1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q (MARK ONE) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to __________ Commission File No. 33-94724 JERRY'S FAMOUS DELI, INC. (Exact name of registrant as specified in its charter) California 95-3302338 - ------------------------------- ----------------------------------- (State or Other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 12711 Ventura Boulevard, Suite 400, Studio City, California 91604 ----------------------------------------------------------------- (Address of Principal Executive Offices) (818) 766-8311 ---------------------------------------------------- (Registrant's Telephone Number, Including Area Code) ----------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ___ APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of July 15, 1999, outstanding common shares totaled 14,049,202 2 JERRY'S FAMOUS DELI, INC. INDEX Page Number PART I - FINANCIAL INFORMATION Item 1. Consolidated Financial Statements Consolidated Balance Sheets as of June 30, 1999 and December 31, 1998................. 2 Consolidated Statements of Operations for the Three Months and Six Months Ended June 30, 1999 and June 30, 1998....................................................... 3 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1999 and June 30, 1998....................................................... 4 Notes to Consolidated Financial Statements............................................ 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations General .............................................................................. 7 Results of Operations................................................................. 8 Liquidity and Capital Resources....................................................... 9 Item 3. Quantitative and Qualitative Disclosure About Market Risk............................. 9 PART II - OTHER INFORMATION Items 1. through 6............................................................................. 10 Signatures..................................................................................... 11 1 3 JERRY'S FAMOUS DELI, INC. CONSOLIDATED BALANCE SHEETS JUNE 30, DECEMBER 31, 1999 1998 ----------- ------------ (unaudited) ASSETS Current assets Cash and cash equivalents $ 527,664 $ 985,382 Accounts receivable, net 269,617 424,400 Inventory 1,326,433 1,394,899 Prepaid expenses 440,429 449,737 Deferred income taxes 269,327 269,327 Prepaid income taxes 58,421 267,321 ----------- ----------- Total current assets 2,891,891 3,791,066 Property and equipment, net 29,304,562 33,534,787 Deferred income taxes 629,801 629,801 Goodwill and covenants not to compete 9,445,678 9,701,723 Other assets 1,249,222 1,335,331 ----------- ----------- Total assets $43,521,154 $48,992,708 =========== =========== LIABILITIES AND EQUITY Current liabilities Accounts payable $ 2,596,581 $ 3,099,839 Accrued expenses 1,176,412 1,411,457 Sales tax payable 196,317 421,897 Current portion of long-term debt 2,337,790 1,279,371 ----------- ----------- Total current liabilities 6,307,100 6,212,564 Long-term debt 10,570,797 15,908,582 Deferred rent 457,151 457,525 ----------- ----------- Total liabilities 17,335,048 22,578,671 Minority interest 601,236 554,899 Equity Preferred stock Series A, no par, 5,000,000 shares authorized, no shares issued or outstanding at June 30, 1999 or at December 31, 1998 - Common stock, no par value, 60,000,000 shares authorized, 14,061,202 and 14,508,902 issued and outstanding at June 30, 1999 and December 31, 1998, respectively 24,621,273 25,271,737 Equity 963,597 587,401 ----------- ----------- Total equity 25,584,870 25,859,138 ----------- ----------- Total liabilities and equity $43,521,154 $48,992,708 =========== =========== The accompanying notes are an integral part of these consolidated financial statements. 2 4 JERRY'S FAMOUS DELI, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, 1999 1998 1999 1998 ------------ ------------ ------------ ------------ Revenues $ 16,760,902 $ 16,094,831 $ 36,348,295 $ 30,359,516 Cost of sales 5,828,203 5,339,797 12,650,885 9,723,981 ------------ ------------ ------------ ------------ Gross profit 10,932,699 10,755,034 23,697,410 20,635,535 Operating expenses Labor 6,296,216 5,226,873 13,158,966 10,379,460 Occupancy and other 2,240,217 2,162,817 4,655,152 4,221,115 Occupancy - related party 277,129 256,535 537,115 417,053 General and administrative expenses 1,174,913 1,454,811 2,391,038 2,551,465 Depreciation 667,308 921,351 1,373,277 1,778,105 Amortization 177,330 196,330 342,402 307,397 ------------ ------------ ------------ ------------ Total expenses 10,833,113 10,218,717 22,457,950 19,654,595 ------------ ------------ ------------ ------------ Income from operations 99,586 536,317 1,239,460 980,940 Other income (expense) Interest income 6,700 18,477 12,545 35,559 Interest expense (307,084) (370,156) (666,043) (562,728) Other income (expense), net (2,548) 287 (2,548) 287 ------------ ------------ ------------ ------------ Income (loss) before provision (benefit) for income taxes and minority interest (203,346) 184,925 583,414 454,058 Provision (benefit) for income taxes (95,087) 50,091 110,900 108,474 Minority interest 24,925 26,430 92,707 52,302 ------------ ------------ ------------ ------------ Income (loss) before cumulative effect of change in accounting principle (133,184) 108,404 379,807 293,282 Cumulative effect of change in accounting principle, net of tax benefit of $65,162 -- -- -- (132,299) ------------ ------------ ------------ ------------ Net income (loss) $ (133,184) $ 108,404 $ 379,807 $ 160,983 ============ ============ ============ ============ Net income (loss) per share before cumulative effect of change in accounting principle applicable to common stock - Basic and Diluted $ (0.01) $ 0.01 $ 0.03 $ 0.02 Cumulative effect of change in accounting principle - Basic and Diluted -- -- -- (0.01) ------------ ------------ ------------ ------------ Net income (loss) per share applicable to common stock - Basic and Diluted $ (0.01) $ 0.01 $ 0.03 $ 0.01 ============ ============ ============ ============ Weighted average shares outstanding - Basic 14,111,619 15,144,664 14,281,694 15,144,664 ============ ============ ============ ============ Weighted average shares outstanding - Diluted 14,136,767 15,212,901 14,306,842 15,246,076 ============ ============ ============ ============ The accompanying notes are an integral part of these consolidated financial statements. 3 5 JERRY'S FAMOUS DELI, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) SIX MONTHS ENDED JUNE 30, 1999 1998 ------------- ------------- Cash flows from operating activities: Net income $ 379,807 $ 160,983 ------------- ------------- Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of change in accounting principle - 132,299 Depreciation 1,373,277 1,778,105 Amortization 342,402 307,397 Minority interest 92,707 52,302 Deferred income taxes - (58,648) Deferred rent (374) - Changes in assets and liabilities: Accounts receivable 154,783 (44,770) Inventory 68,466 (120,150) Prepaid expenses 9,308 1,158,142 Prepaid income taxes 208,900 24,605 Preopening costs - (222,693) Other assets (21,863) (130,719) Accounts payable (503,258) 1,630,418 Accrued expenses (235,045) (312,892) Sales tax payable (225,580) (210,238) ------------- ------------- Total adjustments 1,263,723 3,983,158 ------------- ------------- Net cash provided by operating activities 1,643,530 4,144,141 ------------- ------------- Cash flows from investing activities: Purchase of Epicure Market - (8,504,323) Acquisition of restaurant - (1,760,000) Net proceeds from sale of Pasadena facility 3,913,244 - Additions to equipment (492,941) (404,950) Additions to improvements - land, building and leasehold (698,883) (346,692) Deductions (additions) to construction-in-progress 153,532 (1,107,251) ------------- ------------- Net cash provided by (used in) investing activities 2,874,952 (12,123,216) ------------- ------------- Cash flows from financing activities: Borrowings on credit facilities 560,000 6,965,000 Payments on long-term debt (4,839,366) (450,631) Dividends paid to minority shareholders (46,370) (45,093) Purchase of Company's common stock (650,464) - ------------- ------------- Net cash provided by (used in) financing activities (4,976,200) 6,469,276 ------------- ------------- Net decrease in cash and cash equivalents (457,718) (1,509,799) Cash and cash equivalents, beginning of period 985,382 2,264,308 ------------- ------------ Cash and cash equivalents, end of period $ 527,664 $ 754,509 ============= ============ The accompanying notes are an integral part of these consolidated financial statements. 4 6 JERRY'S FAMOUS DELI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION AND ORGANIZATION: Basis of Presentation The accompanying consolidated financial statements of Jerry's Famous Deli, Incorporated and its subsidiaries ("the Company") for the three and six months ended June 30, 1999 and June 30, 1998 have been prepared in accordance with generally accepted accounting principles and with the instructions to Form 10-Q and Article 10 of Regulation S-X. These financial statements have not been audited by independent accountants, but include all adjustments (consisting of normal recurring adjustments) which are, in Management's opinion, necessary for a fair presentation of the financial condition, results of operations and cash flows for such periods. However, these results are not necessarily indicative of results for any other interim period or for the full year. The December 31, 1998 consolidated balance sheet is derived from the audited consolidated financial statements included in the Company's December 31, 1998 Form 10-K. Certain information and footnote disclosures normally included in financial statements in accordance with generally accepted accounting principles have been omitted pursuant to requirements of the Securities and Exchange Commission. Management believes that the disclosures included in the accompanying interim financial statements and footnotes are adequate to make the information not misleading, but should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Form 10-K for the preceding fiscal year. Organization The accompanying consolidated financial statements consist of Jerry's Famous Deli, Incorporated ("JFD--Inc."), a California corporation, JFD--Encino ("JFD--Encino"), a California limited partnership and National Deli Corporation, ("NDC"), a Florida corporation and wholly-owned subsidiary of JFD--Inc. JFD--Inc. and JFD--Encino operate family oriented, full-service restaurants. NDC operates The Epicure Market ("Epicure"), a specialty gourmet food store located in Miami Beach, Florida. These entities are collectively referred to as "Jerry's Famous Deli, Inc." or the "Company." JFD--Inc. and JFD--Encino include the operations of the Southern California restaurants located in Studio City, Encino, Marina del Rey, West Hollywood, Pasadena, Westwood, Sherman Oaks, Woodland Hills, and Costa Mesa. JFD--Inc.also includes the two Rascal House restaurants located in Miami Beach and Boca Raton, Florida. Reclassification Certain amounts in the previously presented financial statements have been reclassified to conform to the current period presentation. 2. SUPPLEMENTAL CASH FLOW INFORMATION Six Months Ended June 30, 1999 1998 --------- ---------- Supplemental cash flow information: Cash paid for: Interest ................................................. $ 335,000 $ 588,000 Income taxes ............................................. 2,000 $ 236,000 Supplemental information on noncash investing and financing activities: Common Stock issued in purchase of Epicure................ $ - $2,395,147 5 7 JERRY'S FAMOUS DELI, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 3. NET INCOME PER SHARE In accordance with Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per Share," basic net income per share is computed by dividing the net income attributable to common shareholders by the weighted average number of common shares outstanding during the period. Diluted net income per common share is computed by dividing the net income attributable to common shareholders by the weighted average number of common and common share equivalents outstanding during the period. Common share equivalents included in the diluted computation represent shares issuable upon assumed exercise of stock options using the treasury stock method. 4. IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS In April 1998, the American Institute of Certified Public Accountants ("AICPA") issued Statement of Position ("SOP") 98-5 entitled "Reporting on the Costs of Start-Up Activities." SOP 98-5 requires entities to expense as incurred all start-up and preopening costs that are not otherwise capitalizable as long-lived assets. Restatement of the previously issued financial statements is not permitted by SOP 98-5, and entities are not required to report the pro forma effects of the retroactive application of the new accounting standard. The Company's early adoption of this new accounting principle in 1998 resulted in the recognition of the cumulative effect of the change in accounting principle as a one-time charge against earnings of $132,299, net of related income tax benefit of $65,162, recorded as of January 1, 1998. Thus, the Consolidated Statement of Operations and the Consolidated Statement of Cash Flows for the six months ended June 30, 1998 have been restated to reflect the change. 5. SALE OF PASADENA PROPERTY The Company closed escrow on the sale of its Pasadena facility at the close of business on May 2, 1999. The gross proceeds from the sale were $4,120,000 which resulted in no significant gain or loss. Of these proceeds, approximately $3,750,000 was used to reduce the Company's debt and the remaining proceeds were applied to other related costs of the sale. 6 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The following table presents for the three and six months ending June 30, 1999 and 1998, the Consolidated Statements of Operations of the Company expressed as percentages of total revenue. The results of operations for the first six months of 1999 are not necessarily indicative of the results to be expected for the full year ending December 31, 1999. PERCENTAGE OF TOTAL REVENUE --------------------------------------- THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------- --------------- 1999 1998 1999 1998 ----- ----- ----- ----- Revenues 100.0% 100.0% 100.0% 100.0% Cost of sales Food 33.6 31.2 33.7 30.1 Other 1.2 2.0 1.1 1.9 ----- ----- ----- ----- Total cost of sales 34.8 33.2 34.8 32.0 ----- ----- ----- ----- Gross profit 65.2 66.8 65.2 68.0 Operating expenses Labor 37.6 32.5 36.2 34.2 Occupancy and other 15.0 15.0 14.3 15.3 ----- ----- ----- ----- Total operating expenses 52.6 47.5 50.5 49.5 General and administrative expenses 7.0 9.0 6.6 8.4 Depreciation and amortization expense 5.1 7.0 4.7 6.9 ----- ----- ----- ----- Total expenses 64.7 63.5 61.8 64.8 ----- ----- ----- ----- Income from operations 0.5 3.3 3.4 3.2 Interest income 0.0 0.1 0.0 0.1 Interest expense (1.8) (2.3) (1.8) (1.8) Other income, net 0.0 0.0 0.0 0.0 ----- ----- ----- ----- Income (loss) before provision for income taxes and minority interest (1.3) 1.1 1.6 1.5 Provision (benefit) for income taxes (0.6) 0.3 0.3 0.3 Minority interest 0.1 0.1 0.3 0.2 ----- ----- ----- ----- Income (loss) before cumulative effect of change in accounting principle (0.8) 0.7 1.0 1.0 Cumulative effect of change in accounting principle -- -- -- 0.4 ----- ----- ----- ----- Net income (loss) (0.8)% 0.7% 1.0% 0.6% ===== ===== ===== ===== 7 9 RESULTS OF OPERATIONS Three Months Ended June 30, 1999 Compared to Three Months Ended June 30, 1998 Revenues for the three months ended June 30, 1999 increased approximately $666,000, or 4.1%, to approximately $16,761,000 for the 1999 quarter from approximately $16,095,000 for the 1998 quarter. The Rascal House restaurant in Boca Raton, Florida, opened July 1, 1998, contributed revenues of approximately $1,089,000 for the 1999 period. In addition, same store sales for the eight Southern California stores in operation since April 1, 1998 increased approximately $368,000, or 3.8% for the 1999 period. The combined increase was primarily offset by a decrease in sales of approximately $132,000 for the other Rascal House restaurant in Miami Beach, Florida, a decrease in sales of approximately $463,000 related to the sale of the Pasadena restaurant, which was sold on May 2, 1999, and a decrease in revenues of approximately $236,000 for The Epicure Market. Management attributes the decrease in sales in the Florida area primarily due to increased competition. To address the above decreases, the Company believes additional marketing of its restaurants and specific products, consistent with other casual dining and fast food restaurants, will have a positive effect on same store sales. Cost of sales, as a percentage of revenues, increased 1.6 percentage points to 34.8% for the 1999 quarter from 33.2% for the 1998 quarter. Total food cost which comprises over 96% of cost of sales increased 2.4 percentage points to 33.6% for 1999 from 31.2% for 1998. This increase is partially a result of the opening of the Boca store. The Rascal House restaurants operate with a higher food cost percentage than the stores in California. The Company's other components of cost of sales decreased 0.8% mainly as a result of more efficient buying. Operating expenses, which include all restaurant level operating costs, including, but not limited to, labor, rent, laundry, maintenance, utilities and repairs, as a percentage of revenues, increased 5.1 percentage points to 52.6% for the 1999 quarter from 47.5% for the 1998 quarter. Labor increased 5.1 percentage points to 37.6% for 1999 from 32.5% for 1998. Contributing to this increase is the higher labor costs associated with the Boca restaurant, which opened in July 1998, although all the Company's restaurants experienced increased labor costs. Management is taking several steps to control such costs, of which one is the implementation of an incentive program for restaurant managers which is based on a reduction of food and labor costs. General and administrative expenses, as a percentage of revenues, decreased 2.0 percentage points, to 7.0% for the 1999 quarter from 9.0% in the 1998 quarter. This decrease is partly due to reclassification of certain expenses at the Epicure store and partly a result of reduction in personnel employed at the Company's corporate headquarters. Depreciation and amortization expense, as a percentage of revenue, decreased 1.9 percentage points to 5.1% for 1999 from 7.0% for the 1998 quarter. Depreciation expense decreased approximately $254,000 for the 1999 quarter as compared to the 1998 quarter, which was primarily the result of the change in life of certain restaurant equipment and furniture and fixtures from a five-year useful life to an eight-year useful life, coupled with the sale of the Pasadena restaurant. The decrease in interest expense of approximately $63,000 to approximately $307,000 for the 1999 second quarter from approximately $370,000 for the same 1998 period, resulted from approximately $17,000 less in interest expense due to the sale of the Pasadena store and a lower interest rate on the credit facilities utilized in the purchase of Epicure on April 1, 1998. Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998 Revenues increased approximately $5,988,000, or 19.7%, to approximately $36,348,000 for the 1999 six-month period from approximately $30,360,000 for the 1998 six-month period. Epicure, acquired on April 1, 1998, contributed increased revenues of approximately $3,741,000 in 1999. The Boca restaurant, which opened in July 1, 1998, contributed revenues of approximately $2,753,000 to the 1999 period. The Rascal House restaurant in Miami Beach, Florida had decreased revenues of approximately $412,000, for the 1999 period, which is mostly due to the opening of the Boca store and increased competition. Revenues for the same eight Southern California restaurants operated during both six-month periods, increased approximately $378,000, or 1.9%. 8 10 Cost of sales, as a percentage of revenues, increased 2.8 percentage points, to 34.8% for the 1999 period from 32.0% for the 1998 period. The majority of these increases are attributable to the reasons discussed in quarter-to-quarter comparison. Labor expense, as a percentage of revenues, increased 2.0 percentage points, to 36.2% in 1999 from 34.2% for 1998, primarily due to the same factors as those discussed above with respect to the second quarter. General and administrative expenses, as a percentage of revenues, decreased 1.8 percentage point to 6.6% for 1999 from 8.4% for 1998 due to the reasons discussed above in the quarter-to-quarter analysis. Depreciation and amortization expense, as a percentage of revenues, decreased 2.2 percentage point to 4.7% in 1999 from 6.9% in the 1998 period, mostly due to the same factors as those discussed above with respect to the second quarter. Interest expense increased approximately $103,000 mostly due to the increase in expense on the credit facility as a result of the purchase of Epicure. This increase was partially offset by the decrease in debt from the proceeds of the sale of the Pasadena restaurant. LIQUIDITY AND CAPITAL RESOURCES The Company's capital requirements are primarily for the development, construction and equipping of new restaurants. Generally, the Company leases the property and extensively remodels the existing building. The cost of renovation will depend upon the style of restaurant being converted. Renovation of Jerry's Famous Deli restaurants have cost between $2 million and $3 million per location, or $267 to $400 per square foot. In addition, the Company spent approximately $650,000 pursuant to the Company's stock repurchase program. In September 1998, the Company entered into a $15,000,000 credit facility with BankBoston, N.A. in the form of a $9,000,000 term loan and $6,000,000 revolving line of credit. In conjunction with the agreement, the Company repaid certain existing debt with the proceeds from the term loan. The term loan and the revolver mature five years from inception and bear interest at the Eurodollar rate plus a variable percentage margin totaling approximately 7.5% at June 30, 1999. The debt is collateralized by assets of the Company and includes certain financial covenants. The Company utilized approximately $560,000 of the credit line in conjunction with the repurchase of approximately $650,000 of its Common Stock during the six months period ended June 30, 1999. In addition, approximately $3,750,000 from the proceeds of the sale of the Pasadena facility was used to reduce the Company's debt. Management believes that cash on hand, including cash drawn on the line of credit, proceeds from the sale of the Pasadena facility and cash flows from operations will be sufficient for operation of the Company's existing restaurants and market. Future anticipated capital needs, primarily for development or acquisition of new restaurants, cannot be projected with certainty. Additional capital expenditures will be required as new locations are added. The Company generally intends to seek leased locations. Statements made herein that are not historical facts are forward looking statements and are subject to a number of risk factors, including the public's acceptance of the Jerry's Famous Deli format in each new location, consumer trends in the restaurant industry, competition from other restaurants, the costs and delays experienced in the course of remodeling or building new restaurants, the amount and rate of growth of administrative expenses associated with building the infrastructure needed for future growth, the availability, amount, type and cost of financing for the Company and general economic conditions and other factors. Further information on these and other factors is contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1998 and its other reports filed with the Securities and Exchange Commission. Item 3. Quantitative and Qualitative Disclosure About Market Risk. Not applicable. 9 11 PART II - OTHER INFORMATION Items 1. through 3. Not applicable. Item 4. Submission of Matters to a Vote of Security Holders. On May 25, 1999, the Company held its Annual Meeting of Shareholders. Shareholders voted upon the election of directors and upon the ratification of PricewaterhouseCoopers LLP, as the Company's independent public accountants for the fiscal year ending December 31, 1999. Isaac Starkman, Guy Starkman, Jason Starkman, Paul Gray, Stanley Schneider and Kenneth Abdalla, all of whom were directors prior to the Annual Meeting and were nominated by management for re-election, were re-elected at the meeting. The following votes were cast for each nominees: Authority Name For Withheld ---- --- --------- Isaac Starkman 13,171,603 162,580 Guy Starkman 13,171,603 162,580 Jason Starkman 13,171,603 162,580 Paul Gray 13,171,603 162,580 Stanley Schneider 13,171,603 162,580 Kenneth Abdalla 13,171,603 162,580 The following votes were cast for the ratification of PricewaterhouseCoopers LLP as the Company's independent public accountants for the fiscal year ending December 31, 1999: For: 13,242,864; Against: 83,669; Abstain: 7,650. Shareholders who wish to submit proposals to be included in the Company's proxy materials for the 2000 annual meeting may do so in accordance with Securities and Exchange Commission Rule 14a-8. For those shareholder proposals which are not submitted in accordance with Rule 14a-8, the Company's management proxies may exercise their discretionary voting authority, without any discussion of the proposal in the Company's proxy materials, for any proposal which is received by the Company after January 5, 2000. Items 5 and 6. Not applicable. 10 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. JERRY'S FAMOUS DELI, INC. Date: August 13, 1999 By: /s/ Isaac Starkman ------------------------------------------- Isaac Starkman Chief Executive Officer and Chairman of the Board of Directors By: /s/ Christina Sterling -------------------------------------------- Christina Sterling Chief Financial Officer 11