UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

Form 10-K

 

(Mark One)

[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended:  December 31, 2012

 

     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from _______ to_________

 

Commission file number 33-20111

 

EAT AT JOE’S, LTD.

(Name of small business issuer in its charter)

Delaware	75-2636283
(State of Incorporation)	(I.R.S. Employer Identification No.)

 

670 White Plains Road, Suite 120

Scarsdale, New York, 10583

(914) 725-2700

Securities Registered Pursuant to Section 12(g) of the Act:

Title of Each Class Name of Each Exchange on which Registered

Common Stock, $.0001 par value

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     [  ] Yes     [X] No

 

Indicate by check mark if the registrant is required to file reports pursuant to Section 13 or Section 15(d) of the Act     [  ] Yes     [X] No

 

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   [X] Yes     No

 

 

 

 

  

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     [X]

 

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]
(do not check if a smaller reporting company)

 

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

 

State the aggregate market value of the voting and non-voting common equity held by non-affiliates:  $426,349 based on 47,372,129 non affiliate shares outstanding at $0.009 per share, which is the average bid and asked price of the common shares as of the last business day of the registrant’s most recently completed second fiscal quarter.

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of March 15, 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 14,705,882 common shares), par value $0.0001.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

List hereunder the following documents if incorporated by reference and the Part of the form 10-K (e.g., Part I, Part II, etc.) into which the document is incorporated: (1) any annual report to security holders; (2) any proxy or information statement; and (3) any prospectus filed pursuant to Rule 424(b) or (c) of the Securities Act of 1933 (“Securities Act”). The listed documents should be clearly described for identification purposes (e.g., annual report to security holders for fiscal year ended December 24, 1980).         None

 

                                                     

 

 

 

 

 

 

 

 

 

 

 

TABLE OF CONTENTS

 

Item Number and Caption		Page
PART I
Item 1.	Description of Business	4
Item 1A.	Risk Factors	5
Item 1B.	Unresolved Staff Comments	6
Item 2.	Description of Property	6
Item 3.	Legal Proceedings	6
Item 4.	Mine Safety Disclosure	6
PART II
Item 5.	Market for Common Equity and Related Stockholder Matters	6
Item 6.	Selected Financial Data	7
Item 7.	Management’s Discussion and Analysis or Plan of Operations	7
Item 7A.	Quantitative and Qualitative Disclosure About Market Risk	11
Item 8.	Financial Statements	11
Item 9.	Changes In and Disagreements with Accountants on Accounting and Financial Disclosure	12
Item 9AT.	Controls and Procedures	12
Item 9B.	Other Information	13
PART III
Item 10.	Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act	13
Item 11.	Executive Compensation	14
Item 12.	Security Ownership of Certain Beneficial Owners and Management	14
Item 13.	Certain Relationships and Related Transactions	15
Item 14.	Principal Accountant Fees and Services	16
Item 15.	Exhibits and Reports on Form 8-K	16

 

 

 

 

 

 

 

 

PART I

 

ITEM 1   BUSINESS 

 

General

 

The business of Eat at Joe’s, Ltd. (the “Company”) is to develop, own and operate theme restaurants called “Eat at Joe’s (R).”  The theme for the restaurants is an "American Diner" atmosphere where families can eat wholesome, home-cooked food in a safe friendly atmosphere.  Eat at Joe's, the classic American grill, is a restaurant concept that takes you back to eating in the era when favorite old rockers were playing on chrome-spangled jukeboxes and neon signs reflected on shiny tabletops of the 1950's.

 

The Company presently owns and operates one theme restaurant located in Philadelphia, Pennsylvania.  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. Any acquisitions would be subject to the availability of funding.  The restaurants will be modest priced restaurants catering to the local working and residential population rather than as a tourist destination.

 

The Company’s common stock is traded on the National Association of Security Dealers, Inc. (the “NASD’s”) OTC Bulletin Board Under the symbol “JOES.”

 

History

 

The company was incorporated as Conceptualistics, Inc. on January 6, 1988 in Delaware as a wholly owned subsidiary of Halter Venture Corporation ("HVC"), a publicly-owned corporation (now known as Debbie Reynolds Hotel and Casino, Inc.)  In 1988, HVC divested itself of approximately 14% of its holdings in the Company by distributing 1,777,000 shares of the issued and outstanding stock of the Company to its shareholders.  The then majority shareholder of HVC became the majority shareholder of the Company.  Its authorized capital stock is 50,000,000 shares of common stock, par value $0.0001 per share and 10,000,000 shares of preferred stock, par value $0.0001 per share.

 

During the period from September 30, 1988 to March 1, 1990, the company remained in the development stage while attempting to enter the mining industry.  The Company acquired certain unpatented mining claims and related equipment necessary to mine, extract, process and otherwise explore for kaolin clay, silica, feldspar, precious metals, antimony and other commercial minerals from its majority stockholder and unrelated third parties.  The Company was unsuccessful in these start up efforts and all activity ceased during 1992 as a result of foreclosure on various loans in default and/or abandonment of all assets.

 

From March 1, 1990 to January 1, 1997, the Company did not engage in any business activities.

 

On January 1, 1997, the Shareholders adopted a plan of reorganization and merger between the Company and E. A. J. Holding Corp. Inc. (“Hold”) to be effective on or before January 31, 1997.  Under the plan, the Company acquired all the issued and outstanding shares of “Hold”, a Delaware corporation making “Hold” a wholly owned subsidiary of the Company for 5,505,000 common shares of the Company. Since that time “Hold” has been dissolved.

 

In addition to its wholly owned subsidiary, Hold, the Company has eight 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,

· 1337855 Ontario Inc., an Ontario corporation,

· 1398926 Ontario Inc., an Ontario corporation.

 

 

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.).

 

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.).

 

Each of the subsidiaries was organized to operate a single restaurant.  The Company presently owns and operates one theme restaurant located in Philadelphia, Pennsylvania and operated under the subsidiary E.A.J. PHL Airport Inc.  The Company is attempting to make at least one acquisition during the next 12 months, subject to the availability of funding.  All restaurants will be located in high traffic locations.  The restaurants will be modest priced restaurants catering to the local working and residential population rather than as a tourist destination.

 

All administrative activities of the Company have been conducted by corporate officers from either their home or shared business offices located at 670 White Plains Road, Suite 120, Scarsdale, NY 10583.  Currently, there are no outstanding debts owed by the Company for the use of these facilities and there are no commitments for future use of the facilities.

 

OPERATING LOSSES

 

The Company has incurred net income (losses) from operations of approximately ($315,000) and $42,000 for the years ended December 31, 2012 and December 31, 2011, respectively.  Such operating income and losses reflect developmental and other administrative costs for 2012 and 2011.  The Company expects to incur losses in the near future until profitability is achieved.  The Company’s operations are subject to numerous risks associated with establishing any new business, including unforeseen expenses, delays and complications.  There can be no assurance that the Company will achieve or sustain profitable operations or that it will be able to remain in business.

 

FUTURE CAPITAL NEEDS AND UNCERTAINTY OF ADDITIONAL FUNDING

 

 Revenues are not yet sufficient to support the Company’s operating expenses and are not expected to reach such levels until the company implements a plan of expansion.  Since the Company’s formation, it has funded its operations and capital expenditures primarily through private placements of debt and equity securities.  The Company expects that it will be required to seek additional financing in the future.  There can be no assurance that such financing will be available at all or available on terms acceptable to the Company.

 

GOVERNMENT REGULATION

 

The Company is subject to all pertinent Federal, State, and Local laws governing its business.  Each Eat at Joe’s is subject to licensing and regulation by a number of authorities in its State or municipality.  These may include health, safety, and fire regulations.  The Company’s operations are also subject to Federal and State minimum wage laws governing such matters as working conditions, overtime and tip credits.

 

COMPETITION

 

The Company faces competition from a wide variety of food distributors, many of which have substantially greater financial, marketing and technological resources than the Company.

 

 

EMPLOYEES

 

As of December 31, 2012, the Company had approximately 10 employees, none of whom is represented by a labor union.

  

ITEM 1A   RISK FACTORS

  

RISK OF LOW-PRICED STOCKS

 

Rules 15g-1 through 15g-9 promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”) impose sales practice and disclosure requirements on certain brokers and dealers who engage in certain transactions involving “a penny stock.”

 

Currently, the Company’s Common Stock is considered a penny stock for purposes of the Exchange Act.  The additional sales practice and disclosure requirements imposed on certain brokers and dealers could impede the sale of the Company’s Common Stock in the secondary market.  In addition, the market liquidity for the Company’s securities may be severely adversely affected, with concomitant adverse effects on the price of the Company’s securities.

 

Under the penny stock regulations, a broker or dealer selling penny stock to anyone other than an established customer or “accredited investor” (generally, an individual with net worth in excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000 together with his or her spouse) must make a special suitability determination for the purchaser and must receive the purchaser’s written consent to the transaction prior to sale, unless the broker or dealer or the transaction is otherwise exempt.  In addition, the penny stock regulations require the broker or dealer to deliver, prior to any transaction involving a penny stock, a disclosure schedule prepared by the Securities and Exchange Commission (the “SEC”) relating to the penny stock market, unless the broker or dealer or the transaction is otherwise exempt.  A broker or dealer is also required to disclose commissions payable to the broker or dealer and the registered representative and current quotations for the Securities.  In addition, a broker or dealer is required to send monthly statements disclosing recent price information with respect to the penny stock held in a customer’s account and information with respect to the limited market in penny stocks.

 

LACK OF TRADEMARK AND PATENT PROTECTION

 

The Company relies on a combination of trade secret, copyright and trademark law, nondisclosure agreements and technical security measures to protect its products.  Notwithstanding these safeguards, it is possible for competitors of the company to obtain its trade secrets and to imitate its products.  Furthermore, others may independently develop products similar or superior to those developed or planned by the Company.

  

ITEM 1B   UNRESOLVED STAFF COMMENTS

  

There are no unresolved staff comments.

  

ITEM 2   PROPERTIES

 

All administrative activities of the Company are conducted by corporate officers from our business office located at 670 White Plains Road, Suite 120, Scarsdale, NY 10583.  

 

 

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 July 6, 2010.  E.A.J. PHL Airport pays $14,000 per month basic rent plus 20% of gross revenues above $1,200,000 under the lease which expires April 30, 2017.

 

 

ITEM 3   LEGAL PROCEEDINGS

 

NONE.

 

ITEM 4   MINE SAFETY DISCLOSURES

 

Not applicable.

 

 

PART II

 

ITEM 5   MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS,

AND ISSUER PURCHASES OF EQUITY SECURITIES

 

MARKET INFORMATION

 

The Company’s Common Stock is traded on the NASD’s OTC Bulletin Board under the symbol “JOES.”  The following table presents the high and low bid quotations for the Common Stock as reported by the NASD for each quarter during the last two years.  Such prices reflect inter-dealer quotations without adjustments for retail markup, markdown or commission, and do not necessarily represent actual transactions.

		High				Low
2011:
First Quarter		$	0.01			$	0.0065
Second Quarter		$	0.01			$	0.0065
Third Quarter		$	0.01			$	0.0030
Fourth Quarter		$	0.01			$	0.0050
2012:
First Quarter		$	0.01			$	0.0052
Second Quarter		$	0.01			$	0.0030
Third Quarter		$	0.01			$	0.0290
Fourth Quarter		$	0.01			$	0.0047

 

DIVIDENDS

 

The Company has never declared or paid any cash dividends.  It is the present policy of the Company to retain earnings to finance the growth and development of the business and, therefore, the Company does not anticipate paying dividends on its Common Stock in the foreseeable future.

 

The number of shareholders of record of the Company’s Common Stock as of December 31, 2012 was approximately 2,320.

 

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.

 

On August 8, 2003, the Board of Directors resolved to issue 20,000 shares of Series E Convertible Preferred Stock with a par value of $0.0001 per share to Joseph Fiore as payment for a $100,000 advance to the company.

 

ITEM 6   SELECTED FINANCIAL DATA

 

Not applicable to smaller reporting companies.

 

 

ITEM 7   MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Plan of Operations - Eat at Joe's Ltd. Intends to open and operate theme restaurants styled in an "American Diner" atmosphere where families can eat wholesome, home cooked food in a safe friendly atmosphere.  Eat at Joe's, the classic American grill, is a restaurant concept that takes you back to eating in the era when favorite old rockers were playing on chrome-spangled jukeboxes and neon signs reflected on shiny tabletops of the 1950's.  Eat at Joe's fulfills the diner dream with homey ambiance that's affordable while providing food whose quality and variety is such you can eat there over and over, meal after meal.  To build on the diner experience, a retail section in each Eat at Joe's would allow customers to take the good feelings home with them, in the form of 50's memorabilia.

 

The Company's expansion strategy is to open restaurants either through Joint Venture agreements or Company owned units.  Units may consist of a combination of full service restaurants or food court locations.  Restaurant construction will take from 90-150 days to complete on a leased site.

 

In considering site locations, the Company concentrates on trade demographics, such as traffic volume, accessibility and visibility.  High Visibility Malls and Strip Malls in densely populated suburbs are the preferred locations.  The Company also scrutinizes the potential competition and the profitability of national restaurant chains in the target market area.  As part of the expansion program, the Company will inspect and approve each site before approval of any joint venture or partnership.

 

A typical food court unit is approximately 500 square feet, whereas for a full service operation it is approximately 3,500 square feet.  Food court operation consists of a limited menu.  A full service restaurant consists of 30-35 tables seating about 140-150 people.  The bar area will hold 6-8 tables and seats 30-35 people.

 

The restaurant industry is an intensely competitive one, where price, service, location, and food quality are critical factors.  The Company has many established competitors, ranging from similar casual-style chains to local single unit operations.  Some of these competitors have substantially greater financial resources and may be established or indeed become established in areas where the Eat at Joe's Company operates.  The restaurant industry may be affected by changes in customer tastes, economic, demographic trends, and traffic patterns.  Factors such as inflation, increased supplies costs and the availability of suitable employees may adversely affect the restaurant industry in general and the Eat at Joe's Company Restaurant in particular.  Significant numbers of the Eat at Joe's personnel are paid at rates related to the federal minimum wage and accordingly, any changes in this would affect the Company's labor costs.

 

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 years ended December 31, 2012 and 2011, the Company had net income (loss) from operations of approximately ($315,000) and $42,000, respectively.

 

Total Revenues - For the years ended December 31, 2012 and 2011, the Company had total sales of approximately $1,118,500 and $1,078,000 respectively, for an increase of approximately $40,500 or 4%. Management believes revenues will continue to grow in the future as airport traffic increases.

 

Costs and Expenses - Costs of revenues, which include the costs of food, beverage, and kitchen supplies increased 3.3% as a percentage of sales from 2011 to 2012.  This increase can be attributed to the higher cost of certain food items.

 

The cost of labor increased less than 2% as a percentage of sales from 2011 to 2012.  There were no sales for a little over three months in 2011 while the restaurant was closed for renovations.  However, managers were paid during this time in order to have a company representative on location at all times during construction and there were some part-time employees paid to help clean out the restaurant just prior to construction and were also paid to help restock the restaurant prior to reopening. Once renovations were completed the restaurant returned to operating with its full staff throughout all of 2012.

 

The cost of rent increased approximately 4% as a percentage of sales from 2011 to 2012.   E.A.J. PHL Airport pays $14,000 per month basic rent plus 20% of gross revenues above $1,200,000 under the lease.  The rent is a fixed cost and sales are variable, so the total rent paid varies from year to year.  

 

Depreciation expense increased approximately $23,000 from 2011 to 2012.  This increase is attributable to the 2011 renovation which resulted in additions to leasehold improvements and the purchase of new equipment.

 

General and administrative expenses increased 20.8% as a percentage of sales from 2011 to 2012.  This increase is a combination of several factors. While the restaurant was closed for three months in 2011 for remodeling, there was a decrease of general and administrative expenses and other professional fees. In 2012 these expenses naturally increased with the return to twelve months of operations. In addition, the company issued stock for services totaling $180,300.

 

Interest income and dividend income decreased from 2011 to 2012.  Interest income decreased $1,540 and, dividend income decreased $27 from 2011 to 2012.  There was less interest due to lower interest rates and lower cash balances.  

 

Interest expense decreased $8,721 from 2011 to 2012.  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 (loss) on trading securities increased from a loss of $105,026 in 2011 to a gain of $97,977 in 2012.  This change was due to the increased value of trading securities by the end of 2012.

 

The realized gain (loss) from the sale of marketable securities changed from a gain of $54,317 in 2011 to a loss of $80,456 in 2012.  This change was due to the sale of certain securities earlier in the year when the price was lower.

 

During 2012, the Company recognized an extraordinary gain of $2,354,988 on the extinguishment of debt for the write-off of convertible debentures, and loans and accounts payable related to subsidiaries that are no longer in business.

  

LIQUIDITY AND CAPITAL RESOURCES

 

As of December 31, 2012, the Company has a working capital deficit of $1,641,650.  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 2012 and 2011, the Company used $6,912 and $333,901, respectfully, in cash from investing activities from the purchase and sale of marketable equity securities and the purchase of property and equipment.  As of December 31, 2012, the company owns marketable securities valued at $492,876.

 

During 2012 and 2011, the company repaid $252,000 and $220,000 in related party loans from past years.  As of December 31, 2012, approximately $2,521,000 in advances and accrued interest was due to related parties.

 

For the years ended December 31, 2012 and 2011, cash flows from operating activities provided (used) were ($70,790) and $54,531, 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.

 

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.

 

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.  

 

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 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. Management does not expect the adoption of ASU 2011-04 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.

 

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 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.

 

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.

 

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.

 

ITEM 7A   QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

 

Not applicable. 

 

ITEM 8   FINANCIAL STATEMENTS

 

The financial statements of the Company and supplementary data are included beginning immediately preceding the signature page to this report.  See Item 13 for a list of the financial statements and financial statement schedules included.

 

ITEM 9   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

There are not and have not been any disagreements between the Company and its accountants on any matter of accounting principles, practices or financial statements disclosure.

 

 

ITEM 9A(T).  CONTROLS AND PROCEDURES

 

Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to management, including the principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which, by their nature, can provide only reasonable assurance regarding management’s control objectives.

 

With the participation of management, our principal executive officer and principal financial officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures at the conclusion of the period ended December 31, 2012. Based upon this evaluation, the principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective in ensuring that material information required to be disclosed is included in the reports that we file with the Securities and Exchange Commission.  

 

Management’s Annual Report on Internal Control over Financial Reporting

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act.   Internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of our financial reporting for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for preparation of our financial statements; providing reasonable assurance that receipts and expenditures of Company assets are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of Company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of the inherent limitations of internal control over financial reporting, misstatements may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management, with the participation of the principal executive officer and principal financial officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2012. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework. Based on this assessment, management, with the participation of the principal executive officer and principal financial officer, believes that, as of December 31, 2012, our internal control over financial reporting is effective based on those criteria.

 

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to temporary rules of Securities and Exchange Commission that permit the Company to provide only the management’s report in this annual report.

 

Changes in Internal Control over Financial Reporting

 

There were no changes in our internal control over financial reporting during the year ended December 31, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

ITEM 9B.  OTHER INFORMATION

  

None

 

PART III

 

ITEM 10   DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

 

Executive Officers and Directors

 

The following table sets forth the name, age, and position of each executive officer and director of the Company:

 

Director's Name		Age				Office		Term Expires
Joseph Fiore			51			Chief Executive Officer, Chief Financial Officer, Chairman of the Board of Director/Secretary		Next annual meeting
James Mylock, Jr.			46			Director		Next annual meeting
Tim Matula			52			Director		Next annual meeting

 

 

Joseph Fiore has been Chairman, Chief Executive Officer, and Chief Financial Officer since October, 1996. In 1982, Mr. Fiore formed East Coast Equipment and Supply Co., Inc., a restaurant supply company that he still owns.  Between 1982 and 1993, Mr. Fiore established 9 restaurants (2 owned and 7 franchised) which featured a 1950's theme restaurant concept offering a traditional American menu.

 

James Mylock, Jr. has worked with Joseph Fiore in marketing and business development since graduating from the State University of New York at Buffalo in 1990.

 

Tim Matula joined Shearson Lehman Brothers as a financial consultant in 1992. In 1994 he joined Prudential Securities and when he left Prudential in 1997, he was Associate Vice President, Investments, Quantum Portfolio Manager.

 

The Company's Certificate of Incorporation provides that the board of directors shall consist of from one to nine members as elected by the shareholders.  Each director shall hold office until the next annual meeting of stockholders and until his successor shall have been elected and qualified.

 

Board Meetings and Committees

 

The Directors and Officers will not receive remuneration from the Company until a subsequent offering has been successfully completed, or cash flow from operating permits, all in the discretion of the Board of Directors.  Directors may be paid their expenses, if any, of attendance at such meeting of the Board of Directors, and may be paid a fixed sum for attendance at each meeting of the Board of Directors or a stated salary as Director.  No such payment shall preclude any Director from serving the Corporation in any other capacity and receiving compensation therefore.  No compensation has been paid to the Directors.  The Board of Directors may designate from among its members an executive committee and one or more other committees.  No such committees have been appointed.

 

Compliance with Section 16(a) of the Exchange Act

 

Based solely upon a review of forms 3, 4, and 5 and amendments thereto, furnished to the Company during or respecting its last fiscal year, no director, officer, beneficial owner of more than 10% of any class of equity securities of the Company or any other person known to be subject to Section 16 of the Exchange Act of 1934, as amended, failed to file on a timely basis reports required by Section 16(a) of the Exchange Act for the last fiscal year.

 

Audit Committee Financial Expert

 

The Company's board of directors does not have an "audit committee financial expert," within the meaning of such phrase under applicable regulations of the Securities and Exchange Commission, serving on its audit committee. The board of directors believes that all members of its audit committee are financially literate and experienced in business matters, and that one or more members of the audit committee are capable of (i) understanding generally accepted accounting principles ("GAAP") and financial statements, (ii) assessing the general application of GAAP principles in connection with our accounting for estimates, accruals and reserves, (iii) analyzing and evaluating our financial statements, (iv) understanding our internal controls and procedures for financial reporting; and (v) understanding audit committee functions, all of which are attributes of an audit committee financial expert. However, the board of directors believes that there is not any audit committee member who has obtained these attributes through the experience specified in the SEC's definition of "audit committee financial expert." Further, like many small companies, it is difficult for the Company to attract and retain board members who qualify as "audit committee financial experts," and competition for these individuals is significant. The board believes that its current audit committee is able to fulfill its role under SEC regulations despite not having a designated "audit committee financial expert."

 

ITEM 11.  EXECUTIVE COMPENSATION

 

None of the executive officer’s salary and bonus exceeded $100,000 during any of the Company’s last two fiscal years.

 

Employment Agreements

 

Effective January 1, 1997, the Company entered into an employment Agreement with Joseph Fiore (the “Fiore Employment Agreement”) under which Joseph Fiore serves as chairman of the board and chief executive officer of the Company. Pursuant to the Fiore Employment Agreement, Mr. Fiore was to be paid $50,000 in 1997 and $75,000 in 1998.   In addition, Mr. Fiore will receive family health insurance coverage until age 70 and life insurance coverage until age 70 with a death benefit of $1,000,000 and the use of an automobile, with all expenses associated with the maintenance and operation of the automobile paid by the Corporation.  Mr. Fiore deferred all salaries and benefits under this agreement until the Company reaches profitability.

 

 

 ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

Principal Shareholders

 

The table below sets forth information as to each person owning of record or who was known by the Company to own beneficially more than 5% of the 136,627,710 shares of issued and outstanding Common Stock of the Company as of December 31, 2012 and information as to the ownership of the Company's Stock by each of its directors and executive officers and by the directors and executive officers as a group.  Except as otherwise indicated, all shares are owned directly, and the persons named in the table have sole voting and investment power with respect to shares shown as beneficially owned by them.

 

 

Name and Address of Beneficial Owners & Directors	Nature of  Ownership	# of  Shares Owned	Percent
Joseph Fiore	Common Stock	73,428,987 *	54%
All Executive Officers and Directors as a Group  (5 persons)	Common Stock	87,657,962 **	64%

  

* Includes 59,143,273 shares of common stock and 20,000 shares (convertible to 14,705,882 common shares) of Series E convertible preferred shares on an as if converted basis.

 

** Includes 73,372,248 shares of common stock and 20,000 shares (convertible to 14,705,882 common shares) of Series E convertible preferred shares on an as if converted basis.

 

 

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED 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.  As of December 31, 2012 and 2011, $1,513,260 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.  This loan was paid off in 2012. As of December 31, 2012 and 2011, related party accounts payable include $0 and $8,784, respectively, due to Berkshire Capital.

 

On May 16, 2007, the Company acquired 3,000,000 shares of Sustainable Power Corp. from Berkshire Capital Management in exchange for a demand note in the amount of $210,000, carrying an interest rate of 6% A.P.R. During the year ended December 31, 2010, the Company paid $210,000 towards this loan. During 2012, this loan was paid off. At December 31, 2012 and 2011, $0 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 December 31, 2012 and 2011, $174,185 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 December 31, 2012 and 2011, $139,182 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 December 31, 2012 and 2011, $220,491 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 December 31, 2012 and 2011, $75,429 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.  At December 31, 2012 and 2011, $24,932 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 December 31, 2012 and 2011, $168,268 and $158,494, 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. At December 31, 2012 and 2011, $93,969 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.  At December 31, 2012 and 2011, $28,843 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 December 31, 2012 and 2011, $82,467 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 fourth 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 fourth 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. During 2012, this loan was paid off. At December 31, 2012 and 2011, $0 and $10,379, respectively, was due on this loan.

 

ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

 

The following is a summary of the fees billed to us by Robison, Hill & Company for professional services rendered during the years ended December 31, 2012 and 2011:

Service		2012		2011
Audit Fees	$	40,627	$	34,845
Audit-Related Fees		-		-
Tax Fees		2,233		1,940
All Other Fees		-		-
Total	$	42,860	$	36,785

 

Audit Fees. Consists of fees billed for professional services rendered for the audits of our consolidated financial statements, reviews of our interim consolidated financial statements included in quarterly reports, services performed in connection with filings with the Securities & Exchange Commission and related comfort letters and other services that are normally provided by Robison, Hill & Company in connection with statutory and regulatory filings or engagements.

 

Tax Fees. Consists of fees billed for professional services for tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and local tax compliance and consultation in connection with various transactions and acquisitions.

 

Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors

 

The Audit Committee is to pre-approve all audit and non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services and other services as allowed by law or regulation. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specifically approved amount. The independent auditors and management are required to periodically report to the Audit Committee regarding the extent of services provided by the independent auditors in accordance with this pre-approval and the fees incurred to date. The Audit Committee may also pre-approve particular services on a case-by-case basis.

 

The Audit Committee pre-approved 100% of the Company’s 2012 audit fees, audit-related fees, tax fees, and all other fees to the extent the services occurred after May 6, 2004, the effective date of the Securities and Exchange Commission’s final pre-approval rules.

 

ITEM 15. EXHIBITS, AND REPORTS ON FORM 8-K

 

(a) The following documents are filed as part of this report.

 

1. Financial Statements

 

2. Exhibits

 

The following exhibits are included as part of this report:

Exhibit Number	Title of Document
3.1	Articles of Incorporation(1)
3.2	By-laws(1)
3.3	Amended Articles of Incorporation
4.1	Form of Warrant Agreement(1)
10.1	Lease Information Form between E.A.J. PHL, Airport, Inc. and Marketplace Redwood Limited Partnership(1)
10.2	Registration of trade name for Eat at Joe's(1)
10.2	Registration Rights Agreement(1)
21	Subsidiaries of the Company(1)
31	Certification Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

(1) Incorporated by reference.

 

(a) No reports on Form 8-K were filed.

 

 

  

 

 

 

 

EAT AT JOE’S LTD., AND SUBSIDIARIES

 

INDEX TO FINANCIAL STATEMENTS

 

 

Report of Independent Registered Public Accounting Firm	19
Consolidated Balance Sheets as of December 31, 2012 and 2011	20
Consolidated Statements of Operations and Comprehensive Income (Loss), For The Years Ended December 31, 2012 and 2011	22
Consolidated Statements of Changes in Stockholders’ Equity (Deficit) For The Years Ended December 31, 2012 and 2011	23
Consolidated Statements of Cash Flows, For The Years Ended December 31, 2012 and 2011	24
Notes to Consolidated Financial Statements	25

 

 

 

ROBISON, HILL & CO.			Certified Public Accountants
A PROFESSIONAL CORPORATION
			DAVID O. SEAL, CPA
			W. DALE WESTENSKOW, CPA
			BARRY D. LOVELESS, CPA
			STEPHEN M. HALLEY, CPA

 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS

 

To the Board of Directors and Shareholders

Eat At Joe’s, Ltd. and Subsidiaries

 

We have audited the accompanying consolidated balance sheets of Eat At Joe’s, Ltd. and Subsidiaries (a Delaware corporation) as of December 31, 2012 and 2011 and the related consolidated statements of operations and comprehensive income (loss), stockholders’ equity, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Eat At Joe’s, Ltd. and Subsidiaries as of December 31, 2012 and 2011 and the results of its operations and its cash flows for the years ended December 31, 2012 and 2011 in conformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a net capital deficiency that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regards to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

 

/s/ Robison, Hill & Co.

Certified Public Accountants

 

Salt Lake City, Utah

April 1, 2013

 

 

 

 

EAT AT JOE’S LTD., AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
			DECEMBER 31, 2012				DECEMBER 31, 2011
ASSETS
Current Assets:
Cash and cash equivalents		$	382,946			$	712,648
Accounts receivable			882				12,877
Inventory			13,400				12,100
Prepaid expense			17,725				17,787
Security deposit			15,000				15,000
Trading securities			200,556				268,163
Available-for-sale securities			292,320				226,160
Total Current Assets			922,829				1,264,735
Property and equipment:
Equipment			104,633				97,594
Furniture & Fixtures			3,964				3,964
Leasehold improvements			274,637				274,637
			383,234				376,195
Less accumulated depreciation			(85,770	)			(35,347	)
Total Property & Equipment			297,464				340,848
TOTAL ASSETS		$	1,220,293			$	1,605,583

 

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

 

 

 

 

 

 

EAT AT JOE’S LTD., AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Continued)
			DECEMBER 31, 2012				DECEMBER 31, 2011
LIABILITIES
Current Liabilities:
Accounts payable and accrued liabilities		$	43,453			$	180,723
Related party accounts payable			—				8,784
Short-term notes payable			—				172,870
Related party notes payable			2,521,026				2,628,964
Convertible debentures			—				2,043,702
Total Current Liabilities			2,564,479				5,035,043
Total Liabilities			2,564,479				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; 136,627,710 and
106,577,710 issued and outstanding, respectively			13,663				10,658
Additional paid-in capital			13,747,780				13,570,485
Unrealized gain on available-for-sale securities			93,820				112,660
Retained deficit			(15,199,451	)			(17,123,265	)
Total Stockholders’ Deficit			(1,344,186	)			(3,429,460	)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)		$	1,220,293			$	1,605,583

 

  

 

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

 

 

 

EAT AT JOE’S LTD., AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
		For the Years Ended December 31,
		2012				2011
Revenues		$	1,118,330			$	1,077,832
Cost of revenues			375,775				326,896
Gross Margin			742,555				750,936
Operating Expenses:
Labor and related expenses			357,149				326,207
Rent			234,396				179,772
Depreciation			50,423				27,889
Other general and administrative			415,414				175,271
Total Operating Expenses			1,057,382				709,139
Net Operating Income (Loss)			(314,827	)			41,797
Other Income (Expense):
Interest income			1,410				2,950
Dividend income			—				27
Interest expense			(135,278	)			(143,999	)
Unrealized gain (loss) on trading securities			97,977				(105,026	)
Gain (loss) on sale of marketable securities			(80,456	)			54,317
Net Other Income (Expense)			(116,347	)			(191,731	)
Net loss before income taxes			(431,174	)			(149,934	)
Income tax (expense) benefit			—				(2,975	)
Net Loss before extraordinary items		$	(431,174	)		$	(152,909	)
Extraordinary item  (See Note 8)
Gain on extinguishment of debt (net of income tax of $0)			2,354,988				—
Net Income (Loss)		$	1,923,814			$	(152,909	)
Other Comprehensive Income (Loss):
Unrealized gain (loss) on available-for-sale securities			(18,840	)			133,610
Comprehensive Income (Loss)		$	(1,904,974	)		$	(19,299	)
Income (Loss) Per Common Share:
Income (Loss) Before Extraordinary Item		$	—			$	—
Extraordinary Item		$	0.02			$	—
Income (Loss) Per Common Share:		$	0.02			$	—
Weighted Average Common Shares:
Basic			106,906,125				106,577,710
Diluted			121,612,007				123,819,089

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

 

 

 

 

EAT AT JOE’S LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT
			Preferred Stock Shares				Common Stock Amount				Additional Shares				Gains Unrealized Amount				Paid-in Capital				(Losses) on Securities				Retained Deficit				Total
Balance at December 31, 2010			20,000			$	2				106,577,710			$	10,658			$	13,370,485			$	(20,950	)		$	(16,970,356	)		$	(3,610,161	)
Contributed capital			—				—				—				—				200,000				—				—				200,000
Unrealized gain on available-for-sale securities			—				—				—				—				—				133,610				—				133,610
Net loss for the year ended December 31, 2011			—				—				—				—				—				—				(152,909	)			(152,909	)
Balance at December 31, 2011			20,000				2				106,577,710				10,658				13,570,485				112,660				(17,123,265	)			(3,429,460	)
Unrealized loss on available-for-sale securities			—				—				—				—				—				(18,840	)			—				(18,840	)
Common stock issued for services			—				—				30,050,000				3,005				177,295				—				—				180,300
Net income for the year ended December 31, 2012			—				—				—				—				—				—				1,923,814				1,923,814
Balance at December 31, 2012			20,000			$	2				136,627,710			$	13,663			$	13,747,780			$	93,820			$	(15,199,451	)		$	(1,344,186	)

 

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

 

 

 

 

 

EAT AT JOE’S LTD. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
		For the Years Ended December 31,
		2012				2011
Cash Flows From Operating Activities:
Net income (loss) for the period		$	1,923,814			$	(152,909	)
Adjustments to reconcile net loss to net cash    provided by operating activities:
Depreciation			50,423				27,889
Gain on extraordinary item			(2,354,988)				—
Common stock issued for services			180,300				—
Unrealized (gain) loss on trading securities			(97,977	)			105,026
(Gain) loss on sale of marketable securities			80,456				(54,317	)
Decrease (increase) in receivables			11,995				23
Decrease (increase) in inventory			(1,300	)			(1,040	)
Decrease (increase) in prepaid expense			62				(440	)
Decrease (increase) in security deposit			—				(15,000	)
(Decrease) increase in accrued interest payable			135,278				143,999
(Decrease) increase in accounts payable and accrued liabilities			1,147				1,300
Net Cash Provided by (Used) in Operating Activities			(70,790	)			54,531
Cash Flows From Investing Activities:
Purchases of trading securities			(161,807	)			(618,017	)
Purchases of available-for-sale securities			(125,000	)			(37,500	)
Proceeds from sale of trading securities			286,934				682,412
Purchase of property and equipment			(7,039	)			(360,796	)
Net Cash Provided by Investing Activities			(6,912	)			(333,901	)
Cash Flows From Financing Activities:
Repayment of notes, advances and related party payables			(252,000	)			(220,000	)
Net Cash Provided by Financing Activities			(252,000	)			(220,000	)
Increase (Decrease)  in Cash			(329,702	)			(499,370	)
Cash at beginning of period			712,648				1,212,018
Cash at end of period		$	382,946			$	712,648
Supplemental Disclosure of Interest and Income Taxes Paid:
Interest paid during the period		$	8,784			$	20,000
Income taxes paid during the period		$	—			$	3,533
Supplemental Disclosure of Non-cash Investing  and Financing Activities:
Marketable securities acquired through related party  notes and contributed capital		$	—			$	210,000
Unrealized gain (loss) on trading securities		$	97,977			$	(105,026	)
The accompanying notes are an integral part of these consolidated financial statements.

 

 

 

  

 

EAT AT JOE’S LTD. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2012 AND 2011

 

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

This summary of accounting policies for Eat At Joe’s, Ltd. and subsidiaries is presented to assist in understanding the Company's financial statements.  The accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements.

 

Organization

 

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.

 

          The Company has incurred a net income (loss) from operations for the years ended December 31, 2012 and 2011 of approximately ($315,000) and $42,000, respectively and had a working capital deficit of $1,641,650 as of December 31, 2012.  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’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 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. 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.

 

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.).

 

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 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.

 

 

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 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.

 

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.

 

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.

 

 

 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.

 

Earnings (Loss) Per Share

 

Net income (loss) per common share is computed pursuant to section 260-10-45 of the FASB Accounting Standards Codification.  Basic net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding during the period.  Diluted net income (loss) per common share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially outstanding shares of common stock during the period.  

 

Pervasiveness of Estimates

 

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

 

Concentration of Credit Risk

 

The Company has no significant off-balance-sheet concentrations of credit risk such as foreign exchange contracts, options contracts or other foreign hedging arrangements.  The Company maintains the majority of its cash balances with one financial institution, in the form of demand deposits.  At December 31, 2012, 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.

  

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 December 31, 2012.

 

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

 

Investment in Marketable Equity 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 equity securities and have no maturity date. The cost basis of the Company’s available-for-sale securities as of December 31, 2012 and 2011 was $198,500 and $113,500, 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:

 

		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
			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 years ended December 31, 2012 and 2011 include a gain of $97,977 for trading securities for the year ended December 31, 2012 and a $105,026 unrealized holding loss on trading securities for the year ended December 31, 2011.  For the year ended December 31, 2012, other comprehensive income includes a loss of $18,840 for unrealized holding losses on available-for-sale securities.  For the year ended December 31, 2011, other comprehensive income includes an unrealized holding gain on available-for-sale securities of $133,610.

 

Realized Gains and losses are determined on the basis of specific identification.  During the years ended December 31, 2012 and 2011, sales proceeds and gross realized gains and losses on securities classified as available-for-sale securities and trading securities were as follows:

 

Trading securities:		2012		2011
Sales Proceeds	$	286,934	$	682,412
Gross Realized Losses	$	80,456	$	-
Gross Realized Gains	$		$	54,317
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
		Fair Value at		Quoted Prices in Active Markets		Significant Other Observable Inputs			Significant Unobservable  Inputs
		December 31, 2012		(Level 1)		(Level 2)			(Level 3)
Trading securities	$	200,556	$	200,556	$	-	$		-
Available-for-sale securities	$	292,320	$	292,320	$	-	$		-
Total	$	492,876	$	492,876	$	-	$

 

 

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

 

NOTE 2 - INCOME TAXES

 

As of December 31, 2012, the Company had a net operating loss carry forward for income tax reporting purposes of approximately $3,300,000 that may be offset against future taxable income through 2032.  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,
		2012				2011
Net Operating Losses		$	1,122,000			$	1,768,000
Depreciation and Other			(15,920	)			(21,340	)
Valuation Allowance			(1,106,080	)			(1,746,660	)
		$	—			$	—

 

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

		December 31,
		2012				2011
Provision (Benefit) at US Statutory Rate		$	548,250			$	(52,200	)
Net Operating Losses			635,580				80,240
Depreciation and Other			(543,250	)			155,140
Increase (Decrease) in Valuation Allowance			(640,580	)			(183,180	)
		$	—			$	—

 

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.

 

 

NOTE 3 - 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, 2012, 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 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 2012. 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 2009. The following describes the open tax years, by major tax jurisdiction, as of December 31, 2012:

 

United States (a)

2009 - Present

 

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

  

NOTE 4 - 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.  As of December 31, 2012 and 2011, $1,513,260 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.  This loan was paid off in 2012. As of December 31, 2012 and 2011, related party accounts payable include $0 and $8,784, respectively, due to Berkshire Capital.

 

On May 16, 2007, the Company acquired 3,000,000 shares of Sustainable Power Corp. from Berkshire Capital Management in exchange for a demand note in the amount of $210,000, carrying an interest rate of 6% A.P.R. During the year ended December 31, 2010, the Company paid $210,000 towards this loan. During 2012 this loan was paid off. At December 31, 2012 and 2011, $0 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 December 31, 2012 and 2011, $174,185 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 December 31, 2012 and 2011, $139,182 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 December 31, 2012 and 2011, $220,491 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 December 31, 2012 and 2011, $75,429 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.  At December 31, 2012 and 2011, $24,932 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 December 31, 2012 and 2011, $168,268 and $158,494, 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. At December 31, 2012 and 2011, $93,969 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.  At December 31, 2012 and 2011, $28,843 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 December 31, 2012 and 2011, $82,467 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 fourth 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 fourth 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. During 2012, this loan was paid off. At December 31, 2012 and 2011, $0 and $10,379, respectively, was due on this loan.

 

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

 

 

Related Party	Date of loan		December 31, 2012		December 31, 2011
Joseph Fiore	2010 & 2011	$	1,513,260	$	1,442,889
Berkshire Capital Management	May 16, 2007		-		46,545
Berkshire Capital Management	September 14, 2007		174,185		164,066
Berkshire Capital Management	July 17, 2007		139,182		131,096
Berkshire Capital Management	August 22, 2007		220,491		207,681
Berkshire Capital Management	September 20, 2007		75,429		71,047
Berkshire Capital Management	January 11, 2008		24,932		59,611
Berkshire Capital Management	February 29, 2008		168,268		158,494
Berkshire Capital Management	April 24, 2008		93,969		88,510
Berkshire Capital Management	April 24, 2008		28,843		170,970
Berkshire Capital Management	July 1, 2008		82,467		77,676
Berkshire Capital Management	May 17, 2011		-		10,379
		$	2,521,026	$	2,628,964

  

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 5 - RENT AND LEASE EXPENSE

 

The Company’s wholly-owned subsidiary E.A.J. PHL Airport, Inc. leases approximately 845 square feet in the Philadelphia Airport, Philadelphia, Pennsylvania pursuant to a lease dated April 30, 1997.  E.A.J. PHL Airport pays $14,000 per month basic rent 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.

 

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. It is expected to be refunded in 2013. 

 

NOTE 6 – 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 7 - CONVERTIBLE PREFERRED STOCK

 

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

 

·

No dividends.

 

·

Convertible to common stock at the average closing bid price for the Company’s common stock for the 5 trading days prior to the conversion date, and is adjustable to prevent dilution.  (Convertible to 14,705,882 common shares at December 31, 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 holders 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 8 – 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.

 

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 $172,870, and other liabilities of $138,416 related to its Ontario restaurants should be written-off and recorded as 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 9 – SUBSEQUENT EVENTS

 

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

 

 

 

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

EAT AT JOE'S LTD.

 

Dated: April 1, 2013

 

By  /S/     Joseph Fiore

Joseph Fiore,

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

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated on this 30th day of March 2013.

 

Signatures and Title

 

/S/     Joseph Fiore

Joseph Fiore

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

(Principal Executive, Financial

and Accounting Officer)

 

/S/     James Mylock, Jr.

James Mylock, Jr.

Director

 

/S/     Tim Matula

Tim Matula

Director