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FINAL PROSPECTUS
PROSPECTUS PURSUANT TO RULE 424(b)(3)
FILE NO. 333-03548
2,550,000 SHARES
BIG BUCK BREWERY & STEAKHOUSE, INC.
COMMON STOCK
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Big Buck Brewery & Steakhouse, Inc. (the "Company") is offering 2,550,000
shares of common stock (the "Shares"), par value $.01 per share (the "Common
Stock"), issuable upon exercise of outstanding Class A Warrants. Each Class A
Warrant entitles the holder to purchase at any time until June 13, 2000, one
share of Common Stock at an exercise price of $8.00 per share, subject to
adjustment. The Class A Warrants are subject to redemption by the Company for
$0.01 per warrant at any time on 30 days' written notice, provided that the
closing high bid price of the Common Stock exceeds $9.00 per share (subject to
adjustment) for any 20 consecutive trading days. The Class A Warrants were
originally issued by the Company in the Company's initial public offering as
part of units ("Units"), each consisting of one share of the Company's Common
Stock and one Class A Warrant.
The Company's Common Stock is traded on the Nasdaq SmallCap Market under the
symbol "BBUC." On October 22, 1997, the average of the high and low prices of
the Common Stock on the Nasdaq SmallCap Market was $7.3125 per share. Current
market quotations are listed in THE WALL STREET JOURNAL and many other
newspapers of general circulation.
THIS OFFERING INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING
ON PAGE 6 OF THIS PROSPECTUS. THESE ARE SPECULATIVE SECURITIES.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
WARRANT HOLDERS DISCOUNT COMPANY(1)(2)
<S> <C> <C> <C>
Per Share................................. $8.00 -- $8.00
Total..................................... $20,400,000 -- $20,400,000
</TABLE>
(1) Assumes all Class A Warrants are exercised.
(2) Before deducting expenses estimated at $30,000.
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THE DATE OF THIS PROSPECTUS IS OCTOBER 24, 1997.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company pursuant to the Exchange
Act may be inspected and copied at the public reference facilities maintained by
the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549 and at the regional offices of the Commission located at Seven World Trade
Center, Suite 1300, New York, New York 10048 and Northwestern Atrium Center, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such
material can also be obtained from the Public Reference Section of the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. The Commission maintains a Web site that contains reports,
proxy statements and other information regarding registrants that file
electronically with the Commission at http:// www.sec.gov. In addition, the
Company's Common Stock is quoted on the Nasdaq SmallCap Market. Reports, proxy
statements and other information concerning the Company can be inspected and
copied at the Public Reference Room of the National Association of Securities
Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act. This Prospectus does not
contain all of the information, exhibits and undertakings set forth in the
Registration Statement, certain parts of which are omitted as permitted by the
rules and regulations of the Commission. For further information, reference is
hereby made to the Registration Statement which may be inspected and copied in
the manner and at the sources described above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents previously filed by the Company (File No. 0-20845)
with the Commission pursuant to the Exchange Act are incorporated into this
Prospectus by reference:
(a) The Company's Annual Report on Form 10-KSB for the year ended December
29, 1996, filed on March 31, 1997.
(b) The Company's Quarterly Reports on Form 10-QSB for the fiscal quarters
ended March 30, 1997 and June 29, 1997, filed on May 9, 1997 and August
12, 1997, respectively.
(c) The Company's Current Report on Form 8-K, filed on October 3, 1997,
relating to (i) the Company filing Restated Articles of Incorporation
with the Michigan Department of Commerce, (ii) the opening of a Big Buck
Brewery & Steakhouse-Registered Trademark- in Auburn Hills, Michigan and
(iii) the Company changing its name from Michigan Brewery, Inc. to Big
Buck Brewery & Steakhouse, Inc.
(d) The Company's Current Report on Form 8-K, filed on May 28, 1997,
relating to the safe harbor for forward-looking statements.
(e) The Company's Definitive Schedule 14A (Proxy Statement), filed on April
21, 1997, relating to the Company's Annual Meeting of Shareholders held
on June 4, 1997.
(f) The description of the Company's capital stock contained in its
Registration Statement on Form SB-2 (File No. 333-3548), filed on April
15, 1996, and as amended by Pre-Effective Amendments Nos. 1 and 2, filed
on May 24, 1996 and June 12, 1996, respectively.
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act after the date of this Prospectus and prior to the
termination of the offering hereunder shall be deemed to be incorporated by
reference in this Prospectus and to be a part hereof from the date of filing of
such documents.
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Any statement contained herein or in a document all or any portion of which
is incorporated or deemed to be incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide, without charge, to each person to whom this
Prospectus is delivered, upon written or oral request of any such person, a copy
of any or all of the foregoing documents (other than exhibits to such documents
which are not specifically incorporated by reference in such documents). Written
requests for such copies should be directed to the Company at 550 South
Wisconsin Street, Gaylord, Michigan 49735, Attention: Chief Financial Officer.
Telephone requests may be directed to the office of the Chief Financial Officer
of the Company at (517) 731-0401.
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PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED BY THE MORE DETAILED INFORMATION AND
CONSOLIDATED FINANCIAL STATEMENTS APPEARING ELSEWHERE OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, INFORMATION IN THIS
PROSPECTUS GIVES EFFECT TO A 112.5-FOR-ONE STOCK SPLIT WITH RESPECT TO THE
COMMON STOCK EFFECTIVE JANUARY 19, 1996.
THIS PROSPECTUS CONTAINS "FORWARD-LOOKING STATEMENTS" AS DEFINED IN THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 THAT INVOLVE RISKS AND
UNCERTAINTIES. PURCHASERS OF THE COMPANY'S COMMON STOCK ARE CAUTIONED THAT THE
COMPANY'S ACTUAL RESULTS MAY DIFFER SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN
THOSE FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE THOSE FACTORS DISCUSSED HEREIN UNDER "RISK FACTORS" AND
ELSEWHERE IN THIS PROSPECTUS.
THE COMPANY
The business of Big Buck Brewery & Steakhouse, Inc. is to develop, own and
operate microbrewery/ restaurants known as Big Buck Brewery & Steakhouses ("Big
Buck Breweries" or "Breweries"). In May 1995, the Company opened its first Big
Buck Brewery in Gaylord, Michigan, adjoining I-75 approximately 200 miles north
of Detroit. On March 17, 1997, the Company opened its second Brewery in Grand
Rapids, Michigan, and on October 1, 1997, the Company opened its third Brewery
in Auburn Hills, Michigan, a suburb of Detroit.
Big Buck Breweries offer casual dining featuring moderately priced steaks,
ribs, chicken and other food and a distinctive selection of beers which are
microbrewed on-site. The Company also sells its microbrewed beer off-site
through wholesale distributors in order to promote customer interest in the
Breweries. The Company's selection of beers ranges from a light golden ale to a
dark full-bodied stout and is designed to satisfy the tastes of a broad spectrum
of consumers. A key element of the Company's strategy is to capitalize on the
growing interest of consumers in high quality, more flavorful microbrewed beer.
The Company believes it will generate customer loyalty to its beers and its
restaurant operations through customer identification with each local Big Buck
Brewery.
The Company believes the appearance of the Breweries has contributed to
their popularity as eating and drinking establishments. The Gaylord Brewery
features a large, open and visually stimulating dining area which highlights the
array of stainless steel and copper brewing equipment used to brew the Company's
craftbrewed beer. This Brewery features a 4,000 square foot dining area and a
1,600 square foot bar area, with combined seating capacity of approximately 420.
It is decorated with rustic wood-finished interiors, mounted deer racks, 36-foot
high vaulted ceilings and warm lighting. The specially commissioned Amish
hand-carved wooden furniture and overhead genuine Tennessee whisky barrel
lighting fixtures add character to the building's decor. The friendly and
attentive staff, on-site brewing and summertime outdoor seating and live music
are designed to create an appealing atmosphere for lunch, dinner and bar
customers. The Grand Rapids Brewery's seating capacity is approximately 250 for
the restaurant and bar combined. The brewing and fermenting tanks of this
Brewery front directly on 28th Street, a street with an average daily vehicle
count of approximately 52,000. The Auburn Hills Brewery, which houses a
15-barrel brewing system, encompasses 26,732 square feet including brewery, bar
and restaurant, with a total seating capacity of approximately 650. This Brewery
is accessible to the over 3.2 million Detroit metro area residents. Each
Brewery's interior follows the Gaylord Brewery's motif with a warm, cozy
atmosphere utilizing soft lighting and Amish furniture. The menu and beer styles
are the same at each Brewery.
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Consumer interest in more flavorful beer has resulted in significant growth
in the craftbrewed beer market during the last several years, despite a decline
in per capita beer consumption. The number of microbreweries in the United
States has grown from 21 in 1985 to approximately 380 as of March 1997. From
1985 to 1996, the annual production of craftbrewed beer in the United States
grew from 75,000 barrels to approximately 5.3 million barrels. Despite these
high levels of growth, sales of craftbrewed beers represented approximately 2.6%
of total beer sales in the United States as of December 1996.
The Company was incorporated in 1993 under the laws of the State of
Michigan. The Company's principal executive offices are located at 550 South
Wisconsin Street, Gaylord, Michigan 49735 and its telephone number is (517)
731-0401.
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RISK FACTORS
AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVES A HIGH
DEGREE OF RISK. PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING
RISK FACTORS, IN ADDITION TO THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS,
IN CONNECTION WITH AN INVESTMENT IN THE SHARES OF COMMON STOCK OFFERED HEREBY.
WHEN USED BELOW AND ELSEWHERE IN THIS PROSPECTUS, INCLUDING DOCUMENTS
INCORPORATED HEREIN BY REFERENCE, THE WORDS "BELIEVES," "ANTICIPATES" AND
"INTENDS" AND SIMILAR EXPRESSIONS ARE INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS. SUCH STATEMENTS ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE PROJECTED. POTENTIAL
PURCHASERS OF THE COMPANY'S COMMON STOCK ARE CAUTIONED NOT TO PLACE UNDUE
RELIANCE ON SUCH FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE
HEREOF.
LACK OF PROFITABILITY; LACK OF OPERATING HISTORY
The Company had a net loss of $613,148 during the six months ended June 29,
1997 and a net loss of $703,592 during the year ended December 29, 1996. The
Company had working capital of $1,025,515 and $3,120,013 at June 29, 1997 and
December 29, 1996, respectively. The Company has opened Big Buck Brewery &
Steakhouses in Gaylord, Michigan (May 1995), Grand Rapids, Michigan (March 1997)
and Auburn Hills, Michigan (October 1997). Prior to the opening of the Gaylord
Brewery, the Company had no operations or revenues. Accordingly, the Company's
operations are subject to all of the risks inherent in the establishment of a
new business enterprise, including the lack of operating history. The likelihood
of success of the Company must be considered in light of the problems, expenses,
difficulties, complications and delays frequently encountered in connection with
the establishment of a business. There can be no assurance that future
operations of any Big Buck Brewery will be profitable. Future revenues and
profits, if any, will depend upon various factors, including the quality of
restaurant operations, the acceptance of the Company's beer and general economic
conditions. In general, restaurants experience a decline in revenue growth or of
actual revenues following a period of excitement which accompanies their
opening. There is no assurance that the Company can operate profitably or that
it will successfully implement its plans to open additional Big Buck Breweries,
in which case the Company will continue to be dependent on the revenues of the
Gaylord, Grand Rapids and Auburn Hills Breweries.
DEVELOPMENT OF FUTURE BREWERIES; EXPANSION PLAN RISKS
The total cost of developing, constructing and opening the Gaylord Brewery
was approximately $5.8 million, including approximately $3.1 million for design
and construction, $1.3 million for equipment, furniture and fixtures relating to
the restaurant, $1.0 million for brewing and bottling equipment, and $400,000
for land. The Company purchased an existing structure for the Grand Rapids
Brewery. The total cost of the land, building, remodeling, equipment, furniture
and fixtures for the Grand Rapids Brewery was approximately $3.1 million. The
total cost of developing, constructing and opening the Auburn Hills Brewery was
approximately $9.0 million. Management believes that each new Brewery will be of
a building style and size suitable to its location. Accordingly, the Company has
not developed a standardized Brewery layout.
The Company plans to develop and open additional Big Buck Breweries and it
will need to obtain additional financing to carry out such expansion plans. The
amount of financing required for such expansion depends on the definitive
locations, site conditions, construction costs and size and type of Breweries to
be built. There can be no assurance that financing will be available on terms
acceptable or favorable to the Company, or at all. Without such financing, the
Company's development plans will be slower than planned or even unachievable.
Successful expansion of the Company's operations will be largely dependent
upon a variety of factors, some of which are currently unknown or beyond the
Company's control, including customer acceptance of Big Buck Brewery restaurants
and Big Buck Beer-Registered Trademark-; the ability of the Company's management
to identify suitable sites and to negotiate purchases and financing of such
sites; timely and economic development and
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construction of Breweries; timely approval from local governmental authorities;
the hiring of skilled management and other personnel; the ability of the
Company's management to apply its policies and procedures to a larger number of
Breweries; the availability of adequate financing; the general ability to
successfully manage growth; and the general state of the economy. There can be
no assurance that the Company will be able to open new Breweries.
The Company's strategy includes operating a brewhouse at each Big Buck
Brewery. Successful operation of separate brewhouses will require the Company to
overcome various organizational challenges such as increasing and maintaining
production and establishing and maintaining quality control over numerous
geographically separated Breweries. In attempting to expand beer distribution,
the Company will be required to establish and manage relationships with
wholesale distributors, retailers and consumers in new markets. The Company is
the sole promoter of sales of its beer in new markets. Consumer tastes and
preferences may vary from market to market. There can be no assurance that the
Company will be successful in entering new markets.
NEED FOR FINANCING
The Company's ability to execute its business strategy is dependent on its
ability to obtain substantial financing for the development of additional
Breweries. The Company anticipates that future development and expansion will be
financed through the public or private sale of additional equity or debt
securities, capital leases and other credit facilities. There can be no
assurance that any additional funds will be available or that such funds, if
available, will be on terms acceptable to the Company or its shareholders. New
investors may seek and obtain substantially better terms than those available to
investors purchasing shares of Common Stock on the open market and the Company's
issuance of securities in the future may result in substantial dilution.
MICHIGAN LAW MAY LIMIT GROWTH
The Company is licensed under Michigan law as a "microbrewery." A
microbrewery in Michigan is limited to the production of not more than 30,000
barrels of beer per year by all breweries owned or controlled by the same
person, whether within or outside Michigan. Without a change in current law, the
Company will limit its sales of beer off-site so as to reserve its brewing
capacity for sales of beer on-site which provide the Company higher margins, but
do not reach the same customer base. There can be no assurance that legislation
raising the barrelage ceiling will pass, that any such legislation will pass in
a form which would facilitate the Company's expansion plans, or that if such
legislation is not passed, the Company will be able to become licensed to brew
in excess of 30,000 barrels per year.
RISKS RELATED TO SALE/LEASEBACKS
In April 1997, the Company sold the Grand Rapids site, including all
improvements thereto, to an unrelated third party pursuant to a real estate
purchase and leaseback agreement for $1.4 million. Pursuant to a separate lease
agreement, the Company leases the Grand Rapids site at a minimum annual base
rent of $140,000 and a maximum annual base rent of $192,500 over a ten-year
term. The lease may be extended at the option of the Company for two additional
five-year terms. In addition to the annual base rent, the Company is obligated
to pay an annual percentage rent in the amount of 5% on gross sales at the site
in excess of $2.9 million per year. In the event that such annual gross sales do
not exceed $2.9 million for any two consecutive years during the lease term, the
Company is obligated to repurchase the Grand Rapids site for $1.4 million, plus
$70,000 for each lease year on a pro rata basis. The Company has the option to
purchase the property from the lessor after the seventh full lease year for $1.4
million, plus $70,000 for each lease year on a pro rata basis. The lessor has
the option to require the Company to purchase the property after the seventh
full lease year at the same price.
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In August 1997, the Company entered into a real estate purchase and
leaseback agreement providing for the sale of the Auburn Hills site, including
all improvements thereto, to an unrelated third party, Michael G. Eyde, for $4.0
million. The Company leases the Auburn Hills Brewery pursuant to a separate
lease agreement which provides for a minimum annual base rent of $400,000, and a
maximum annual base rent of $550,000. The lease has a 25-year term and the
Company is able to extend such term for two additional ten-year terms. In
addition to the annual base rent, the Company is obligated to pay an annual
percentage rent of 5.25% of gross sales at the site in excess of $8.0 million
per year. In the event that such annual gross sales do not exceed $8.0 million
for any two consecutive years during the lease term, the Company will be
obligated to repurchase the Auburn Hills site for $4.0 million, plus $200,000
for each lease year on a pro rata basis. The lessor has the ability to require
that the Company issue Common Stock (valued at $5.00 per share) in payment of
such repurchase price. The Company has the option to purchase the property from
the lessor after the seventh full lease year for $4.0 million, plus $200,000 for
each lease year on a pro rata basis. Independent of annual gross sales, the
lessor has the option to require the Company to purchase the property before the
third full lease year at the same price.
The lessor in each case may terminate in the event of a default which is not
cured within the applicable grace period. A default is defined as (i) the
Company's failure to make a rental payment within 30 days after receipt of
written notice that a payment is past due or (ii) the Company's failure to
perform its obligations under the lease (other than rent payments) within 30
days after written notice of a curable violation, provided, however that if such
default cannot be cured within the 30-day period, a default will be deemed to
have occurred only if the Company has failed to commence a cure within such
30-day period.
Annual percentage rent is required whether the Breweries are profitable or
not. In the event that the Company is required to pay annual percentage rent,
the funds available to the Company for working capital and development plans
will be reduced. In the event that annual percentage rent is not required over
two consecutive years, the Company may be forced to repurchase such sites at a
premium over their respective sale prices. There can be no assurance that the
Company will have sufficient funds to repurchase the Grand Rapids Brewery or the
Auburn Hills Brewery. In the event of a default and termination of either lease,
the Company would be unable to continue to operate the related Brewery, which
could have a material adverse impact on the Company's operating results.
COMPETITION; CERTAIN FACTORS AFFECTING THE RESTAURANT AND BREWING INDUSTRIES
The restaurant industry is highly competitive with respect to price,
service, food quality (including taste, freshness, and nutritional value) and
location. New restaurants have a high failure rate. The restaurant industry is
also generally affected by changes in consumer preferences, national, regional
and local economic conditions, and demographic trends. The performance of
individual restaurants may also be affected by factors such as traffic patterns,
demographic considerations, and the type, number and location of competing
restaurants. In addition, factors such as inflation, increased food, labor and
employee benefit costs, and the lack of availability of experienced management
and hourly employees may also adversely affect the restaurant industry in
general and the Company's restaurants in particular. Restaurant operating costs
are further affected by increases in the minimum hourly wage, unemployment tax
rates and similar matters over which the Company has no control. There are
numerous well-established competitors, including national, regional and local
restaurant chains, possessing substantially greater financial, marketing,
personnel and other resources than the Company. The Company also competes with a
large variety of locally owned restaurants, diners and other establishments that
offer moderately priced food to the public and with other microbrewery
restaurants in a highly competitive and developing microbrewery and brewpub
restaurant market. Other restaurants and companies could utilize the Big Buck
Brewery format or a related format. There can be no assurance that the Company
will be able to respond to various competitive factors affecting the restaurant
industry.
The domestic beer market is highly competitive due to: the enormous
advertising and marketing expenditures by national and major regional brewers;
the continuing proliferation of microbreweries,
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regional craft breweries, brewpubs and other small craftbrewers; the
introduction of fuller-flavored products by certain major national brewers; and
a general surplus of domestic brewing capacity, which facilitates existing
contract brewer expansion and the entry of new contract brewers. Although
domestic demand for craftbrewed beers has increased dramatically over the past
decade, there can be no assurance that this demand will continue. The Company
anticipates intensifying competition in the craftbrewed beer market. Most of the
Company's brewing competitors possess marketing, financial, personnel and other
resources substantially greater than those of the Company, and there can be no
assurance that the Company will be able to succeed against intensified
competition in the craftbrewed and fuller-flavored beer markets.
BREWERY OPERATING HAZARDS
The Company's brewing operations are subject to certain hazards and
liability risks faced by all brewers, such as potential contamination of
ingredients or products by bacteria or other external agents that may be
wrongfully or accidentally introduced into products or packaging. The Company's
products are not pasteurized. While the Company has never experienced a
contamination problem in its products, the occurrence of such a problem could
result in a costly product recall and serious damage to the Company's reputation
for product quality. The Company's operations are also subject to certain injury
and liability risks normally associated with the operation and possible
malfunction of brewing and other equipment. Although the Company maintains
insurance against certain risks under various general liability and product
liability insurance policies, there can be no assurance that the Company's
insurance will be adequate.
BEER AND LIQUOR REGULATION
A significant percentage of the Company's revenue is derived from beer
sales. On-site sales of beer accounted for 21% of revenues and off-site sales of
beer accounted for an additional 3.6% of revenues during the fiscal year ended
December 29, 1996. These percentages are expected to increase over the next few
years in relation to food sales. The Company must comply with federal licensing
requirements imposed by the Bureau of Alcohol, Tobacco and Firearms of the
United States Department of Treasury, as well as the licensing requirements of
states and municipalities where its Breweries are or will be located. Failure to
comply with federal, state or local regulations could cause the Company's
licenses to be revoked and force it to cease the brewing and/or sale of its
beer. Typically, licenses must be renewed annually and may be revoked or
suspended for cause at any time. Additionally, state liquor laws may prevent or
impede the expansion of the Company's Breweries into certain markets. While the
Company has not experienced and does not anticipate any significant problems in
obtaining required licenses, permits or approvals, any difficulties, delays or
failures in obtaining such required licenses, permits or approvals could delay
or prevent the opening of a Brewery in a particular area. In addition, changes
in legislation, regulations or administrative interpretation of liquor laws
after the opening of a Brewery in a jurisdiction may prevent or hinder the
Company's expansion or operations in that jurisdiction or increase operating
costs. See "--Michigan Law May Limit Growth."
RESTAURANT REGULATION
The restaurant industry is subject to numerous federal, state and local
government regulations, including those relating to the preparation and sale of
food and to building and zoning requirements. The Company is subject to
regulation by air and water pollution control divisions of the Environmental
Protection Agency of the United States and by various states and municipalities
in which its Breweries are or will be located. The Company is also subject to
laws governing its relationship with employees, including minimum wage
requirements, overtime, working and safety conditions and citizenship
requirements. Restaurant operating costs are affected by increases in the
minimum hourly wage, unemployment tax rates,
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sales taxes and similar matters, such as any government mandated health
insurance, over which the Company has no control.
The Company is subject to "dram-shop" laws in Michigan and will be subject
to such statutes in certain other states into which it expands. These laws
generally provide someone injured by an intoxicated person the right to recover
damages from an establishment which wrongfully served alcoholic beverages to
such person. The Company carries liquor liability coverage as part of its
existing comprehensive general liability insurance. However, a judgment against
the Company under a dram-shop statute in excess of the Company's liability
coverage could have a material adverse effect on the Company.
TAXES; SMALL BREWERS EXCISE TAX CREDIT
The federal government currently imposes an excise tax of $18 on each barrel
of beer produced for domestic consumption in the United States. However, each
brewer with production under 2,000,000 barrels per year is granted a small
brewer's excise tax credit in the amount of $11 per barrel on its first 60,000
barrels produced annually. No assurance can be given that the federal government
will not reduce or eliminate this credit. To the extent Company-wide production
increases to amounts over 60,000 barrels per year, there will be an increase in
the average federal excise tax rate of the Company. Michigan currently imposes
an excise tax of $6.30 per barrel on each barrel of beer sold in Michigan.
However, each brewer which is a "microbrewery" under Michigan law (presently
with production under 30,000 barrels per year) is granted a microbrewer's excise
tax credit in the amount of $2 per barrel on its first 20,000 barrels produced
annually. To the extent Company-wide production increases to amounts over 20,000
barrels per year, there will be an increase in the average Michigan excise tax
rate of the Company. Other states and municipalities into which the Company may
expand also impose excise or other taxes or special charges on alcoholic
beverages in varying amounts, which amounts are subject to change. It is
possible that in the future the rate of excise taxation could be increased by
either the federal or state governments, or both. Increased excise taxes on
alcoholic beverages have been considered by the United States Congress as an
additional source of tax revenue in connection with various proposals and could
be included in future legislation. Future increases in excise taxes on alcoholic
beverages, if enacted, could adversely affect the Company.
DEPENDENCE ON KEY PERSONNEL; NEED FOR ADDITIONAL PERSONNEL
The Company's future success will depend in large part upon the continued
service of its key management personnel including William F. Rolinski, Gary J.
Hewett and Anthony P. Dombrowski. Given the Company's limited operating history,
the Company is dependent on its ability to identify, hire, train and motivate
qualified personnel necessary to enable it to continue operations. The Company
does not have key person life insurance policies on any of its employees. The
departure of key employees could have a material adverse effect on the Company's
business. The Company's success will also be dependent upon its ability to
attract and retain qualified people, including additional management personnel.
No assurance can be given that the Company's current employees will continue to
work for the Company or that the Company will be able to obtain the services of
additional personnel necessary for the Company's growth. To date, the Company
has not entered into any employment agreements with its personnel.
NO ASSURANCE AS TO LIQUIDITY ON THE NASDAQ SMALLCAP MARKET
The Company's Common Stock, Class A Warrants and Units are currently listed
on the Nasdaq SmallCap Market. There can be no assurance that an active public
market will develop or be sustained for the Company's securities. In addition,
if the Company's securities do not continue to trade on the Nasdaq SmallCap
Market, the securities would become subject to certain rules of the Securities
and Exchange Commission relating to "penny stocks." Such rules require
broker-dealers to make a suitability determination for purchasers and to receive
the purchaser's prior written consent for a purchase transaction, thus
restricting the ability to purchase or sell the securities in the open market.
10
<PAGE>
POSSIBLE REDEMPTION OF WARRANTS
The Class A Warrants are subject to redemption at any time by the Company at
$.01 per warrant, on 30 days prior written notice, if the high closing bid price
of the Common Stock exceeds $9.00 per share (subject to adjustment) for 20
consecutive trading days. If the Class A Warrants are redeemed, warrantholders
will lose their right to exercise the Class A Warrants except during such 30-day
redemption period. Redemption of the Class A Warrants could force the holders to
exercise the Class A Warrants at a time when it may be disadvantageous for the
holders to do so or to sell the Class A Warrants at the then market price or
accept the redemption price of $.01 per warrant.
CONTROL BY MANAGEMENT
The current officers and directors of the Company beneficially own
approximately 43.7% of the outstanding Common Stock. Assuming the exercise of
all Class A Warrants, the current officers and directors of the Company will
beneficially own approximately 29.5% of the outstanding Common Stock.
Accordingly, such persons can exert substantial influence over the composition
of the Company's Board of Directors and generally direct the affairs of the
Company and may have the power to control the outcome of shareholder approvals
of business acquisitions, mergers and combinations and other actions.
SEASONALITY AND FLUCTUATIONS IN QUARTERLY RESULTS
The Company's sales and earnings are expected to fluctuate based on seasonal
patterns. The Company anticipates that its highest earnings will occur in the
second and third calendar quarters. In addition, quarterly results in the future
are likely to be substantially affected by the timing of new Brewery openings.
Because of the seasonality of the Company's business and the impact of new
Brewery openings, results for any quarter are not necessarily indicative of the
results for a full fiscal year.
MICHIGAN ANTI-TAKEOVER LAWS
The Company is subject to Michigan statutes regulating business combinations
and restricting voting rights of certain persons acquiring shares of Common
Stock which may hinder or delay a change in control of the Company.
VOLATILITY OF MARKET PRICE OF COMMON STOCK
The market price of the Company's Common Stock has been subject to
significant fluctuations in response to numerous factors, including variations
in the annual or quarterly financial results of the Company or its competitors,
changes by financial research analysts in their estimates of the earnings of the
Company or its competitors, conditions in the economy in general or in the
brewing industry in particular, unfavorable publicity or changes in applicable
laws and regulations (or judicial or administrative interpretations thereof)
affecting the Company or the brewing industry. During the first 295 days of
1997, the Company's Common Stock ranged from a high of $7.25 on October 22,
1997, to a low of $1.75 on March 24, 1997. There can be no assurance that
purchasers of shares of Common Stock will be able to sell their shares at or
above the prices at which they were purchased.
IMPACT OF SALE OF SECURITIES; SECURITIES ELIGIBLE FOR FUTURE SALE
The Company had 5,285,000 shares of Common Stock outstanding as of October
15, 1997, and had warrants and options outstanding to purchase additional Common
Stock totaling 3,553,500 shares of Common Stock, exercisable at prices ranging
from $2.00 to $8.00 per share. The sale of the Shares and additional Common
Stock which may become eligible for sale in the public market from time to time
upon exercise of warrants and stock options, or upon the expiration of
applicable holding periods, could have the effect of depressing the market
prices for the Company's Common Stock.
11
<PAGE>
ABSENCE OF DIVIDENDS
The Company has not paid any cash dividends since its inception and does not
anticipate paying cash dividends in the foreseeable future. The Company
presently expects to retain its earnings to finance the development and
expansion of its business. The declaration or payment by the Company of
dividends, if any, on its Common Stock in the future is subject to the
discretion of the Board of Directors and will depend on the Company's earnings,
financial condition, capital requirements and other relevant factors. The
declaration or payment by the Company of dividends is also subject to the terms
of the Company's credit facility with its bank.
USE OF PROCEEDS
In the event that the Company realizes proceeds from the exercise of the
Class A Warrants, the net proceeds to the Company are expected to be
approximately $20.4 million. The Company intends to use such net proceeds as
follows:
<TABLE>
<CAPTION>
PERCENTAGE
OF
USE OF
USE OF PROCEEDS DOLLAR AMOUNT PROCEEDS
- ---------------------------------------------------------------- -------------- ------------
<S> <C> <C>
New Restaurant Construction................................... $ 18,370,000 90.2%
Repayment of Indebtedness..................................... $ 2,000,000 9.8%
-------------- ------------
Total....................................................... $ 20,370,000 100.0%
</TABLE>
The Company plans to use approximately $18.4 million of the proceeds from
the exercise of the Class A Warrants for the development and opening of new Big
Buck Breweries. The Company intends to obtain real estate financing for up to
50% of the cost of developing and opening such Breweries. The Company currently
estimates that the cost of developing and opening each Brewery, including
equipment, furniture, fixtures, pre-opening expenses and leasehold improvements,
if such Breweries are leased, will range from approximately $1.65 million to
$8.8 million, depending upon the locations, site conditions, construction costs
and sizes and types of Breweries built or leased. There can be no assurance that
the Company will be able to develop and open additional Big Buck Breweries at
such costs or obtain the necessary financing on terms favorable to the Company.
In addition, the Company's expansion plans will be altered absent the enactment
of an amendment to current Michigan law. See "Risk Factors--Michigan Law May
Limit Growth." The Company anticipates using the remainder of the net proceeds
for the repayment of current indebtedness.
Pending the use of the net proceeds for the above purposes, the Company
intends to invest such funds in short-term bank deposits, United States
government securities and other short-term investment-grade securities.
PLAN OF DISTRIBUTION
The Common Stock issuable upon exercise of the Class A Warrants is
distributed when and as such Class A Warrants are exercised by the holders. The
Company may solicit the exercise of the Class A Warrants at any time, and may
redeem the Class A Warrants if the market price of the Company's Common Stock
rises to the necessary level for the necessary duration. The Company may also
reduce the exercise price of the Class A Warrants in order to encourage their
exercise. The exercise price and other terms of the Class A Warrants were
initially negotiated between the Company and the underwriter of its initial
public offering.
12
<PAGE>
LEGAL MATTERS
The validity of the Shares offered hereby and certain legal matters
pertaining to the Company were passed upon on behalf of the Company by Briggs
and Morgan, Professional Association.
EXPERTS
The financial statements as of December 31, 1995 and December 29, 1996 and
for each of the years in the two-year period ended December 29, 1996 of Big Buck
Brewery & Steakhouse, Inc., incorporated by reference in this Prospectus have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto and are incorporated by reference
herein in reliance upon the authority of said firm as experts in giving said
report.
13
<PAGE>
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFER DESCRIBED IN THIS PROSPECTUS AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE SELLING SHAREHOLDERS. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE UNDER THIS PROSPECTUS SHALL UNDER ANY
CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR SINCE THE DATE OF ANY DOCUMENTS
INCORPORATED HEREIN BY REFERENCE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OTHER THAN
THE SECURITIES TO WHICH IT RELATES, OR AN OFFER OR SOLICITATION IN ANY STATE TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH STATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Available Information.......................... 2
Incorporation of Certain Documents by
Reference.................................... 2
Prospectus Summary............................. 4
The Company.................................... 4
Risk Factors................................... 6
Use of Proceeds................................ 12
Plan of Distributions.......................... 12
Legal Matters.................................. 13
Experts........................................ 13
</TABLE>
2,550,000 SHARES
BIG BUCK BREWERY &
STEAKHOUSE, INC.
COMMON SHARES
---------------------
PROSPECTUS
---------------------
OCTOBER 24, 1997
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