UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-Q
(Mark One)
[X]   QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended:  March 31, 2008

or

[  ]   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 registrant as specified in its charter)

Delaware
 
75-2636283
(State or other jurisdiction of incorporation or organization)
 
(IRS Employer Identification No.)

670 White Plains Road, Suite 120, Scarsdale, New York, 10583
(Address of principal executive offices)

(914) 725-2700
(Registrant's telephone number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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.
x Yes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o
Accelerated filer o
Non-accelerated filer o  (Do not check if a smaller reporting company)
Smaller reporting company x

Indicate by check mark whether the registrant is a shell company (as defined by Rule 12b-2 of the Exchange Act). Yes o No x

APPLICABLE ONLY TO CORPORATE ISSUERS

As of March 31, 2008, there were 106,577,710 shares of the Registrant's common stock, par value $0.0001, issued, and 20,000 shares of Series E Convertible preferred stock (convertible to 6,944,444 common shares), par value $0.0001.

 
1

 

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

EAT AT JOE’S LTD., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS


   
(Unaudited)
       
   
March 31,
   
December 31,
 
   
2008
   
2007
 
ASSETS
           
Current Assets:
           
Cash and cash equivalents
  $ 1,197,359     $ 1,543,465  
Receivables
    6,857       5,058  
Inventory
    6,900       6,900  
Prepaid expense
    16,192       519  
Marketable Securities
    114,725       194,615  
                 
     Total Current Assets
    1,342,033       1,750,557  
                 
Property and equipment:
               
Equipment
    118,503       118,503  
Furniture & Fixtures
    3,964       3,964  
Leasehold improvements
    381,133       381,133  
      503,600       503,600  
Less accumulated depreciation
    (489,340 )     (488,796 )
                 
     Total Property & Equipment
    14,260       14,804  
                 
Other Assets:
               
Intangible and other assets net of
               
amortization of $154,837 and $152,754
               
for 2008 and 2007, respectively
    -       2,083  
                 
     Total Other Assets
    -       2,083  
                 
     TOTAL ASSETS
  $ 1,356,293     $ 1,767,444  
                 

 
2

 

EAT AT JOE’S LTD., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)



   
(Unaudited)
       
   
March 31,
   
December 31,
 
   
2008
   
2007
 
LIABILITIES
           
Current Liabilities:
           
Accounts payable and accrued liabilities
  $ 170,747     $ 191,499  
Related party accounts payable
    8,784       100,314  
Short-term notes payable
    172,870       172,870  
Related Party Notes Payable
    2,071,457       2,327,577  
Convertible Debentures
    2,043,702       2,043,702  
                 
     Total Current Liabilities
    4,467,560       4,835,962  
                 
STOCKHOLDERS EQUITY
               
Preferred stock - $0.0001 par value.
               
   10,000,000 shares authorized;
               
   20,000 Series E shares issued and outstanding
    2       2  
Common Stock - $0.0001 par value.
               
   250,000,000 shares authorized;
               
   106,577,710 and 90,577,710 issued and outstanding
               
   March 31, 2008 and December 31, 2007.
    10,658       9,058  
Additional paid-in capital
    13,240,515       13,034,115  
Unrealized Losses on available-for-sale securities
    (259,360 )     (503,633 )
Retained deficit
    (16,103,082 )     (15,608,060 )
                 
     Total Stockholders’ Equity
    (3,111,267 )     (3,068,518 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  $ 1,356,293     $ 1,767,444  
                 




The accompanying notes are an integral part of these financial statements.

 
3

 

EAT AT JOE’S LTD., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

   
For the three months ended
 
   
March 31,
 
   
2008
   
2007
 
             
Revenues
  $ 353,627     $ 343,608  
Cost of Revenues
    137,807       148,200  
Gross Margin
    215,820       195,408  
                 
Expenses
               
   Labor and Related Expenses
    108,061       103,737  
   Rent
    48,769       44,742  
   Depreciation and Amortization
    2,627       13,708  
   Other General and Administrative
    271,337       64,691  
      Total Operating Expenses
    430,794       226,878  
Net Income (Loss) from Continuing
               
 Operations
    (214,974 )     (31,470 )
                 
Other Income (Expense)
               
   Interest income
    8,617       8,255  
   Dividend income
    579       79  
   Interest expense
    (26,537 )     (12,866 )
   Gain (Loss) on sale of Marketable
               
      Securities
    (262,707 )     32,093  
Net Other Income (Expense)
    (280,048 )     27,561  
                 
Net Loss Before Income Taxes
  $ (495,022 )   $ (3,909 )
Income Tax (Expense) Benefit
    -       -  
                 
Net Loss
  $ (495,022 )   $ (3,909 )
                 
Basic Loss Per Common Share:
  $ (0.01 )   $ -  
                 
Weighted Average Common Shares
    96,379,908       45,048,299  
                 
The accompanying notes are an integral part of these financial statements.

 
4

 

EAT AT JOE’S LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
   
For the three months ended
 
   
March 31,
 
   
2008
   
2007
 
Cash Flows From Operating Activities
           
   Net gain (loss) for the period
  $ (495,022 )   $ (3,909 )
Adjustments to reconcile net loss to net cash
   Provided by operating activities
               
     Depreciation and amortization
    2,627       13,708  
     Compensation expense on stock issued
    208,000       -  
     (Gain) Loss on sale of marketable securities
    262,707       (32,093 )
     Decrease (Increase) in receivables
    (1,799 )     (3,776 )
     Decrease (Increase) in prepaid expense
    (15,673 )     -  
     (Decrease) Increase in accrued interest payable
    26,537       12,866  
     (Decrease) Increase in accounts payable and accrued liabilities
    (20,752 )     1,344  
Net Cash Used in Operating Activities
    (33,375 )     (11,860 )
                 
Cash Flows From Investing Activities
               
   Purchases of marketable securities
    (11,646 )     (17,085 )
   Proceeds from sale of marketable securities
    229,415       274,979  
Net Cash Provided by Investing Activities
    217,769       257,894  
                 
Cash Flows From Financing Activities
               
   Proceeds from related party notes payable
    19,500       17,000  
   Repayment of notes, advances and related party payables
    (550,000 )     -  
                 
Net Cash Provided by Financing Activities
    (530,500 )     17,000  
                 
Increase in Cash
    (346,106 )     263,034  
Cash at beginning of period
    1,543,465       846,062  
Cash at End of Period
  $ 1,197,359     $ 1,109,096  

Supplemental Disclosure of Interest and Income Taxes Paid
           
   Interest paid during the period
  $ 13,398     $ -  
   Income taxes paid during the period
  $ 1,525     $ 3,079  
                 

Supplemental Disclosure of Non-cash Investing and Financing Activities:
       
    Marketable Securities acquired through related party notes
  $ 173,000     $ -  
    Common stock issued for compensation
  $ 208,000     $ -  

The accompanying notes are an integral part of these financial statements.

 
5

 

EAT AT JOE’S LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007

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.

The unaudited financial statements as of March 31, 2008 and for the three months then ended reflect, in the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to fairly state the financial position and results of operations for the three months.  Operating results for interim periods are not necessarily indicative of the results which can be expected for full years.

Organization

Eat At Joe’s Ltd. (Company) was incorporated on January 6, 1988, under the laws of the State of Delaware, as a wholly-owned subsidiary of Debbie Reynolds Hotel and Casino, Inc. (DRHC) (formerly Halter Venture Corporation or Halter Racing Stables, Inc.) a publicly-owned corporation.  DRHC caused the Company to register 1,777,000 shares of its initial 12,450,000 issued and outstanding shares of common stock with the Securities and Exchange Commission on Form S-18.  DRHC then distributed the registered shares to DRHC stockholders.

During the period September 30, 1988 to December 31, 1992, the Company remained in the development stage while attempting to enter the mining industry.  The Company acquired certain unpatented mining claims and related equipment necessary to mine, extract, process and otherwise explore for kaolin clay, silica, feldspar, precious metals, antimony and other commercial minerals from its majority stockholder and other unrelated third-parties.  The Company was unsuccessful in these start-up efforts and all activity was ceased during 1992 as a result of foreclosure on various loans in default and/or the abandonment of all assets.  From 1992 until 1996 the Company had no operations, assets or liabilities.

On July 29, 2003, the Board of Directors Resolved to change the authorized capital stock from 50,000,000 common shares to 250,000,000 common shares.  There was no change to the par value.

Basis of Presentation

The Company’s consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.  The consolidated financial statements do not include any adjustment relating to recoverability and classification of recorded amounts of assets and liabilities that might be necessary should the Company be unable to continue as a going concern.

 
6

 

EAT AT JOE’S LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
(Continued)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

Basis of Presentation (continued)

The Company has incurred a net loss for the three months ended March 31, 2008 and 2007 of $495,022 and $3,909 respectively, and as of  March 31, 2008 had a working capital deficit of $3,125,527.  These conditions raise substantial doubt as to the Company's ability to continue as a going concern.

The Company's continued existence is dependent upon its ability to execute its operating plan and to obtain additional debt or equity financing.  There can be no assurance the necessary debt or equity financing will be available, or will be available on terms acceptable to the Company.

Management plans include opening one new restaurants during the next twelve months and obtaining additional financing to fund payment of obligations and to provide working capital for operations and to finance future growth.  The Company is actively pursuing alternative financing and has had discussions with various third parties, although no firm commitments have been obtained.  In the interim, shareholders of the Company have committed to meeting its operating expenses.  Management believes these efforts will generate sufficient cash flows from future operations to pay the Company’s obligations and realize other assets.  There is no assurance any of these transactions will occur.

Nature of Business

The Company is developing, owns and operates theme restaurants styled in an “American Diner” atmosphere.

Principles of Consolidation

The consolidated financial statements include the accounts of Eat At Joe’s, LTD. And its wholly-owned subsidiaries, E.A.J. Hold, Inc., a Nevada corporation (“Hold”),  E.A.J. PHL Airport, Inc., a Pennsylvania corporation, E.A.J. Shoppes, Inc., a Nevada corporation, E.A.J. Cherry Hill, Inc., a Nevada corporation, E.A.J. Neshaminy, Inc., a Nevada corporation, E.A.J. PM, Inc., a Nevada corporation, E.A.J. Echelon, Inc., a Nevada corporation, E.A.J. Market East, Inc., a Nevada corporation, E.A.J. MO, Inc., a Nevada corporation, E.A.J. Syracuse, Inc., a Nevada corporation, E.A.J. Walnut Street, Inc., a Nevada corporation, E.A.J. Owings, Inc., a Nevada corporation, and 1398926 Ontario, Inc. and 1337855 Ontario, Inc., British Columbia corporations.  All significant intercompany accounts and transactions have been eliminated.

 
7

 

EAT AT JOE’S LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
(Continued)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

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.

Revenue Recognition

The Company generates revenue from the sale of food and beverage though its restaurants.  Revenue is recognized upon receipt of payment.

Income Taxes

The Company accounts for income taxes under the provisions of SFAS No. 109, “Accounting for Income Taxes.”  SFAS No.109 requires recognition of deferred income tax assets and liabilities for the expected future income tax consequences, based on enacted tax laws, of temporary differences between the financial reporting and tax bases of assets and liabilities.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents to the extent the funds are not being held for investment purposes.

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.

 
8

 

EAT AT JOE’S LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
(Continued)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

Amortization

Intangible assets consist of a trademark registered with the United States of America Patent and Trademark Office with a registration No. 1575696.  Intangible assets are amortized over their estimated useful life of 10 years.

The Company has adopted the Financial Accounting Standards Board SFAS No., 142,  “Goodwill and Other Intangible Assets.”  SFAS 142 requires, among other things, that companies no longer amortize goodwill, but instead test goodwill for impairment at least annually.  In addition, SFAS 142 requires that the Company identify reporting units for the purposes of assessing potential future impairments of goodwill, reassess the useful lives of other existing recognized intangible assets, and cease amortization of intangible assets with an indefinite useful life.  An intangible asset with an indefinite useful life should be tested for impairment in accordance with the guidance in SFAS 142.

The Company has adopted Financial Accounting Standards Board Statement No. 144.  SFAS 144 requires that long-lived assets, such as property, plant, and equipment, and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  Recoverability of assets to be held and used is measured by comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset.  If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and are no longer depreciated. The assets and liabilities of a disposed group classified as held for sale would be presented separately in the appropriate asset and liability sections of the balance sheet.

 
9

 

EAT AT JOE’S LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
(Continued)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

Recent Accounting Standards

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS 159"). SFAS 159 provides companies with an option to report selected financial assets and liabilities at fair value. The objective of SFAS 159 is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. Generally accepted accounting principles have required different measurement attributes for different assets and liabilities that can create artificial volatility in earnings. The FASB has indicated it believes that SFAS 159 helps to mitigate this type of accounting-induced volatility by enabling companies to report related assets and liabilities at fair value, which would likely reduce the need for companies to comply with detailed rules for hedge accounting. SFAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities.  SFAS 159 does not eliminate disclosure requirements included in other accounting standards, including requirements for disclosures about fair value measurements included in SFAS 157 and SFAS No. 107, "Disclosures about Fair Value of Financial Instruments." SFAS 159 is effective for the Company as of the beginning of fiscal year 2008. The adoption of this pronouncement did  not have an impact on the Company's financial position, results of operations or cash flows.

In December 2007, the FASB issued No. 160, “Noncontrolling Interests in Financial Statements, an amendment of ARB No. 51" (“SFAS 160").  SFAS 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary.  It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements.  This Statement is effective for fiscal years beginning on or after December 15, 2008.  Early adoption is not permitted. Management is currently evaluating the effects of this statement, but it is not expected to have any impact on the Company’s financial statements.

 
10

 

EAT AT JOE’S LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
(Continued)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

Recent Accounting Standards

In December 2007, the FASB issued No. 141(R),  “Business Combinations” (“SFAS 141(R)”.  SFAS 141(R) provides companies with principles and requirements on how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree as well as the recognition and measurement of goodwill acquired in a business combination. SFAS 141(R) also requires certain disclosures to enable users of the financial statements to evaluate the nature and financial effects of the business combination. Acquisition costs associated with the business combination will generally be expensed as incurred. SFAS 141(R) is effective for business combinations occurring in fiscal years beginning after December 15, 2008, which will require the Company to adopt these provisions for business combinations occurring in fiscal 2009 and thereafter. Early adoption of SFAS 141(R) is not permitted.  Management is currently evaluating the effects of this statement, but it is not expected to have any impact on the Company’s financial statements.

In March 2008, the FASB issued No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133.  (“SFAS 161").  SFAS 161 requires enhanced disclosures about an entity's derivative and hedging activities and thereby improves the transparency of financial reporting.  This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. This Statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption.  Management is currently evaluating the effects of this statement, but it is not expected to have any impact on the Company’s financial statements.

Earnings (Loss) Per Share

Basic loss per share has been computed by dividing the loss for the year applicable to the common stockholders by the weighted average number of common shares outstanding during the years.

Diluted  net income per common share was calculated based on an increased number of shares that would be outstanding assuming that the preferred shares were converted to 6,944,444 and 5,882,353 common shares as of March 31, 2008 and 2007, respectively.

 
11

 

EAT AT JOE’S LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
(Continued)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

Pervasiveness of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles required management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Concentration of Credit Risk

The Company has no significant off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements.  The Company maintains the majority of its cash balances with one financial institution, in the form of demand deposits.

Reclassifications

Certain reclassifications have been made in the 2008 financial statements to conform with the 2007 presentation.

Fair Value of Financial Instruments

The carrying value of the Company's financial instruments, including receivables and accounts payable and accrued liabilities at March 31, 2008 and December 31, 2007 approximates their fair values due to the short-term nature of these financial instruments.  The carrying values of marketable securities available for sale are based on quoted market prices.

 
12

 

EAT AT JOE’S LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
(Continued)

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)

Investment in Marketable Securities

The Company’s securities investments that are bought and held for an indefinite period of time are classified as available-for-sale securities.  Available-for-sale securities are recorded at fair value on the balance sheet in current assets, with the change in fair value during the period excluded from earnings and recorded net of tax as a component of other comprehensive income.

Investments in securities are summarized as follows:
 
   
December 31, 2007
 
   
Gross
   
Gross
       
   
Unrealized
   
Unrealized
   
Fair
 
   
Gain
   
Loss
   
Value
 
Available-for-sale securities
  $ -     $ 503,633     $ 194,615  

   
March 31, 2008
 
   
Gross
   
Gross
       
   
Unrealized
   
Unrealized
   
Fair
 
   
Gain
   
Loss
   
Value
 
Available-for-sale securities
  $ -     $ 259,360     $ 114,725  
                         
Realized Gains and losses are determined on the basis of specific identification.  During the three months ended March 31, 2008 and 2007, sales proceeds and gross realized gains and losses on securities classified as available-for-sale securities were:
 
   
For the Three Months Ended
 
   
March 31,
 
   
2008
   
2007
 
             
Sale Proceeds
  $ 229,415     $ 274,979  
                 
Gross Realized Losses
  $ 262,707     $ -  
                 
Gross Realized Gains
  $ -     $ 32,093  


 
13

 

EAT AT JOE’S LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
(Continued)

NOTE 2 - SHORT-TERM NOTES PAYABLE

Short-Term Notes Payable consist of loans from unrelated entities as of March 31, 2008 and December 31, 2007.  The notes are payable one year from the date of issuance together with interest at 6.50% A.P.R.

NOTE 3 - INCOME TAXES

As of December 31, 2007, the Company had a net operating loss carryforward for income tax reporting purposes of approximately $6,200,000 that may be offset against future taxable income through 2027.  Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs.  Therefore, the amount available to offset future taxable income may be limited.  No tax benefit has been reported in the financial statements, because the Company believes there is a 50% or greater chance the carryforwards will expire unused.  Accordingly, the potential tax benefits of the loss carryforwards are offset by a valuation allowance of the same amount.

The Company has the following tax assets:
 
   
December 31,
   
December 31,
 
   
2007
   
2006
 
Net Operating Losses
  $ 2,108,000     $ 2,244,024  
Other
    114,000       107,805  
Valuation Allowance
    (2,222,000 )     (2,351,829 )
    $ -     $ -  

The provision for income taxes differs from the amount computed using the federal US statutory income tax rate as follows:
 
   
December 31,
   
December 31,
 
   
2007
   
2006
 
Provision (Benefit) at US Statutory Rate
  $ (191,974 )   $ (158,305 )
Net Operating Losses
    136,000       210,094  
Other
    185,803       66,189  
Increase (Decrease) in Valuation Allowance
    (129,829 )     (117,978 )
    $ -     $ -  

The Company evaluates its valuation allowance requirements based on projected future operations. When circumstances change and causes a change in management's judgement about the recoverability of deferred tax assets, the impact of the change on the valuation is reflected in current income.

 
14

 

EAT AT JOE’S LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
(Continued)

NOTE 4 - RELATED PARTY TRANSACTIONS

During 2008 and 2007, Joseph Fiore, C.E.O. of the Company, and Berkshire Capital, which is controlled by Mr. Fiore, paid expenses and made advances to the Company.  All expenses paid on behalf of the company have been recorded in the consolidated statements of operations for period paid.  As of March31, 2008 and December 31, 2007,  $2,071,457 and $2,327,577 (including accrued interest at 6%) in advances was due to these related parties.

On August 8, 2003, the Board resolved to enter into an agreement with Berkshire Capital Management Co., Inc., a related party, for the purpose of utilizing the Company’s tax loss carry forward to sell Berkshire’s acquired free trading stock in other public companies.  During the three months ended March 31, 2008 and 2007, the Company has sold marketable securities acquired under this agreement for $21,738 and $274,979, respectively, and recorded a net loss on sale of $4,172 for 2008 and a net gain of $32,093 for 2007.  As of March 31, 2008 and December 31, 2007, the remaining securities acquired under this agreement are recorded in the accompanying Balance Sheets at their quoted market value of $4,416 and $27,759, respectively.  As of March 31, 2008 and December 31, 2007, related party accounts payable include $8,784 and $100,314, respectively, due to Berkshire Capital.

On May 16, 2007, the Company acquired 3,000,000 shares of Sustainable Power Corp. from Berkshire Capital Management in exchange for a demand note in the amount of $210,000, carrying an interest rate of 6% A.P.R.

On May 16, 2007, 45,529,411 restricted shares of Eat at Joe’s, LTD were issued by the Board of Directors to Berkshire Capital Management Co, Inc at $0.015 per share in satisfaction of $682,941.00 in related party accounts payable due to Berkshire Capital Management.

On June 14, 2007, the Company acquired 1,000,000 shares of International Oil & Gas Holdings Corp. from Berkshire Capital Management in exchange for a demand note in the amount of $125,000, carrying an interest rate of 6% A.P.R.

On July 17, 2007, the Company acquired 3,000,000 shares of International Oil & Gas Holdings Corp. from Berkshire Capital Management in exchange for a demand note in the amount of $465,000, carrying an interest rate of 6% A.P.R.

On August 22, 2007, the Company acquired 2,000,000 shares of International Oil & Gas Holdings Corp. from Berkshire Capital Management in exchange for a demand note in the amount of $160,000, carrying an interest rate of 6% A.P.R.

 
15

 

EAT AT JOE’S LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
(Continued)

NOTE 4 - RELATED PARTY TRANSACTIONS (Continued)

On September 20, 2007, the Company acquired 1,000,000 shares of International Oil & Gas Holdings Corp. From Berkshire Capital Management in exchange for a demand note in the amount of $ 55,000, carrying an interest rate of 6% A.P.R.

On January 11, 2008, the Company acquired 1,000,000 shares of Sustainable Power Corp from Berkshire Capital Management in exchange for a demand note in the amount of $47,000, carrying an interest rate of 6% A.P.R.

On February 29, 2008, the Company acquired 2,000,000 shares of Sustainable Power Corp. From Berkshire Capital Management in exchange for a demand note in the amount of $ 126,000, carrying an interest rate of 6% A.P.R.

On February 28, 2008, 16,000,000 shares at $.013 of common stock were issued to the company’s current officers, directors and support staff.  Compensation expense of $208,000 resulting from this issuance has been recorded in the accompanying financial statements.

NOTE 5 - RENT AND LEASE EXPENSE

The Company’s wholly-owned subsidiary E.A.J. PHL Airport, Inc. leases approximately 845 square feet in the Philadelphia Airport, Philadelphia, Pennsylvania pursuant to a  lease dated April 30, 1997.  E.A.J. PHL Airport pays $7,083 per month basic rent plus 15% -18% of gross revenues above $850,000 under the lease which expires April 2009.

The minimum future lease payments under these leases for the next five years are:

Year Ended December 31,
 
Real Property
 
     2008
  $ 84,996  
     2009
    28,332  
     2010
    -  
     2011
    -  
     2012
    -  
         
Total five year minimum lease payments
  $ 113,328  

The lease generally provides that insurance, maintenance and tax expenses are obligations of the Company.  It is expected that in the normal course of business, leases that expire will be renewed or replaced by leases on other properties.

 
16

 

EAT AT JOE’S LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007
(Continued)

NOTE 6 - CONVERTIBLE DEBENTURES

On July 31, and September 2, 1998, the Company sold its 8% convertible debenture in the aggregate principal amount of $1,500,000 to an accredited investor pursuant to an exemption from registration under Section 4(2) and/or Regulation D.

The material terms of the Company' convertible debentures provide for the payment of interest at 8% per annum payable quarterly, mandatory redemption after 3 years from the date of issuance at 130% of the principal amount.  Subject to adjustment, the debentures are convertible into Common Stock at the lower of a fixed conversion price ($1.82 per share for $900,000 principal amount of debentures; $1.61 per share for $600,000 principal amount of debentures) or 75% of the average closing bid price for the Company's Common Stock for the 5 trading days preceding the date of the conversion  notice.  Repayment of the indebtedness is secured by a general lien on the assets of the Company and guarantee by 5 of the Company's subsidiaries.

Total issue costs were $156,551.20 which were amortized over the initial terms of the debt with a maturity date of July 31 and September 2, 2001.

NOTE 7 - CONVERTIBLE PREFERRED STOCK

The Series E Convertible Preferred Stock carries the following rights and preferences;

 
·
No dividends.
 
·
Convertible to common stock at the average closing bid price for the Company’s common stock for the 5 trading days prior to the conversion date, and is adjustable to prevent dilution.  (Convertible to 6,944,444 common shares at March 31, 2008)
 
·
Convertible at the Option of the Company at par value only after repayment of the shareholder loans from Joseph Fiore and subject to the holder’s option to convert.
 
·
Entitled to vote 1,000 votes per share of Series E Convertible Preferred Shares.
 
·
Entitled to liquidation preference at par value.
 
·
Is senior to all other share of preferred or common shares issued past, present and future.

 
17

 

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, 2007.

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.

 
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Over the next twelve months, the company will maintain operations as they currently exist.  We do not anticipate the hiring of new full-time employees or the need for additional funds to satisfy cash requirements.  Expansion within the current location is not viable, however management may seek to make acquisitions of established businesses, or, if a desirable location becomes available, we may elect to expand the concept.  Locations would be sought in heavily trafficked areas, such as within an airport, train station, etc.  We have not found any such location as of the date of this filing and no agreements are in place.

Results of Operations - For the three months ended March 31, 2008, the Company had a net loss of $495,022 composed of a loss from continuing operations of $214,974 and net other loss of $280,048.  Net other loss is primarily due to losses from the sale of marketable securities of $262,707.  For the three months ended March 31, 2007, the Company had a net loss of $3,909 composed of a loss from continuing operations of $31,470 and net other income of $27,561.  Net other income is primarily due to gains from the sale of marketable securities of $32,903.

Total Revenues - For the three months ended March 31, 2008 and 2007, the Company had total sales of approximately $354,000 and $344,000  respectively, for a increase of approximately $10,000.  Management believes that revenues will continue to grow in the future as airport traffic increases.

Costs and Expenses - Costs of revenues, which include the costs of food, beverage, and kitchen supplies decreased as a percentage of sales by approximately 4% from 2007 to 2008.  This decrease can be attributed to many factors, including, but not limited to more efficient purchasing of supplies/products from food service distributors.  The cost of labor, rent and other general and administrative costs, increased by 59% as a percentage of sales for the three months ended March 31, 2008 compared to the three months ended March 31, 2007. This increase is due to administrative compensation expense of $208,000 resulting from the issuance of 16,000,000 shares at $.013 to officers, directors and support staff.  Depreciation and amortization expense decreased by approximately $11,000 from 2007 to 2008, respectively, due to certain fixed assets reaching the end of their estimated depreciable lives.  Management expects depreciation and amortization to decline until the Company can carry out its expansion plans.  Depreciation expense will increase as these plans are completed and as new assets are acquired.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2008, the Company has a working capital deficit of approximately $3,125,527.  The Company's continued existence is dependent upon its ability to execute its operating plan and to obtain additional debt or equity financing.  There can be no assurance the necessary debt or equity financing will be available, or will be available on terms acceptable to the Company.

Management plans include searching for and opening new restaurants in the future and obtaining additional financing to fund payment of obligations and to provide working capital for operations and to finance future growth.  The Company is actively pursuing alternative financing and has had discussions with various third parties, although no firm commitments have been obtained.  In the interim, shareholders of the Company have committed to meeting its operating expenses.  Management believes these efforts will generate sufficient cash flows from future operations to pay the Company’s obligations and realize other assets.  There is no assurance any of these transactions will occur.

 
19

 

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 2008 and 2007, the Company generated approximately $218,000 and $258,000 respectfully, in cash from investing activities from the purchase and sale of marketable equity securities.  As of March 31, 2008, the company owns marketable securities valued at $114,725 with corresponding liabilities of $862,843 in the form of related party payables of $8,784 and related party notes payable of $854,059 (including interest accruing at 6%).

During 2008 and 2007, the Company raised approximately $19,500 and $17,000 during 2008 and 2007 through short-term notes payable and advances from Majority stockholders.  The net proceeds to the Company were used for working capital.  During 2008, the Company repaid  $550,000 in shareholder advances from past years. As of March 31, 2008, approximately $1,217,398 (including interest accruing at 6%) in advances was due to Joseph Fiore, C.E.O. of the Company.

On May 16, 2007, 45,529,411 restricted shares of Eat at Joe’s, LTD were issued by the Board of Directors to Berkshire Capital Management Co, Inc. at $0.015 per share in satisfaction of $682,941.00 in related party accounts payable due to Berkshire Capital Management.

On February 28, 2008, 16,000,000 shares at $.013 of common stock were issued to the company’s current officers, directors and support staff.  Compensation expense of $208,000 resulting from this issuance has been recorded in the accompanying financial statements.

For the three months ended March 31, 2008 and 2007, operating activities used approximately $33,000 and $12,000 in cash .

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.



 
20

 

Critical Accounting Policies - -The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities of the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Note 1 to the Consolidated Financial Statements describes the significant accounting policies and methods used in the preparation of the Consolidated Financial Statements. Estimates are used for, but not limited to, contingencies and taxes.  Actual results could differ materially from those estimates. The following critical accounting policies are impacted significantly by judgments, assumptions, and estimates used in the preparation of the Consolidated Financial Statements.

We are subject to various loss contingencies arising in the ordinary course of business.  We consider the likelihood of loss or impairment of an asset or the incurrence of a liability, as well as our ability to reasonably estimate the amount of loss in determining loss contingencies.  An estimated loss contingency is accrued when management concludes that it is probable that an asset has been impaired or a liability has been incurred and the amount of the loss can be reasonably estimated.  We regularly evaluate current information available to us to determine whether such accruals should be adjusted.

We recognize deferred tax assets (future tax benefits) and liabilities for the expected future tax consequences of temporary differences between the book carrying amounts and the tax basis of assets and liabilities.  The deferred tax assets and liabilities represent the expected future tax return consequences of those differences, which are expected to be either deductible or taxable when the assets and liabilities are recovered or settled.  Future tax benefits have been fully offset by a 100% valuation allowance as management is unable to determine that it is more likely than not that this deferred tax asset will be realized.

Recently Enacted and Proposed Regulatory Changes - Recently enacted and proposed changes in the laws and regulations affecting public companies, including the provisions of the Sarbanes-Oxley Act of 2002 and rules proposed by the SEC and NASDAQ could cause us to incur increased costs as we evaluate the implications of new rules and respond to new requirements. The new rules could make it more difficult for us to obtain certain types of insurance, including directors and officers liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on the Company's board of directors, or as executive officers. We are presently evaluating and monitoring developments with respect to these new and proposed rules, and we cannot predict or estimate the amount of the additional costs we may incur or the timing of such costs.



 
21

 

In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS 159"). SFAS 159 provides companies with an option to report selected financial assets and liabilities at fair value. The objective of SFAS 159 is to reduce both complexity in accounting for financial instruments and the volatility in earnings caused by measuring related assets and liabilities differently. Generally accepted accounting principles have required different measurement attributes for different assets and liabilities that can create artificial volatility in earnings. The FASB has indicated it believes that SFAS 159 helps to mitigate this type of accounting-induced volatility by enabling companies to report related assets and liabilities at fair value, which would likely reduce the need for companies to comply with detailed rules for hedge accounting. SFAS 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities.  SFAS 159 does not eliminate disclosure requirements included in other accounting standards, including requirements for disclosures about fair value measurements included in SFAS 157 and SFAS No. 107, "Disclosures about Fair Value of Financial Instruments." SFAS 159 is effective for the Company as of the beginning of fiscal year 2008. The adoption of this pronouncement did not have an impact on the Company's financial position, results of operations or cash flows.

In December 2007, the FASB issued No. 160, “Noncontrolling Interests in Financial Statements, an amendment of ARB No. 51" (“SFAS 160").  SFAS 160 amends ARB 51 to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary.  It clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements.  This Statement is effective for fiscal years beginning on or after December 15, 2008.  Early adoption is not permitted. Management is currently evaluating the effects of this statement, but it is not expected to have any impact on the Company’s financial statements.

In December 2007, the FASB issued No. 141(R),  “Business Combinations” (“SFAS 141(R)”.  SFAS 141(R) provides companies with principles and requirements on how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree as well as the recognition and measurement of goodwill acquired in a business combination. SFAS 141(R) also requires certain disclosures to enable users of the financial statements to evaluate the nature and financial effects of the business combination. Acquisition costs associated with the business combination will generally be expensed as incurred. SFAS 141(R) is effective for business combinations occurring in fiscal years beginning after December 15, 2008, which will require the Company to adopt these provisions for business combinations occurring in fiscal 2009 and thereafter. Early adoption of SFAS 141(R) is not permitted.  Management is currently evaluating the effects of this statement, but it is not expected to have any impact on the Company’s financial statements.

In March 2008, the FASB issued No. 161, “Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133.  (“SFAS 161").  SFAS 161 requires enhanced disclosures about an entity's derivative and hedging activities and thereby improves the transparency of financial reporting.  This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. This Statement encourages, but does not require, comparative disclosures for earlier periods at initial adoption.  Management is currently evaluating the effects of this statement, but it is not expected to have any impact on the Company’s financial statements.

 
22

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4.  Controls and Procedures

The Company's Chief Executive Officer and Chief Financial Officer are responsible for establishing and maintaining disclosure controls and procedures for the Company.

(a)
Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's President, of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Based upon the evaluation, the Company's President concluded that, as of the end of the period, the Company's disclosure controls and procedures were effective in timely alerting him to material information relating to the Company required to be included in the reports that the Company files and submits pursuant to the Exchange Act.

(b)
Changes in Internal Controls

Based on this evaluation as of March 31, 2008, there were no changes in the Company's internal controls over financial reporting or in any other areas that could significantly affect the Company's internal controls subsequent to the date of his most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


 
23

 


PART II - OTHER INFORMATION

Item 1.  Legal Proceedings

None.

Item 1A.  Risk Factors

None.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

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

The following exhibits are included as part of this report:

Exhibit Number
Title of Document
31
Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.




 
24

 

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:     May   15, 2008
By:    /s/ Joseph Fiore
 
Joseph Fiore
 
C.E.O., C.F.O., Chairman, Secretary, Director
 
(Principal Executive & Accounting Officer)
 
 
 
 
 
25