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: September 30, 2012


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)


Check whether the issuer (1) 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 issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days x  Yes  ¨  No  


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    x  Yes  ¨  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           

¨

 

Accelerated filer   

¨

Non-accelerated filer              

¨

 

Smaller reporting company    

x



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



1





 

APPLICABLE ONLY TO CORPORATE ISSUERS


As of November 5, 2012, 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 31,645,570 common shares), par value $0.0001.


 

 

 

 

 


 

2





PART I.   FINANCIAL INFORMATION


Item 1. Financial Statements

 

 

 

 



 

3





EAT AT JOE’S LTD., AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


 

 

 

 

 

 

 

September 30,

2012

 

December 31,

2011

 

 

(Unaudited)

 

 

ASSETS

 

 

 

 

Current Assets:

 

 

 

 

Cash and cash equivalents

$

  450,059 

$

  712,648 

Receivables

 

  11,494 

 

  12,877 

Inventory

 

  12,100 

 

  12,100 

Prepaid expense

 

  17,719 

 

  17,787 

Security Deposit

 

  15,000 

 

  15,000 

Trading securities

 

  133,392 

 

  268,163 

Available-for-sale securities

 

  306,130 

 

  226,160 

     

 

 

 

 

     Total Current Assets

 

  945,894 

 

  1,264,735 

 

 

 

 

 

Property and equipment:

 

 

 

 

Equipment

 

  105,383 

 

  97,594 

Furniture & Fixtures

 

  3,964 

 

  3,964 

Leasehold improvements

 

  274,637 

 

  274,637 

 

 

  383,984

 

  376,195 

Less accumulated depreciation

 

  (73,042)

 

  (35,347)

 

 

 

 

 

     Total Property & Equipment

 

310,942

 

  340,848 

 

 

 

 

 

     TOTAL ASSETS

$

1,256,836

$

  1,605,583 

 

 

 

 

 




4




EAT AT JOE’S LTD., AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 (Continued)



 

 

 

 

 

 

 

September 30,

2012

 

December 31,

2011

 

 

(Unaudited)

 

 

LIABILITIES

 

 

 

 

Current Liabilities:

 

 

 

 

Accounts payable and accrued liabilities

$

  155,185 

$

  180,723 

Related party accounts payable

 

  - 

 

  8,784 

Short-term notes payable

 

  172,870 

 

  172,870 

Related party notes payable

 

  2,490,505 

 

  2,628,964 

Convertible debentures

 

  2,043,702 

 

  2,043,702 

 

 

 

 

 

     Total Current Liabilities

 

  4,862,262 

 

  5,035,043 

 

 

 

 

 

     Total Liabilities

 

  4,862,262 

 

  5,035,043 

 

 

 

 

 

STOCKHOLDERS’ EQUITY (DEFICIT)

 

 

 

 

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 issued and outstanding

 

  10,658 

 

  10,658 

Additional paid-in capital

 

  13,570,485 

 

  13,570,485 

Unrealized gain (loss) on available-for-sale securities

 

  103,130 

 

  112,660 

Retained deficit

 

  (17,289,701)

 

  (17,123,265)

 

 

 

 

 

     Total Stockholders’ Deficit

 

  (3,605,426)

 

  (3,429,460)

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

$

  1,256,836

$

  1,605,583 

 

 

 

 

 





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



5




EAT AT JOE’S LTD., AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)


 

 

 

 

 

For the three months ended

 

For the nine months ended

 

September 30,

 

September 30,

 

2012

 

2011

 

2012

 

2011

 

 

 

 

 

 

 

 

Revenues

$

269,570 

 

$

400,967 

 

$

872,042

 

$

735,940 

Cost of Revenues

87,862 

 

124,227 

 

272,003 

 

209,162 

Gross Margin

181,708 

 

276,740 

 

600,039 

 

526,778 

 

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

 

 

   Labor and Related Expenses

66,742 

 

96,496 

 

255,231 

 

229,535

   Rent

78,570 

 

71,887 

 

184,157 

 

127,731

   Depreciation and Amortization

12,814 

 

12,226 

 

37,695 

 

15,811

   Other General and Administrative

51,878 

 

77,233 

 

206,792 

 

137,091

      Total Operating Expenses

210,004 

 

257,842 

 

683,875

 

510,168

Net Operating Income (Loss)

(28,296)

 

18,898

 

(83,836)

 

16,610

 

 

 

 

 

 

 

 

Other Income (Expense)

 

 

 

 

 

 

 

   Interest income

278 

 

580 

 

1,201 

 

2,497 

   Dividend income

-

 

16 

 

 

27 

   Interest expense

(35,580)

 

(35,955)

 

(104,757)

 

(110,090)

   Unrealized gain (loss) on Trading securities

(79,678)

 

(80,443)

 

100,943

 

(156,096)

   Gain (Loss) on sale of Marketable

 

 

 

 

 

 

 

      Securities

(1,378) 

 

(102,775) 

 

(79,987) 

 

59,302 

Net Other Income (Expense)  

(116,358)

 

(218,577)

 

(82,600)

 

(204,360)

 

 

 

 

 

 

 

 

Net Income (Loss) Before Income Taxes

$

(144,654)

 

$

(199,679)

 

$

(166,436)

 

$

(187,750)

Income Tax (Expense) Benefit

 

 

 

 

 

 

 

 

 

 

 

Net Income (Loss)

$

(144,654)

 

$

(199,679)

 

$

(166,436)

 

$

(187,750)

 

 

 

 

 

 

 

 

Other Comprehensive Income (Loss)

 

 

 

 

 

 

 

  Unrealized gain (loss) on available-for-sale  securities

(157,250)

 

(8,680)

 

(9,530)

 

145,840

 

 

 

 

 

 

 

 

Comprehensive Income (Loss)

$

(301,904)

 

$

(208,359)

 

$

(175,966)

 

$

(41,910)

 

 

 

 

 

 

 

 

Basic & Diluted Income (Loss) Per Common Share:

$

 

$

 

$

 

$

 

 

 

 

 

 

 

 

Weighted Average Common Shares

  106,577,710 

 

  106,577,710 

 

  106,577,710 

 

  106,577,710 

 

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

 

 

6




EAT AT JOE’S LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


For the nine months ended

 

September 30,

 

2012

 

2011

Cash Flows From Operating Activities

 

 

 

   Net gain (loss) for the period

$

(166,436) 

 

$

(187,750)

Adjustments to reconcile net income (loss) to net cash

   Provided by operating activities

 

 

 

     Depreciation and amortization

37,695 

 

15,811 

     Unrealized (gain) loss on trading securities

(100,943)

 

156,096 

     (Gain) Loss on sale of marketable securities

79,987 

 

(59,302) 

     Decrease (Increase) in receivables

1,383 

 

698 

     Decrease (Increase) in inventory

 

     Decrease (Increase) in prepaid expense

68 

 

     Decrease (Increase) in security deposit

 

(15,000)

     (Decrease) Increase in accrued interest payable

104,757 

 

110,090 

     (Decrease) Increase in accounts payable and accrued liabilities

(25,538)

 

(17,311)

Net Cash Provided by (Used) in Operating Activities

(69,027)

 

3,332

 

 

 

 

Cash Flows From Investing Activities

 

 

 

   Purchases of trading securities

(91,807)

 

(320,360) 

   Purchases of available-for-sale securities

(127,500)

 

(15,000) 

   Proceeds from sale of trading securities

285,534 

 

667,451 

   Proceeds from sale of available-for-sale securities

 

   Purchase of property and equipment

(7,789)

 

(351,796)

Net Cash Provided (Used) by Investing Activities

58,438 

 

(19,705)

 

 

 

 

Cash Flows From Financing Activities

 

 

 

   Repayment of notes, advances and related party payables

(252,000)

 

(295,000)

 

 

 

 

Net Cash Provided (Used) by Financing Activities

(252,000)

 

(295,000)

 

 

 

 

Increase (Decrease)  in Cash

(262,589) 

 

(311,373)

Cash at beginning of period

712,648 

 

1,212,018 

Cash at end of period

$

450,059 

 

$

900,645 

Supplemental Disclosure of Interest and Income Taxes Paid

 

 

 

   Interest paid during the period

$

 

$

   Income taxes paid during the period

$

 

$

 

 

 

Supplemental Disclosure of Non-cash Investing  and Financing Activities:

 

 

    Marketable securities acquired through related party notes

 

 

 

        and contributed capital

$

-

 

$

700,000 

    Unrealized gain (loss) on trading securities

$

100,943

 

$

(156,096)

 

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



7




EAT AT JOE’S LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012


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.


Interim Financial Statements


The unaudited financial statements as of September 30, 2012 and for the three and nine month periods ended September 30, 2012 and 2011 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 nine 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.



8




EAT AT JOE’S LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012

(Continued)


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(Continued)


Basis of Presentation (continued)


The Company has incurred a net loss for the nine months ended September 30, 2012 and 2011 of $166,436 and $187,750, respectively, and the Company provided (used) cash from operations of ($69,027) and $3,332, respectively.  As of September 30, 2012, the Company had a working capital deficit of $3,916,368.  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 restaurant 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, Branded Restaurant Group, Inc. (formerly 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.


On January 29, 2010, the Company filed certificates of dissolution with the State of Nevada for E.A.J. Echelon, Inc., E.A.J. Owings, Inc., and Regency Communications Group, Inc. (formerly E.A.J. Neshaminy, Inc.).


 

9





EAT AT JOE’S LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012

 (Continued)


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(Continued)


On April 14, 2011, the Company filed certificates of dissolution with the State of Nevada for E.A.J. Hold, Inc., E.A.J. PM, Inc., and Branded Restaurant Group, Inc. (formerly E.A.J. Syracuse, Inc.).


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 through its restaurants.  Revenue is recognized upon receipt of payment.


Income Taxes


The Company accounts for income taxes under the provisions of ASC 740 (formerly SFAS No. 109, “Accounting for Income Taxes”).  ASC 740 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

Computer equipment

                3 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




 

10




EAT AT JOE’S LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2012

 (Continued)


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(Continued)


property and related accumulated depreciation accounts, and any resulting gain or loss is credited or charged to income.


During 2011, the Company remodeled the restaurant and added leasehold improvements totaling $269,669, and purchased new equipment totaling $91,127.  The old leasehold improvements of $376,165 and old equipment of $116,954 were removed from service and disposed of; resulting in total cost of the property and the corresponding accumulated depreciation of $493,119 being eliminated from the property and related accumulated depreciation accounts.  No gain or loss was recorded on the disposal.


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 ASC 350 (formerly SFAS No., 142, “Goodwill and Other Intangible Assets”).  ASC 350 requires, among other things, that companies no longer amortize goodwill, but instead test goodwill for impairment at least annually.  In addition, ASC 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 ASC 350.  



The Company has adopted Financial Accounting Standards Board ASC 360 (formerly Statement No. 144).  ASC 360 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.




11




EAT AT JOE’S LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012

 (Continued)


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(Continued)


Recent Accounting Standards


In December 2011, FASB issued ASU 2011-12 “Comprehensive Income (Topic 220).”  In order to defer only those changes in Update 2011-05 that relate to the presentation of reclassification adjustments, the paragraphs in this Update supersede certain pending paragraphs in Update 2011-05. The amendments are being made to allow the Board time to re-deliberate whether to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income for all periods presented. While the Board is considering the operational concerns about the presentation requirements for reclassification adjustments and the needs of financial statement users for additional information about reclassification adjustments, entities should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before Update 2011-05.All other requirements in Update 2011-05 are not affected by this Update, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. Public entities should apply these requirements for fiscal years, and interim periods within those years, beginning after December 15, 2011.  Management does not expect the adoption of ASU 2011-11 to have a material effect on the Company’s financial position, results of operations or cash flows.


In June 2011, FASB issued ASU 2011-05 “Comprehensive Income (Topic 220).”  Under the amendments in this Update, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. In a single continuous statement, the entity is required to present the components of net income and total net income, the components of other comprehensive income and a total for other comprehensive income, along with the total of comprehensive income in that statement. In the two-statement approach, an entity is required to present components of net income and total net income in the statement of net income. The statement of other comprehensive income should immediately follow the statement of net income and include the components of other comprehensive income and a total for other comprehensive income, along with a total for comprehensive income.  The amendments in this Update should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted. The amendments do not require any transition disclosures.  Management elected early adoption and has presented the total of comprehensive income, the components of net income, and the components of other comprehensive income in a single continuous statement of comprehensive income.  

12





EAT AT JOE’S LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012

 (Continued)


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(Continued)


In May 2011, FASB issued ASU 2011-04 “Fair Value Measurement (Topic 820).” The amendments in ASU 2011-04 change the wording used to describe the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The amendments include (1) those that clarify the Board's intent about the application of existing fair value measurement and disclosure requirements and (2) those that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. In addition, to improve consistency in application across jurisdictions some changes in wording are necessary to ensure that U.S. GAAP and IFRS fair value measurement and disclosure requirements are described in the same way (for example, using the word shall rather than should to describe the requirements in U.S. GAAP). The amendments that clarify the Board's intent about the application of  existing fair value measurement and disclosure requirements include (a) the application of the highest and best use and valuation premise concepts, (b) measuring the fair value of an instrument classified in a reporting entity's shareholders' equity, and (c) disclosures about fair value measurements that clarify that a reporting entity should disclose quantitative information about the unobservable inputs used in a fair value measurement that is categorized within Level 3 of the fair value hierarchy. The amendments in this Update that change a particular principle or requirement for measuring fair value or disclosing information about fair value measurements include (a) measuring the fair value of financial instruments that are managed within a portfolio, (b) application of premiums and discounts in a fair value measurement, and (c) additional disclosures about fair value measurements that expand the disclosures about fair value measurements. The amendments in ASU 2011-04 are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. Early application by public entities is not permitted. The Company does not expect the provisions of ASU 2010-29 to have a material effect on its financial position, results of operations or cash flows.


The Company has implemented all new accounting pronouncements that are in effect.  These pronouncements did not have any material impact on the financial statements unless otherwise disclosed, and the Company does not believe that there are any other new accounting pronouncements that have been issued that might have a material impact on its financial position or results of operations.


 

13




EAT AT JOE’S LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012

 (Continued)


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(Continued)


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 31,645,570 and 10,000,000 common shares as of September 30, 2012 and 2011, respectively.  The effect of outstanding common stock equivalents are anti-dilutive for 2011 and are thus not considered.


Pervasiveness of Estimates


The preparation of financial statements in conformity with generally accepted accounting principles requires 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.  At September 30, 2012, the Company had cash deposits in one financial institution that were above FDIC limits of $250,000.  


Reclassifications


Certain reclassifications have been made in the 2011 financial statements to conform with the 2012 presentation.


Fair Value of Financial Instruments


The carrying value of the Company's financial instruments, including receivables and accounts payable and accrued liabilities at September 30, 2012 and December 31, 2011 approximates their fair values due to the short-term nature of these financial instruments.  The carrying values of trading securities and available for sale securities are based on quoted market prices.




14




EAT AT JOE’S LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012

 (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.   All of the Company’s available-for-sale are marketable securities and have no maturity date.


The Company’s securities investments that are bought and held principally for the purpose of selling them in the near term are classified as trading securities.  Trading securities are recorded at fair value on the balance sheet in current assets, with the change in fair value during the period included in earnings.


Investments in securities are summarized as follows:


 

 

September 30, 2012

 

 

Gross

 

Gross

 

 

 

 

Unrealized

 

Unrealized

 

Fair

 

 

Gain

 

Loss

 

Value

Trading securities

 

$

100,943

 

$

-

 

$

133,392 

Available-for-sale securities

 

$      103,130

 

$

 

$

306,130


 

 

December 31, 2011

 

 

Gross

 

Gross

 

 

 

 

Unrealized

 

Unrealized

 

Fair

 

 

Gain

 

Loss

 

Value

Trading securities

 

$

-

 

$

105,026

 

$

268,163

Available-for-sale securities

 

$

112,660

 

$

-

 

$

226,160

 

 

 

 

 

 

 


Results of operations for the nine months ended September 30, 2012 includes a gain of $100,943 on unrealized holding gains on trading securities.  Results of operations for the nine months ended September 30, 2011 includes a charge of $156,096 for unrealized holding losses on trading securities.  For the nine months ended September 30, 2012, other comprehensive income includes a loss of $9,530 for unrealized holding losses on available-for-sale securities.  For the nine months ended September 31, 2011, other comprehensive income includes a gain of $145,840 for unrealized holding gains on available-for-sale securities.  





15




EAT AT JOE’S LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012

 (Continued)


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(Continued)


Realized Gains and losses are determined on the basis of specific identification.  During the nine months ended September 30, 2012 and 2011, sales proceeds and gross realized gains and losses on securities classified as available-for-sale securities and trading securities were:


 

For the nine months ended

 

September 30,

 

2012

 

2011

Trading securities:

 

 

 

  Sales Proceeds

$

285,534

 

$

667,451

  Gross Realized Losses

$

79,987

 

$

-

  Gross Realized Gains

$

-

 

$

59,302 

 

 

 

 

Available-for-sale securities:

 

 

 

  Sale Proceeds

$

-

 

$

-

  Gross Realized Losses

$

-

 

$

-

  Gross Realized Gains

$

-

 

$

-


The following table discloses the assets measured at fair value on a recurring basis and the methods used to determine fair value:


 

 

 

Fair Value Measurements at Reporting Date Using

 

 

 

Quoted Prices

 

Significant

 

Significant

 

 

 

in Active

 

Other

 

Unobservable

 

Fair Value at

 

Markets

 

Observable Inputs

 

Inputs

 

September 30, 2012

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

 

 

 

 

 

 

 

Trading securities

$

133,392 

 

$

133,392 

 

$

-

 

$

-

Available-for-sale securities

$

306,130 

 

$

306,130 

 

$

-

 

$

-

 

 

 

 

 

 

 

 

Total

$

439,522

 

$

439,522

 

$

-

 

$

-


Generally, for all trading securities and available-for-sale securities, fair value is determined by reference to quoted market prices.


 



16




EAT AT JOE’S LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012

(Continued)


NOTE 2 - SHORT-TERM NOTES PAYABLE


Short-Term Notes Payable consists of loans from unrelated entities as of September 30, 2012 and December 31, 2011.  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, 2011, the Company had a net operating loss carryforward for income tax reporting purposes of approximately $5,200,000 that may be offset against future taxable income through 2031.  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 carry forwards will expire unused.  Accordingly, the potential tax benefits of the loss carry forwards are offset by a valuation allowance of the same amount.

The Company has the following tax assets:


 

 

December 31,

 

December 31,

 

 

2011

 

2010

Net Operating Losses

 

$

1,768,000 

 

$

1,836,000 

Depreciation and Other

 

(21,340)

 

93,840 

Valuation Allowance

 

(1,746,660)

 

(1,929,840)

 

 

$

 

$


The provision for income taxes differ from the amount computed using the federal US statutory income tax rate as follows:


 

 

December 31,

 

December 31,

 

 

2011

 

2010

Provision (Benefit) at US Statutory Rate

 

$

(52,200)

 

$

(213,000)

Net Operating Losses

 

80,240 

 

(12,600)

Depreciation and Other

 

155,140 

 

234,100 

Increase (Decrease) in Valuation Allowance

 

(183,180)

 

(8,500)

 

 

$

 

$


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


 



17




EAT AT JOE’S LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012

 (Continued)



NOTE 4 - UNCERTAIN TAX POSITIONS


Effective January 1, 2007, the company adopted the provisions of ASC 740 (formerly FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109” (“FIN 48”)). ASC 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The adoption of the provisions of ASC 740 did not have a material impact on the company’s condensed consolidated financial position and results of operations. At December 31, 2011, the company had no liability for unrecognized tax benefits and no accrual for the payment of related interest and penalties. The Company did not record a cumulative effect adjustment relating to the adoption of ASC 740.


Interest costs related to unrecognized tax benefits are classified as “Interest expense, net” in the accompanying condensed consolidated statements of operations. Penalties, if any, would be recognized as a component of “Selling, general and administrative expenses”. The Company recognized $0 of interest and penalties expense related to unrecognized tax benefits during 2011. In many cases the company’s uncertain tax positions are related to tax years that remain subject to examination by relevant tax authorities. With few exceptions, the company is generally no longer subject to U.S. federal, state, local or non-U.S. income tax examinations by tax authorities for years before 2008. The following describes the open tax years, by major tax jurisdiction, as of December 31, 2011:

 

 

 

United States (a)

 

2008 - Present


(a) Includes federal as well as state or similar local jurisdictions, as applicable.


NOTE 5 - RELATED PARTY TRANSACTIONS


During 2011 and 2010, 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 the period incurred.  As of September 30, 2012 and December 31, 2011, $1,495,271 and $1,442,889 (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.  As of September 30, 2012 and December 31, 2011, related party accounts payable include $0 and $8,784, respectively, due to Berkshire Capital.

 



18





EAT AT JOE’S LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012

(Continued)

 

NOTE 5 - RELATED PARTY TRANSACTIONS (continued)


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.  During the year ended December 31, 2010, the Company paid $210,000 towards this loan.  At September 30, 2012 and December 31, 2011, $24,405 and $46,545, respectively was due on this loan.




On September 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.  At September 30, 2012 and December 31, 2011, $171,598 and $164,066 was due on this loan, respectively.


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 January 8, 2008, $375,156 was paid on this note.  At September 30, 2012 and December 31, 2011, $137,801 and $131,096 was due on this loan, respectively.  


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.  At September 30, 2012 and December 31, 2011, $218,302 and $207,681 was due on this loan, respectively.


         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.  At September 30, 2012 and December 31, 2011, $74,309 and $71,047, respectively, was due on this loan.


         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 April 30, 2012 and May 15, 2012 the Company paid back $30,000 and $20,000, respectively. During the third quarter the remaining balance was paid. At September 30, 2012 and December 31, 2011, $0 and $59,611, respectively, was due on this loan.


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.  At September 30, 2012 and December 31, 2011, $166,589 and $158,494, respectively, was due on this loan.

 





19





EAT AT JOE’S LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012

(Continued)


NOTE 5 - RELATED PARTY TRANSACTIONS (continued)

 

On April 24, 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 $71,000, carrying an interest rate of 6% A.P.R.  At September 30, 2012 and December 31, 2011, $92,574 and $88,510, respectively, was due on this loan.


On April 24, 2008, the Company acquired 862,500 shares of EFoodSafety.Com from Berkshire Capital Management in exchange for a demand note in the amount of $163,875, carrying an interest rate of 6% A.P.R.  On March 26, 2010, $30,000 was paid on this note.  On March 31, 2012, $61,464 was paid on this note. During the quarter ended September 30, 2012 $86,216 was paid on this note. At September 30, 2012 and December 31, 2011, $28,414 and $170,970, respectively, was due on this loan.


On July 1, 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 $63,000, carrying an interest rate of 6% A.P.R.  At September 30, 2012 and December 31, 2011, $81,242 and $77,676, respectively, was due on this loan.


On November 18, 2009, the Company acquired 5,000,000 share of Nuvilex, Inc. from Berkshire Capital Management in exchange for a note payable in the amount of $150,000.  The note is due in three years and carries an interest rate of 6% A.P.R.  During the 4th quarter of 2011, this note was paid in full.  


On October 19, 2010, the Company acquired 171,400 shares of Diamond Ranch Foods from Berkshire Capital Management in exchange for a note payable in the amount of $50,000.  The market value of the shares on October 19, 2010 was $1.05 per share, for a total value of $179,970.  As part of this transaction, the Company recorded contributed capital of $129,970, which was the difference in the value of the shares and note payable.  The note is due in three years and carries an interest rate of 6% A.P.R.  During the 4th quarter of 2011, this note was paid in full.  


On May 17, 2011, the Company acquired 3,000,000 shares of Nuvilex, Inc. from Berkshire Capital Management in exchange for a note payable in the amount of $10,000.  The market value of the shares on May 17, 2011 was $0.07 per share, for a total value of $210,000.  As part of this transaction, the Company recorded contributed capital of $200,000, which was the difference in the value of the shares and the note payable.  The note is due on demand and carries an interest rate of 6% A.P.R.  On March 31, 2012, this note was paid in full.  At September 30, 2012 and December 31, 2011, $0 and $10,379, respectively, was due on this loan.



20




EAT AT JOE’S LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012

 (Continued)



A summary of the above related party transactions is presented below.


Related Party

Date of loan

 

September 30, 2012

 

December 31, 2011

Joseph Fiore

2010 & 2011

$

1,495,271

$

1,442,889

Berkshire Capital Management

May 16, 2007

 

24,405

 

46,545

Berkshire Capital Management

September 14, 2007

 

171,598

 

164,066

Berkshire Capital Management

July 17, 2007

 

137,801

 

131,096

Berkshire Capital Management

August 22, 2007

 

218,302

 

207,681

Berkshire Capital Management

September 20, 2007

 

74,309

 

71,047

Berkshire Capital Management

January 11, 2008

 

0

 

59,611

Berkshire Capital Management

February 29, 2008

 

166,589

 

158,494

Berkshire Capital Management

April 24, 2008

 

92,574

 

88,510

Berkshire Capital Management

April 24, 2008

 

28,414

 

170,970

Berkshire Capital Management

July 1, 2008

 

81,242

 

77,676

Berkshire Capital Management

November 18, 2009

 

-   

 

-   

Berkshire Capital Management

October 19, 2010

 

-   

 

-   

Berkshire Capital Management

May 17, 2011

 

-   

 

10,379

 

 

$

2,490,505

$

2,628,964


NOTE 6 - 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 $14,000 per month basic rent under the lease which expires April 2017.  A construction security deposit of $15,000 was paid prior to construction.  Amount will be refunded upon completion of renovation.


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


Year Ended December 31,

 

 

Real Property

 

 

 

2011

 

$

168,000

 

 

 

2012

 

168,000

 

 

 

2013

 

168,000

 

 

 

2014

 

168,000

 

 

 

2015

 

168,000

 

 

 

 

 

Total five year minimum lease payments  

 

$

840,000

 

 




21




EAT AT JOE’S LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012

 (Continued)



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.


During 2011, the restaurant was closed for renovation starting in February 2011 and reopening in May 2011.  The Company paid a construction security deposit of $15,000 prior to construction.  The Company expects the deposit to be refunded in 2012.  


NOTE 7 - 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 which were amortized over the initial terms of the debt with a maturity date of July 31 and September 2, 2001.


The Company has stopped accruing interest on the convertible debentures since the six year statute of limitations under New York state law has expired.  The Company believes no further payments are due, and because of that no interest should accrue.




22





EAT AT JOE’S LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2012

 (Continued)


NOTE 8 - 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 31,645,570 common shares at September 30, 2012).

 

*

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.









23




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-K for the year ended December 31, 2011.


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.


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 Nine Months Ended September 30, 2012:


Results of Operations - For the nine months ended September 30, 2012, the Company had a net loss of $166,436 composed of a loss from operations of $83,836 and net other loss of $82,600.   For the nine months ended September 30, 2011, the Company had a net loss of $187,750 composed of gain from operations of $16,610 and net other loss of $204,360.  Net other income/loss is primarily due to gains and losses from the sale of trading and available for sale securities and the unrealized gains and losses on trading securities.



24




 

Total Revenues - For the nine months ended September 30, 2012 and 2011, the Company had total sales of approximately $872,000 and $736,000, respectively, for an increase of approximately $136,000.  The increase is mainly due to the restaurant being closed effective February 21, 2011 for remodeling.  The restaurant reopened on May 27, 2011.  Also, the overall economic condition of the country has caused airport traffic to decline. Consumers are spending and traveling less and airlines are eliminating or combining flights. There is a direct correlation between airport traffic and the Company’s sales.  As the economy stabilizes and moves toward a recovery, airport traffic is expected to increase and will be reflected in increased sales for the Company.


Costs and Expenses - Costs of revenues, which include the costs of food, beverage, and kitchen supplies slightly increased as a percentage of sales from 2011 to 2012, from 29% to 31%. This was mainly due to the increase in sales in 2012 compared to 2011, and to the restaurant being closed for remodeling during the 2011 year.  The cost of labor, rent and other general and administrative costs, increased as a percentage of sales for the nine months ended September 30, 2012 compared to the nine months ended September 30, 2011 from 67% to 74%.


Depreciation and amortization expense increased by approximately $21,900 from 2011 to 2012 due to new fixed assets being placed in service during the renovation.  Depreciation expense will increase now that these plans are completed and as new assets are acquired.


Results of Operations for the Three Months Ended September 30, 2012:


Results of Operations - For the three months ended September 30, 2012, the Company had a net loss of $144,654 composed of a loss from operations of $28,296 and net other loss of $116,358.   For the three months ended September 30, 2011, the Company had a net loss of $199,679 composed of gain from operations of $18,898 and net other loss of $218,577.  Net other income/loss is primarily due to gains and losses from the sale of trading and available for sale securities and the unrealized gains and losses on trading securities.  


Total Revenues - For the three months ended September 30, 2012 and 2011, the Company had total sales of approximately $269,570 and $400,967, respectively, for a decrease of approximately $131,400.  The decrease is mainly due a decline in airport traffic. Consumers are spending and traveling less and airlines are eliminating or combining flights. There is a direct correlation between airport traffic and the Company’s sales.  As the economy stabilizes and moves toward a recovery, airport traffic is expected to increase and will be reflected in increased sales for the Company.


Costs and Expenses - Costs of revenues, which include the costs of food, beverage, and kitchen supplies slightly increased as a percentage of sales from 2011 to 2012, from 31% to 33%. The cost of labor, rent and other general and administrative costs, increased as a percentage of sales for the three months ended September 30, 2012 compared to the three months ended September 30, 2011 from 61% to 73%.


LIQUIDITY AND CAPITAL RESOURCES


As of September 30, 2012, the Company has a working capital deficit of approximately $3,916,000.  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.



25




 

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 the nine months ended September 30, 2012, the Company received approximately $286,000 in cash from proceeds of sales of trading securities for investing activities.  Cash of approximately $8,000 was used for purchase of equipment and improvements due to the restaurant remodeling.  Net cash of approximately $220,000 was used for the purchase  of marketable equity securities for the nine months ended September 30, 2012.  For the nine months ended September 30, 2011, the Company used approximately $20,000 in cash from investing activities from the purchase of equipment and improvements due to the restaurant remodeling.   As of September 30, 2012, the company owns marketable securities valued at $439,522.  


During the nine months ended September 30, 2012, the Company repaid approximately $252,000 in short-term notes payable.  During the nine months ended September 30, 2011, the Company repaid $295,000 in shareholder advances from past years. As of September 30, 2012, approximately $1,495,271 (including interest accruing at 6%) in advances was due to Joseph Fiore, C.E.O. of the Company.




For the nine months ended September 30, 2012 and 2011, operating activities provided (used) approximately ($69,027) and $3,332 in cash, respectively.


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.


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.



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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.



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.   


The Company’s securities investments that are bought and held principally for the purpose of selling them in the near term are classified as trading securities.  Trading securities are recorded at fair value on the balance sheet in current assets, with the change in fair value during the period included in earnings.


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.


In December 2011, FASB issued ASU 2011-12 “Comprehensive Income (Topic 220).”  In order to defer only those changes in Update 2011-05 that relate to the presentation of reclassification adjustments, the paragraphs in this Update supersede certain pending paragraphs in Update 2011-05. The amendments are being made to allow the Board time to re-deliberate whether to present on the face of the financial statements the effects of reclassifications out of accumulated other comprehensive income on the components of net income and other comprehensive income for all periods presented. While the Board is considering the operational concerns about the presentation requirements for reclassification adjustments and the needs of financial statement users for additional information about reclassification adjustments, entities should continue to report reclassifications out of accumulated other comprehensive income consistent with the presentation requirements in effect before Update 2011-05.All other requirements in Update 2011-05 are not affected by this Update, including the requirement to report comprehensive income either in a single continuous financial statement or in two separate but consecutive financial statements. Public entities should apply these requirements for fiscal years, and interim periods within those years, beginning after December 15, 2011.  Management does not expect the adoption of ASU 2011-11 to have a material effect on the Company’s financial position, results of operations or cash flows.


In June 2011, FASB issued ASU 2011-05 “Comprehensive Income (Topic 220).”  Under the amendments in this Update, an entity has the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to



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present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. In a single continuous statement, the entity is required to present the components of net income and total net income, the components of other comprehensive income and a total for other comprehensive income, along with the total of comprehensive income in that statement. In the two-statement approach, an entity is required to present components of net income and total net income in the statement of net income. The statement of other comprehensive income should immediately follow the statement of net income and include the components of other comprehensive income and a total for other comprehensive income, along with a total for comprehensive income.  The amendments in this Update should be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted. The amendments do not require any transition disclosures.  Management elected early adoption and has presented the total of comprehensive income, the components of net income, and the components of other comprehensive income in a single continuous statement of comprehensive income.  


In May 2011, FASB issued ASU 2011-04 “Fair Value Measurement (Topic 820).” The amendments in ASU 2011-04 change the wording used to describe the requirements in U.S. GAAP for measuring fair value and for disclosing information about fair value measurements. The amendments include (1) those that clarify the Board's intent about the application of existing fair value measurement and disclosure requirements and (2) those that change a particular principle or requirement for measuring fair value or for disclosing information about fair value measurements. In addition, to improve consistency in application across jurisdictions some changes in wording are necessary to ensure that U.S. GAAP and IFRS fair value measurement and disclosure requirements are described in the same way (for example, using the word shall rather than should to describe the requirements in U.S. GAAP). The amendments that clarify the Board's intent about the application of  existing fair value measurement and disclosure requirements include (a) the application of the highest and best use and valuation premise concepts, (b) measuring the fair value of an instrument classified in a reporting entity's shareholders' equity, and (c) disclosures about fair value measurements that clarify that a reporting entity should disclose quantitative information about the unobservable inputs used in a fair value measurement that is categorized within Level 3 of the fair value hierarchy. The amendments in this Update that change a particular principle or requirement for measuring fair value or disclosing information about fair value measurements include (a) measuring the fair value of financial instruments that are managed within a portfolio, (b) application of premiums and discounts in a fair value measurement, and (c) additional disclosures about fair value measurements that expand the disclosures about fair value measurements. The amendments in ASU 2011-04 are to be applied prospectively. For public entities, the amendments are effective during interim and annual periods beginning after December 15, 2011. Early application by public entities is not permitted. The Company does not expect the provisions of ASU 2010-29 to have a material effect on its financial position, results of operations or cash flows.


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.



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(b)

Changes in Internal Controls


Based on this evaluation as of September 30, 2012, 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.

 


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. Mine Safety Disclosures


Not applicable


Item 5.  Other Information


None.




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Item 6.  Exhibits


The following exhibits are included as part of this report:


Exhibit

Exhibit Description

Filed herewith

31

Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

X

32

Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

X

101.INS*

XBRL Instance Document

X

101.SCH*

XBRL Taxonomy Extension Schema Document

X

101.CAL*

XBRL Taxonomy Extension Calculation Linkbase Document

X

101.LAB*

XBRL Taxonomy Extension Label Linkbase Document

X

101.PRE*

XBRL Taxonomy Extension Presentation Linkbase Document

X

101.DEF*

XBRL Taxonomy Extension Definition Linkbase Definition

X















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SIGNATURES


In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



 EAT AT JOE'S LTD.

(Registrant)

 



DATE:  November 13, 2012

By: /s/ Joseph Fiore

Joseph Fiore

C.E.O., C.F.O., Chairman, Secretary, Director

(Principal Executive & Accounting Officer)

 

 

 

 

 

 

 

 

 

 


 


 

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