrease (increase) in deposits .................... -- (28,345)
Increase in accounts payable and accrued liabilities 247,143 (1,103)
----------- -----------
Net Cash Provided by (Used in) Operating Activities ..... (1,340,597) (674,458)
----------- -----------
Cash Flows From Investing Activities
Investments .......................................... (100,000) --
Purchase of property and equipment ................... (695,567) (4,627,664)
Purchase of intangible assets ........................ -- (5,000)
----------- -----------
Net Cash Provided by Investing Activities ............... (795,567) (4,632,664)
----------- -----------
Cash Flows From Financing Activities
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 .................. 166,744 113,825
Repayments of notes and advances ..................... (7,200) (364,292)
Proceeds from short-term notes payable ............... 1,842,663 2,395,000
----------- -----------
Net Cash Provided by Financing Activities ............... 2,002,207 5,208,478
----------- -----------
Increase (Decrease) in Cash ............................. (133,957) (98,644)
Cash at beginning of period ............................. 133,957 232,601
----------- -----------
Cash at End of Period ................................... $ -- $ 133,957
=========== ===========
</TABLE>
F - 9
<PAGE>
EAT AT JOE'S LTD. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1999, AND 1998
(Continued)
1999 1998
---------- ----------
Supplemental Disclosure of Interest and
Income Taxes Paid
Interest paid during the period ................. $ 70,348 $ 295
========== ==========
Income taxes paid during the period ............. $ 2,725 $ 4,225
========== ==========
Supplemental Disclosure of Non-cash Investing
and Financing Activities
Leasehold Improvements Acquired with Issuance
of Common Stock ............................... $ 198,500 $ 40,188
========== ==========
Short-term Notes Settled with Issuance of
Common Stock ................................. $2,194,897 $2,010,000
========== ==========
The accompanying notes are an integral part of these financial statements.
F - 10
<PAGE>
EAT AT JOE'S LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, AND 1998
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 subsidiarys, E.A.J. Holding Corporation, a
Delaware corporation ("Holding"), 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, Eat at Joe's Owings Mills, Inc., a Maryland
corporation, and 1337855 Ontario. All significant intercompany accounts and
transactions have been eliminated.
F - 11
<PAGE>
EAT AT JOE'S LTD. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, AND 1998
(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:
Furniture & Fixtures 5-10 years
Equipment 5- 7 years
Leasehold improvements 8-15 years
Maintenance and repairs are charged to operations; betterments are
capitalized. The cost of property sold or otherwise disposed of and the
accumulated depreciation thereon are eliminated from the property and related
accumulated depreciation accounts, and any resulting gain or loss is credited or
charged to income.
AMORTIZATION
Intangible assets are amortized over useful life of 10 years.
F - 12
<PAGE>
EAT AT JOE'S LTD. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, AND 1998
(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 - 13
<PAGE>
EAT AT JOE'S LTD. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, AND 1998
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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
Diluted net income per common share was calculated based on an
increased number of shares that would be outstanding assuming that the warrants
are converted to common shares. The effect of outstanding common stock
equivalents are anti-dilutive for 1999 and 1998 and are thus not considered.
The reconciliations of the numerators and denominators of the basic
earnings per share computations are as follows:
For the Year Ended 1998
----------------------------------------------------------
Per Share
Income Shares Amount
------------------ ------------------ ------------------
Basic EPS
Net Loss to common
shareholders $ (2,033,093) 13,062,921 $ (0.16)
================== ================== ==================
For the Year Ended 1999
----------------------------------------------------------
Per Share
Income Shares Amount
------------------ ------------------ ------------------
Basic EPS
Net Loss to common
shareholders $ 26,406,856 (6,451,751) $ (0.24)
================== ================== ==================
F - 14
<PAGE>
EAT AT JOE'S LTD. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, AND 1998
(Continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RECLASSIFICATIONS
Certain reclassifications have been made in the 1998 financial
statements to conform with the 1999 presentation.
NOTE 2 - SHORT-TERM NOTES PAYABLE
Short-Term Notes Payable consist of loans from unrelated entities as of
December 31, 1999 and 1998. 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 $2,040,000 and $349,000 for the years ended
December 31, 1999 and 1998 respectively, are the result of net operating losses.
The Company has recorded net deferred income taxes in the accompany
consolidated balance sheets as follows:
As at December 31,
-------------------------
1999 1998
------------ -----------
Future deductible temporary differences related to
Reserves, accruals, and net operating losses $ 2,829,000 $ 736,000
Valuation allowance (2,829,000) (736,000)
------------ -----------
Net Deferred Income Tax $ -- $ --
============ ===========
F - 15
<PAGE>
EAT AT JOE'S LTD. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, AND 1998
(Continued)
NOTE 3 - INCOME TAXES (CONTINUED)
As of December 31, 1999, the Company had a net operating loss ("NOL")
carry forward for income tax reporting purposes of approximately $8,320,000
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 $2,829,000 as of December 31, 1999. 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,
--------------------------
1999 1998
------------ ------------
Benefit at the federal statutory rate of 34% $ 2,040,000 $ 349,000
Nondeductible expenses -- --
------------ ------------
Utilization of net operating loss carryforward $ 2,040,000 $ (349,000)
------------ ------------
$ -- $ --
============ ============
NOTE 4 - PURCHASE OF SUBSIDIARIES
The Company has entered into a non-binding letter of intent to acquire
a 16 unit regional restaurant chain. Either party to the letter may terminate
the letter of intent without penalty. The parties have agreed to proceed toward
negotiation of a mutually agreeable purchase agreement. No assurances can be
given that the purchase of the restaurant chain will be completed.
In March of 1999, 1337855 Ontario, Inc. ("Ontario"), wholly owned
subsidiary of the Company entered into a purchase agreement with Koo Koo Roo
Canada Limited (Koo Koo Roo) to acquire certain assets and assume certain
liabilities of that company. Koo Koo Roo is a California-based casual dining,
quick service restaurant chain featuring skinless flame broiled chicken, roasted
hand-carved turkey and made-to-order tossed salads and specialty sandwiches. In
F - 16
<PAGE>
EAT AT JOE'S LTD. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, AND 1998
(Continued)
NOTE 4 - PURCHASE OF SUBSIDIARIES (CONTINUED)
consideration for its payment of approximately $375,000, Ontario acquired (1) a
20 year exclusive license agreement in Canada with a 20 year renewal term to
operate Koo Koo Roo restaurants; (2) re-negotiated the leases to operate 3
existing Koo Koo Roo locations in Toronto, and (3) satisfied outstanding debt
obligations due the second lender to Koo Koo Roo.
<PAGE>
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
---------------------------------- ----------- ------------
2000 $ 360,036 $ --
2001 360,036 --
2002 360,036 --
2003 360,036 --
2004 360,036 --
Thereafter 2,196,492 --
----------- ------------
Total minimum future lease payments $ 3,996,672 $ --
=========== ============
The leases generally provides that insurance, maintenance and tax
expenses are obligations of the Company. It is expected that in the normal
course of business, leases that expire will be renewed or replaced by leases on
other properties.
NOTE 6 - RELATED PARTY TRANSACTIONS
The Company utilized office space that is shared with companies
controlled by two officers of the Company. During 1998 Cozco Management received
$36,387, as reimbursement for rent, telephone, equipment, travel, automotive
salaries and other shared expenses. During 1999 and 1998 the two officers and/or
companies controlled by the two officers paid expenses and made advances to the
Company. As of December 31, 1999, $724,760 in advances was due to officers and
directors of the Company.
F - 17
<PAGE>
EAT AT JOE'S LTD. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, AND 1998
(Continued)
NOTE 7 - CONVERTIBLE PREFERRED STOCK, DEBENTURES, WARRANTS & OPTIONS
Holders of Convertible Preferred Stock received 17,357,061 shares of
the Company's Common stock during 1999 in conversion of 46 shares of Series A,
31 shares of Series B, 14 shares of Series C and 20 Shares of Series D
Convertible Preferred Stock. As of December 31, 1999 there were 2 shares of
Convertible Preferred Stock outstanding which were converted subsequent to
December 31, 1999.
During 1999, holders of $130,450 of Convertible debentures received
700,320 shares of Common Stock on conversion of debentures.
The following table sets forth the options and warrants outstanding as
of December 31, 1999 and 1998.
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
Options & warrants outstanding, beginning of year 1,247,750 1,100,000
Granted -- 1,247,750
Expired -- (1,060,000)
Exercised -- (40,000)
-------------- --------------
Options & warrants outstanding, end of year 1,247,750 1,247,750
============== ==============
Exercise price for options & warrants outstanding, end of year $0.50 to $1.79 $0.50 to $1.79
============== ==============
</TABLE>
NOTE 8 - CONTINGENCIES
Various Rouse Corporation Entities have brought litigation against various Eat
At Joe's Entities.
The subject litigation was instituted by Cherry Hill Center, Inc.,
Echelon Mall Joint Venture, Owings Mills Limited Partnership and Plymouth
Meeting Mall, Inc. against Eat At Joe's, Cherry Hill, Inc. t/a Eat At Joe's,
E.A.J. Holding Corporation, E.A.J. Echelon Mall, Inc. t/a Eat At Joe's Express,
Eat At Joe's Limited, Eat At Joe's Owings Mills, Inc. t/a Eat At Joe's and Eat
At Joe's Plymouth Meeting, Inc. t/a Eat At Joe's. Each of the Plaintiffs is the
Landlord for the corresponding Eat At Joe's entity, each of which Eat At Joe's
Entities are single purpose entities. E.A.J. Holding
F - 18
<PAGE>
EAT AT JOE'S LTD. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, AND 1998
(Continued)
NOTE 8 - CONTINGENCIES CONTINUED)
Corporation was named as a party because it is a Guarantor of the leases. To the
best of my knowledge, none of the Eat At Joe's Defendants have any assets or are
currently engaged in any actively ongoing business activity. Therefore, any
potential judgment against them in the action will be uncollectible.
In response to the Complaint of the Plaintiffs, the Defendants asserted
various defenses and Counterclaims against the Plaintiffs and certain additional
Rouse-related Third-Party Defendants based upon fraud, consumer fraud, tortuous
interference with prospective economic advantage, negligent misrepresentation
and breach of the duty of good faith and fair dealing. Eat At Joe's Moorestown,
Inc. joined in the case as a Third-Party Plaintiff to assert similar claims
against certain of the Rouse-related entities. It is very difficult to predict
the outcome of this case. Plaintiffs' claims totaled approximately $830,000.00
as of the date of the filing of the Complaint. Additionally, Plaintiffs are
seeking judgment for additional rent which comes due under the leases between
the time of the filing of the Complaint and the entry of the judgment together
with their costs and attorney's fees. The Eat At Joe's Defendants and
Third-Party Plaintiffs seek damages in the form of recovery of Eat At Joe's
improvements to the various leaseholds totaling in excess of $4,000,000.00.
Counsel is presently attempting to negotiate a settlement of the entire
litigation without adverse consequence to Eat At Joe's.
NOTE 9 - RESTAURANT CLOSURES
During 1999, E.A.J. Cherry Hill, Inc., E.A.J. Gallery, Inc., Eat At
Joe's Harborplace, Inc., E.A.J. Echelon Mall, Inc., and two of the 1337855
Ontario restaurants were closed and substantially all assets and leasehold
improvements abandoned. This abandonment of assets has been reported in the
accompanying financial statements as a loss on sale of assets at $4,359,377 for
the year ended December 31, 1999.
F - 19
<PAGE>
EAT AT JOE'S LTD. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999, AND 1998
(Continued)
NOTE 10 - 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
----------- ----------- ----------- -----------
Income statement data:
<S> <C> <C> <C> <C>
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)
=========== =========== =========== ===========
1999 QUARTERS ENDED
--------------------------------------------------------
Mar 31 Jun 30 Sep 30 Dec 31
----------- ----------- ----------- -----------
Income statement data:
Net sales ................... $ 846,995 $ 1,091,321 $ 849,716 $ 673,143
Gross profit ................ 588,915 661,481 374,672 370,891
Income (loss) from
operations before
depreciation & amortization 39,641 (282,217) (592,926) (448,589)
Loss from operations ........ (114,665) (458,104) (765,557) (555,380)
Other income ................... (53,462) (45,860) (1,429,643) (3,026,354)
----------- ----------- ----------- -----------
Loss before taxes .............. (168,127) (503,964) (2,195,200) (3,581,734)
Income tax (provision) benefit . (682) (681)
(681) (681)
----------- ----------- ----------- -----------
Net Income (Loss) .............. $ (168,809) $ (504,645) $(2,195,881) $(3,582,415)
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
BALANCE SHEET OF EAT AT JOES, LTD AND SUBSIDIARIES AS OF DECEMBER 31, 1999 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-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 10
<ALLOWANCES> 0
<INVENTORY> 46
<CURRENT-ASSETS> 135
<PP&E> 3139
<DEPRECIATION> 548
<TOTAL-ASSETS> 2952
<CURRENT-LIABILITIES> 1803
<BONDS> 1383
0
0
<COMMON> 4
<OTHER-SE> (239)
<TOTAL-LIABILITY-AND-EQUITY> 2952
<SALES> 3461
<TOTAL-REVENUES> 3461
<CGS> 1465
<TOTAL-COSTS> 1465
<OTHER-EXPENSES> 3890
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 199
<INCOME-PRETAX> (6449)
<INCOME-TAX> 3
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6452)
<EPS-BASIC> (.24)
<EPS-DILUTED> (.24)
</TABLE>
