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, 2013

 

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

 

1
 

 

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

 

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

As of November 11, 2013, there were 136,627,710 shares of the Registrant's common stock, par value $0.0001, issued, and 20,000 shares of Series E Convertible preferred stock (convertible to 3,571,429 common shares), par value $0.0001.

 

 

 

 

 

 

2
 

 

PART I.   FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

 EAT AT JOE’S LTD., AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

     

(Unaudited)

September 30,
2013

     

December 31,
2012

 
ASSETS                
Current Assets:                
   Cash and cash equivalents   $ 1,944,597     $ 382,946  
   Accounts receivable     731       882  
   Inventory     13,400       13,400  
   Prepaid expense     17,469       17,725  
   Security deposit     15,000       15,000  
   Trading securities     1,858,202       200,556  
   Available-for-sale securities     2,504,150       292,320  
                 
       Total Current Assets     6,353,549       922,829  
                 
   Property and equipment:                
     Equipment     104,905       104,633  
     Furniture & fixtures     3,964       3,964  
     Leasehold improvements     274,637       274,637  
      383,506       383,234  
   Less accumulated depreciation     (139,968)       (85,770)  
                 
   Total property & equipment     243,538       297,464  
                 
       TOTAL ASSETS   $ 6,597,087     $ 1,220,293  
                 

 

3
 

 

 

EAT AT JOE’S LTD., AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Continued)

     

(Unaudited)

September 30,
2013

      December 31,
2012
 
LIABILITIES                
Current Liabilities:                
   Accounts payable and accrued liabilities   $ 24,140     $ 43,453  
   Related party notes payable     2,359,758       2,521,026   
                 
       Total Current Liabilities     2,383,898       2,564,479  
                 
          Total Liabilities     2,383,898       2,564,479  
                 
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; 136,627,710 and                
   136,627,710 issued and outstanding, respectively     13,663       13,663  
   Additional paid-in capital     14,587,780       13,747,780  
   Unrealized gain on available-for-sale securities     257,399       93,820  
   Retained deficit     (10,645,655)       (15,199,451)  
                 
       Total Stockholders’ Equity (Deficit)     4,213,189       (1,344,186)  
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)   $ 6,597,087     $ 1,220,293  
                 

 

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

4
 
 

 

EAT AT JOE’S LTD., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)
   For the Nine months ended  For the Three months ended
   September 30,  September 30,
   2013  2012  2013  2012
             
Revenues  $968,992   $872,042   $364,924   $269,570 
Cost of revenues   312,312    272,003    130,690    87,862 
Gross margin   656,680    600,039    234,234    181,708 
                     
Expenses                    
   Labor and related expenses   248,793    255,231    85,140    66,742 
   Rent   163,321    184,157    55,006    78,570 
   Depreciation and amortization   54,199    37,695    28,953    12,814 
   Other general and administrative   244,697    206,792    61,667    51,878 
      Total operating expenses   711,010    683,875    230,766    210,004 
Net Operating Income (Loss)   (54,330)   (83,836)   3,468    (28,296)
                     
Other Income (Expense)                    
   Interest income   475    1,201    107    278 
   Interest expense   (96,427)   (104,757)   (30,832)   (35,580)
   Unrealized gain (loss) on trading securities   1,023,002    100,943    (983,758)   (79,678)
   Gain (Loss) on sale of marketable                    
      securities   3,681,075    (79,987)   1,943,004    (1,378)
Net Other Income (Expense)   4,608,125    (82,600)   928,521    (116,358)
                     
Net Income (Loss)  $4,553,795   $(166,436)  $931,989   $(144,654)
                     
Other Comprehensive Income (Loss)                    
  Unrealized gain (loss) on available-for-sale securities   163,579    (9,530)   154,099    (157,250)
                     
Comprehensive Income (Loss)  $4,717,374   $(175,966)  $1,086,088   $(301,904)
                     
Basic & diluted income (loss) per common share:  $0.03   $(0.00)  $0.01   $(0.00)
Weighted average common shares                    
  Basic   136,627,710    106,577,710    136,627,710    106,577,710 
  Diluted   140,199,139    138,223,280    140,199,139    138,223,280 
                     
The accompanying notes are an integral part of these consolidated financial statements.
  

 

5
 

 

EAT AT JOE’S LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
    
   For the Nine Month Ended
September 30,
   2013  2012
Cash Flows From Operating Activities:          
Net income (loss) for the period  $4,553,795   $(166,436)
Adjustments to reconcile net loss to net cash
   provided by operating activities:
          
     Depreciation   54,198    37,695 
     Unrealized (gain) loss on trading securities   (1,023,002)   (100,943)
     (Gain) loss on sale of marketable securities   (3,681,075)   79,987 
     Decrease (increase) in receivables   151    1,383 
     Decrease (increase) in prepaid expense   256    68 
     (Decrease) increase in accrued interest payable   96,425    104,757 
     (Decrease) in accounts payable and accrued liabilities   (19,313)   (25,538)
Net Cash Provided used in Operating Activities   (18,565)   (69,027)
           
Cash Flows From Investing Activities:          
     Purchases of trading securities   (225,170)   (91,807)
     Purchases of available-for-sale securities   (2,212,500)   (127,500)
     Proceeds from sale of trading securities   4,478,158    285,534 
     Purchase of property and equipment   (272)   (7,789)
Net Cash Provided by Investing Activities   2,040,216    58,438 
           
Cash Flows From Financing Activities:          
   Repayment of notes, advances and related party payables   (460,000)   (252,000)
Net Cash Used by Financing Activities   (460,000)   (252,000)
           
Increase (Decrease) in Cash   1,561,651    (262,589)
Cash at beginning of period   382,946    712,648 
Cash at end of period  $1,944,597   $450,059 
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  $202,306   $—   
Marketable securities acquired through contributed capital  $840,000   $—   
   Unrealized gain (loss) on available-for-sale securities  $257,399   $100,943 

 

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

 
6
 

EAT AT JOE’S LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2013

 

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, 2013 and for the nine month periods ended September 30, 2013 and 2012 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.

 

 

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.

 

The Company has generated net income for the nine months ended September 30, 2013 of $4,553,795; however, the Company used cash from operations of $18,565. In addition, as of September 30, 2013, the Company had an accumulated deficit of $10,645,655. These conditions continue to 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.

7
 

 

Management’s plans include searching for and opening new restaurants in the future, utilizing company assets to maximize share holder value 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 owns and operates a theme restaurant 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. 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. Market East, Inc., a Nevada corporation, E.A.J. MO, Inc., a Nevada corporation, E.A.J. Walnut Street, Inc., a Nevada corporation, and 1398926 Ontario, Inc. and 1337855 Ontario, Inc., Ontario corporations.  All significant intercompany accounts and transactions have been eliminated.

 

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 a company to first determine whether it is more likely than not (which is defined as a likelihood of more than fifty percent) that a tax position will be sustained based on its technical merits as of the reporting date, assuming that taxing authorities will examine the position and have full knowledge of all relevant information.  A tax position that meets this more likely than not threshold is then measured and recognized at the largest amount of benefit that is greater than fifty percent likely to be realized upon effective settlement with a taxing authority.

 

Deferred income taxes are recognized for the tax consequences related to temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for tax purposes at each year end, based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.  A valuation allowance is recognized when, based on the weight of all available evidence, it is considered more likely than not that all, or some portion, of the deferred tax assets will not be realized.  Income tax expense is the sum of current income tax plus the change in deferred tax assets and liabilities.

 

8
 

 

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 6-15 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.

 

Recent Accounting Standards

 

In October 2012, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2012-04, ''Technical Corrections and Improvements" in Accounting Standards Update No. 2012-04. The amendments in this update cover a wide range of Topics in the Accounting Standards Codification. These amendments include technical corrections and improvements to the Accounting Standards Codification and conforming amendments related to fair value measurements. The amendments in this update will be effective for fiscal periods beginning after December 15, 2012. The adoption of ASU 2012-04 is not expected to have a material impact on our financial position or results of operations.

 

In August 2012, the FASB issued ASU 2012-03, "Technical Amendments and Corrections to SEC Sections: Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin (SAB) No. 114, Technical Amendments Pursuant to SEC Release No. 33-9250, and Corrections Related to FASB Accounting Standards Update 2010-22 (SEC Update)" in Accounting Standards Update No. 2012-03. This update amends various SEC paragraphs pursuant to the issuance of SAB No. 114. The adoption of ASU 2012-03 is not expected to have a material impact on our financial position or results of operations.

 

In July 2012, the FASB issued ASU 2012-02, "Intangibles -Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment" in Accounting Standards Update No. 2012-02. This update amends ASU 2011-08, Intangibles -Goodwill and Other (Topic 350): Testing Indefinite-Lived Intangible Assets for Impairment and permits an entity first to assess qualitative factors to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform the quantitative impairment test in accordance with Subtopic 350-30, Intangibles -Goodwill and Other -General Intangibles Other than Goodwill. The amendments are effective for annual and interim impairment tests performed for fiscal years beginning after September 15, 2012. Early adoption is permitted, including for annual and interim impairment tests performed as of a date before July 27, 2012, if a public entity's financial statements for the most recent annual or interim period have not yet been issued or, for nonpublic entities, have not yet been made available for issuance. The adoption of ASU 2012-02 is not expected to have a material impact on our financial position or results of operations.

 

9
 

 

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.

 

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 3,571,429 and 31,645,570, common shares as of September 30, 2013 and 2012, respectively.

 

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, 2013, the Company had cash deposits in one financial institution that were above FDIC limits of $250,000.

 

Fair Value of Financial Instruments

 

The Company follows paragraph 825-10-50-10 of the FASB Accounting Standards Codification for disclosures about fair value of its financial instruments and paragraph 820-10-35-37 of the FASB Accounting Standards Codification (“Paragraph 820-10-35-37”) to measure the fair value of its financial instruments. Paragraph 820-10-35-37 establishes a framework for measuring fair value in accounting principles generally accepted in the United States of America (U.S. GAAP), and expands disclosures about fair value measurements. To increase consistency and comparability in fair value measurements and related disclosures, Paragraph 820-10-35-37 establishes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three (3) broad levels.  The fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three (3) levels of fair value hierarchy defined by Paragraph 820-10-35-37 are described below:

 

Level 1: Quoted market prices available in active markets for identical assets or liabilities as of the reporting date. 
   
Level 2: Pricing inputs other than quoted prices in active markets included in Level 1, which are either directly or indirectly observable as of the reporting date.
   
Level 3: Pricing inputs that are generally observable inputs and not corroborated by market data.
   

 

10
 

 

The carrying amount of the Company’s financial assets and liabilities, such as cash, prepaid expenses and accrued expenses approximate their fair value because of the short maturity of those instruments.  The Company’s notes payable approximate the fair value of such instruments based upon management’s best estimate of interest rates that would be available to the Company for similar financial arrangements at September 30, 2013.

 

The Company does not have any assets or liabilities measured at fair value on a non-recurring basis.

 

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 securities are marketable securities and have no maturity date. When sold the cost of the securities is determined using the average purchase cost of the securities. On occasion the Company will transfer some of its available for sale securities to trading securities. When this occurs the unrealized gain or loss is immediately recognized in earnings. During the period ended September 30, 2013 the Company recognized a $119,000 unrealized gain on securities transferred from available for sale to trading. No securities have been transferred from trading to available for sale. The cost basis of the Company’s available-for-sale securities as of September 30, 2013 and December 31, 2012 was $1,646,750 and $938,899, respectively.

 

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, 2013
    Gross    Gross      
    Unrealized    Unrealized    Fair 
    Gain    Loss    Value 
Trading securities  $1,023,002   $—     $1,858,202 
Available-for-sale securities  $257,399   $—     $2,504,150 

 

   December 31, 2012
    Gross    Gross      
    Unrealized    Unrealized    Fair 
    Gain    Loss    Value 
Trading securities  $97,977   $—     $200,556 
Available-for-sale securities  $93,820   $—     $292,320 
                

 

Results of operations for the nine months ended September 30, 2013 includes a gain of $1,023,002 on unrealized holding gains on trading securities. For the nine months ended September 30, 2013, other comprehensive income includes $163,579 for unrealized holding gains on available-for-sale securities.

 

Realized Gains and losses are determined on the basis of specific identification. During the nine months ended September 30, 2013 and 2012, sales proceeds and gross realized gains and losses on securities classified as available-for-sale securities and trading securities were:

11
 

 

 

   For the nine months ended
   September 30,
   2013  2012
Trading securities:          
  Sales Proceeds  $4,478,158   $285,534 
  Gross Realized Losses  $(89,931)  $(79,987)
  Gross Realized Gains  $3,771,006   $—   
           
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, 2013    (Level 1)    (Level 2)    (Level 3) 
                     
Trading securities  $1,858,202   $1,858,202   $—     $—   
Available-for-sale securities  $2,504,150   $2,504,150   $—     $—   
                     
Total  $4,362,352   $4,362,352   $—     $—   

 

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

 

NOTE 2 - RELATED PARTY TRANSACTIONS

 

In prior years, Joseph Fiore, CEO 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.  At September 30, 2013 and December 31, 2012, $1,568,871 and $1,513,260 was due on this loan, respectively (including accrued interest at 6%).

 

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.  This loan was paid off in 2012.

 

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. This loan was paid off in 2012.

 

12
 

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, 2013 and December 31, 2012, $182,063 and $174,185 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, 2013 and December 31, 2012, $145,477 and $139,182 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, 2013 and December 31, 2012, $230,462 and $220,491 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, 2013 and December 31, 2012, $78,840 and $75,429, 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.  This loan was paid off in the period ended September 30, 2013.

 

  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, 2013 and December 31, 2012, $99,249 and $168,268, respectively, was due on this loan.

 

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. This loan was paid off in the period ended September 30, 2013.

 

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 January 3, 2013 $20,000 was paid on this note.  This loan was paid off in the quarter ended September 30, 2013.

 

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.  This loan was paid off in the period ended September 30, 2013.

 

On May 31, 2013 the Company acquired 16,230,637 shares of Nuvilex, Inc. and 1,000,000 shares of Inscor, Inc. from Berkshire Capital Management in exchange for a demand note in the amount of $202,306, carrying an interest rate of 6% A.P.R.  During the quarter ended September 30, 2013, $150,000 was repaid on this loan. At September 30, 2013 $54,796, was due on this loan.

 

13
 

 

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

 

Related Party Date of loan   September 30, 2013   December 31, 2012
Berkshire Capital Management May 31, 2013 $ 54,796 $ -
Joseph Fiore 2010 & 2011   1,568,871   1,513,260
Berkshire Capital Management September 14, 2007   182,063   174,185
Berkshire Capital Management July 17, 2007   145,477   139,182
Berkshire Capital Management August 22, 2007   230,462   220,491
Berkshire Capital Management September 20, 2007   78,840   75,429
Berkshire Capital Management January 11, 2008   -   24,932
Berkshire Capital Management February 29, 2008   99,249   168,268
Berkshire Capital Management April 24, 2008   -   93,969
Berkshire Capital Management April 24, 2008   -   28,843
Berkshire Capital Management July 1, 2008   -   82,467
    $ 2,539,758 $ 2,521,026

 

During the year ended December 31, 2012, the Company issued 10,000,000 shares of common stock to its CEO for services rendered. The shares were valued at $0.006, the closing price on the date of grant, for a total expense of $60,000.

 

During the year ended December 31, 2012, the Company issued 12,500,000 shares of common stock to two of its Board Members for services rendered. The shares were valued at $0.006, the closing price on the date of grant, for a total expense of $75,000.

 

NOTE 3 - 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 plus percentage rent equal to 20% of gross revenues above $1,200,000 under the lease which expires April 2017.  

 

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

 

Year Ended December 31,     Real Property
  2013   $ 168,000
  2014   168,000
  2015   168,000
  2016   168,000
  2017   56,000
  Total five year minimum lease payments     $ 728,000
         

 

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.

 

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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 2013.

 

NOTE 4 - COMMON STOCK TRANSACTIONS

 

During the year ended December 31, 2012, the Company issued 10,000,000 shares of common stock to its CEO for services rendered. The shares were valued at $0.006, the closing price on the date of grant, for a total expense of $60,000.

 

During the year ended December 31, 2012, the Company issued 12,500,000 shares of common stock to two of its Board Members for services rendered. The shares were valued at $0.006, the closing price on the date of grant, for a total expense of $75,000.

 

During the year ended December 31, 2012, the Company issued 7,550,000 shares of common stock to various individuals for services rendered. The shares were valued at $0.006, the closing price on the date of grant, for a total expense of $45,300. 

 

NOTE 5 - 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 3,571,429 common shares at September 30, 2013).
  * 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.

 

NOTE 6 - EXTRAORDINARY ITEMS

 

As of December 31, 2012, the Company recognized an extraordinary gain of $2,043,702 due to the write-off of the Company’s 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 five of the Company's subsidiaries. On January 14, 2000, $150,000 of the debenture was converted to 500,000 shares of the Company’s common stock.

 

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Since approximately 2004, the Company has tried repeatedly to contact the lender and its principals regarding the remaining balance owed by the Company on the convertible debenture. The Company continued to accrue interest on the debenture through December 31, 2005, when it was determined less than probable that any further payments would be made. No claims have been filed against the Company regarding these debentures. The Company’s attorney has determined the six year statute of limitations under New York state law has expired, and that no further payments are due from the Company. Based on this information, the Company has written off the balance of the convertible debenture on the balance sheet of $2,043,702 and recorded an extraordinary gain of the same amount.

 

As of December 31, 2012, the Company also determined that notes payable of $172,870 and other liabilities of $138,416 related to its Ontario restaurants should be written-off and recorded as an extraordinary gain. The Company had two restaurants in Ontario, Canada, that were closed in 2002. No claims have ever been filed against the Company relating to these liabilities. The Company has determined the statute of limitations related to these liabilities has expired and that no further payments are due from the Company. An extraordinary gain of $311,286 was recognized in the financial statements at December 31, 2012.

 

NOTE 7 - SUBSEQUENT EVENTS

 

Management has evaluated subsequent events pursuant to the requirements of ASC Topic 855 and has determined that no reportable subsequent events exist.

 

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Item 2. Management's Discussion and Analysis or Plan of Operation.

 

General - The condensed consolidated interim financial statements and 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, 2012.

 

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 Three Months Ended September 30, 2013 and 2012:

 

Results of Operations - For the three months ended September 30, 2013 the Company had net income of $931,989 compared to a net loss of $144,654 for the three months ended September 30, 2012. The change to, and large increase in net income is attributed to gains on the sale of marketable securities.

 

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Total Revenues - For the three months ended September 30, 2013 and 2012, the Company had total sales of approximately $365,000 and $270,000, respectively, for an increase of approximately $95,000 or 35%. Management believes revenues will continue to increase in the future as airport traffic increases.

 

Costs and Expenses - Costs of revenues, which include the costs of food, beverage, and kitchen supplies decreased 3.2% as a percentage of sales during the third quarter from 2012 to 2013.  

 

The cost of labor increased $18,398 to $85,140 from $66,742 for the three months ended September 30, 2013 compared to the three months ended September 30, 2012. The increase is a result of responding to increased business with more hours for employees.

 

The cost of rent decreased approximately 14% as a percentage of sales from 2012 to 2013.   E.A.J. PHL Airport pays $14,000 per month basic rent plus percentage rent equal to 20% of gross revenues above $1,200,000 under the lease based on sales for the 12 month period from July to June of each year.  Basic rent is a fixed cost and percentage rent is variable, so the total rent paid varies from year to year.  

 

General and administrative expenses decreased 2.3% as a percentage of sales for the third quarter from 2012 to 2013.  The decrease can be attributed to a greater increase in sales than in expenses.

 

Interest expense decreased $4,748 during the quarter from 2012 to 2013.  This decrease is due to the decrease in interest being accrued on notes payable as some of those notes were partially repaid or paid in full.

 

The unrealized loss on trading securities increased $904,080 from $79,678 for the three months ended September 30, 2012 to $983,758 for the three months ended September 30, 2013.  

 

The realized gain (loss) from the sale of marketable securities changed from a loss of $1,378 in 2012 to a gain of $1,943,004 in 2013.  

 

Results of Operations for the Nine Months Ended September 30, 2013 and 2012:

 

Results of Operations - For the nine months ended September 30, 2013 the Company had net income of $4,553,795 compared to a net loss of $166,436 for the nine months ended September 30, 2012. The change to and large increase in net income is attributed to gains realized on the sale of marketable securities and unrealized gains on the change in value of trading securites.

 

Total Revenues - For the nine months ended September 30, 2013 and 2012, the Company had total sales of approximately $969,000 and $872,000, respectively.

 

Costs and Expenses - Costs of revenues, which include the costs of food, beverage, and kitchen supplies increase 1% as a percentage of sales during the third quarter from 2012 to 2013.  

 

The cost of labor decreased $6,438 to $248,793 from $255,231 for the nine months ended September 30, 2013 compared to the nine months ended September 30, 2012. The decrease for the nine month period was a result of less wages being paid in the first three months compared to an increase in the later part of the period.

 

The cost of rent decreased 4.2% as a percentage of sales from 2012 to 2013.   E.A.J. PHL Airport pays $14,000 per month basic rent plus percentage rent equal to 20% of gross revenues above $1,200,000 under the lease based on sales for the 12 month period from July to June of each year.  Basic rent is a fixed cost and percentage rent is variable, so the total rent paid varies from year to year.  

 

General and administrative expenses increased 1.5% as a percentage of sales for the third quarter from 2012 to 2013.  The increase can be attributed to some additional expenditure on sales, consulting and professional fees.

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Interest expense decreased $8,330 during the nine months from 2012 to 2013.  This decrease is due to the decrease in interest being accrued on notes payable as some of those notes were partially repaid or paid in full.

 

The unrealized gain on trading securities increased $922,059 from $100,943 for the nine months ended September 30, 2012 to $1,023,002 for the nine months ended September 30, 2013.  This increase was due to the increased value of trading securities by the end of the third quarter 2013.

 

The realized gain (loss) from the sale of marketable securities changed from a loss of $79,987 in 2012 to a gain of $3,681,075 in 2013.  

 

LIQUIDITY AND CAPITAL RESOURCES

 

As of September 30, 2013, the Company has an accumulated deficit of $10,645,655. 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’s plans include searching for and opening new restaurants in the future, utilizing company assets to maximize shareholder value 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.

 

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, 2013, the Company received $4,478,158 in cash from proceeds of sales of trading securities for investing activities. Cash of $2,212,500 was used for the purchase of marketable equity securities for the nine months ended September 30, 2013. As of September 30, 2013, the company owns trading and available for sale securities valued at $4,362,352.

 

During the nine months ended September 30, 2013, the company repaid $460,000 in related party loans from past years.  As of September 30, 2013, $2,359,758in advances and accrued interest was due to related parties.

 

For the nine months ended September 30, 2013 and 2012, cash flows used for operating activities were $18,565 and $69,027, 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.

 

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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.

 

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.

 

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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 September 30, 2013, 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

NumberTitle of Document

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

 

 

 

 

 

 

 

 

 

 

 

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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 14, 2013

By: /s/ Joseph Fiore

Joseph Fiore

Chief Executive Officer, Chief Financial Officer, Chairman and Secretary

(Principal Executive Officer & Principal Accounting Officer)

 

   

 

 

 

 

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