<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-QSB
/x/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 29, 1998
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
COMMISSION FILE NUMBER 0-20845
BIG BUCK BREWERY & STEAKHOUSE, INC.
(Exact Name of Registrant as Specified in Its Charter)
MICHIGAN 38-3196031
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
550 SOUTH WISCONSIN STREET
GAYLORD, MICHIGAN 49735
(517) 731-0401
(Address of Principal Executive Offices and Registrant's
telephone number, including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or 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 .
----- -----
As of May 8, 1998, there were outstanding 5,285,000 shares of common stock,
$.01 par value, of the registrant.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 1
ITEM 1 Financial Statements
Balance Sheets as of March 29, 1998 and December 28, 1997. . . . . 1
Statements of Operations for the three months ended March 29,
1998 and March 30, 1997 . . . . . . . . . . . . . . . . . . . . . . 2
Statements of Cash Flows for the three months ended
March 29, 1998 and March 30, 1997 . . . . . . . . . . . . . . . . . 3
Condensed Notes to Financial Statements . . . . . . . . . . . . . . 4
ITEM 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . 5
PART II OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
ITEM 6 Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . 9
</TABLE>
i
<PAGE>
PART I
ITEM 1 Financial Statements
BIG BUCK BREWERY & STEAKHOUSE, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
March 29, December 28,
1998 1997
------------- ----------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 439,234 $ 354,015
Sale and Leaseback Financing Receivable 50,000 749,650
Accounts receivable 71,264 170,460
Inventories 289,212 289,805
Preopening expenses, net - 348,581
Prepaids and other 161,480 171,766
----------- -----------
Total current assets 1,011,190 2,084,277
PROPERTY AND EQUIPMENT, net 18,509,945 18,340,043
OTHER ASSETS, net 425,585 383,301
----------- -----------
$19,946,720 $20,807,621
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----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 750,473 $ 843,430
Accrued expenses 521,961 735,727
Current maturities of long-term debt 249,042 249,824
----------- -----------
Total current liabilities 1,521,476 1,828,981
LONG-TERM DEBT, less current maturities 7,210,215 7,274,558
----------- -----------
Total liabilities 8,731,691 9,103,539
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value, 20,000,000
shares authorized; 5,285,000 shares
issued and outstanding 52,850 52,850
Warrants 153,650 153,650
Additional paid-in capital 13,240,694 13,240,694
Accumulated deficit (2,232,165) (1,743,112)
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Total shareholders' equity 11,215,029 11,704,082
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$19,946,720 $20,807,621
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</TABLE>
The accompanying notes are an integral part of these balance sheets.
1
<PAGE>
BIG BUCK BREWERY & STEAKHOUSE, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
--------------------------------
March 29, 1998 March 30, 1997
-------------- --------------
<S> <C> <C>
REVENUE:
Restaurant sales $ 3,815,738 $ 1,029,744
Wholesale beer and gift shop sales 149,197 87,007
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Total revenue 3,964,935 1,116,751
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COSTS AND EXPENSES:
Cost of sales 1,359,163 364,621
Restaurant salaries and benefits 1,146,341 330,422
Operating expenses 805,737 308,044
Depreciation and amortization 187,510 96,916
------------ -------------
Total costs and expenses 3,498,751 1,100,003
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Restaurant operating income 466,184 16,748
General and administrative expenses 424,176 370,937
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Income (loss) from operations 42,008 (354,189)
OTHER INCOME (EXPENSE):
Interest expense (188,026) (58,941)
Interest income and other 3,512 57,944
------------ -------------
LOSS BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE $ (142,506) $ (355,186)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING
PRINCIPLE FOR PREOPENING COSTS (346,547) -
------------ -------------
NET LOSS $ (489,053) $ (355,186)
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BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.09) $ (0.07)
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WEIGHTED AVERAGE
SHARES OUTSTANDING 5,285,000 5,275,000
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</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
BIG BUCK BREWERY & STEAKHOUSE, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 29, March 30,
1998 1997
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<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (489,053) $ (355,186)
Adjustments to reconcile net loss to cash flows used in
operating activities-
Depreciation and amortization 187,510 96,916
Cumulative effect of change in accounting for
preopening costs 346,547 -
Change in operating assets and liabilities:
Accounts receivable 99,196 -
Inventories 593 (50,114)
Prepaids and other 10,286 (17,412)
Accounts payable (92,957) 481,406
Accrued expenses (213,766) 17,029
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Net cash provided by (used in) operating activities (151,644) 172,639
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INVESTING ACTIVITIES:
Purchases of property and equipment, net (355,378) (2,821,818)
Proceeds from sale of property - 2,710,000
Increase in other assets (42,284) -
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Net cash used in investing activities (397,662) (111,818)
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FINANCING ACTIVITIES:
Payments on long-term debt (65,125) (62,894)
Proceeds from capital lease obligations 699,650 -
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Net cash used provided by (used in) financing
activities 637,525 (62,894)
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INCREASE (DECREASE) IN CASH 85,219 (2,073)
CASH, beginning of period 354,015 28,486
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CASH, end of period $ 439,234 $ 26,395
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SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 193,556 $ 62,304
Income taxes paid - -
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
BIG BUCK BREWERY & STEAKHOUSE, INC.
Condensed Notes to Financial Statements
March 29, 1998
(1) The accompanying financial statements included herein have been prepared
by Big Buck Brewery & Steakhouse, Inc. (the Company), without audit, in
accordance with generally accepted accounting principles for interim
financial information and pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although
the Company believes that the disclosures made are adequate to make the
information not misleading.
The unaudited balance sheet as of March 29, 1998 and the unaudited
statements of operations and cash flows for the three months ended
March 29, 1998 and March 30, 1997 include, in the opinion of management,
all adjustments, consisting solely of normal recurring adjustments,
necessary for a fair presentation of the financial results for the
respective interim periods and are not necessarily indicative of results
of operations to be expected for the entire fiscal year ending January 3,
1999. The accompanying interim financial statements have been prepared
under the presumption that users of the interim financial information have
either read, or have access to, the audited financial statements and notes
in the Company's Form 10-KSB for the fiscal year ended December 28, 1997.
Accordingly, footnote disclosures which would substantially duplicate
the disclosures contained in the December 28, 1997 audited financial
statements have been omitted from these interim financial statements
except for the disclosures below. It is suggested that these interim
financial statements should be read in conjunction with the financial
statements and the notes thereto included in the Company's Form 10-KSB
for the fiscal year ended December 28, 1997.
(2) The Company adopted in the fiscal year ending December 28, 1997,
Statement of Financial Accounting Standards No. 128 "Earnings Per Share"
(SFAS No. 128), which requires disclosure of basic earnings per share (EPS)
and diluted EPS, which replaces the existing primary EPS and fully diluted
EPS, as defined by APB No. 15. Basic EPS is computed by dividing net income
by the weighted average number of shares of Common Stock outstanding during
the year. Dilutive EPS is computed similarly to EPS as previously
reported, provided that, when applying the treasury stock method to
common equivalent shares, the Company must use its average share price
for the period rather than the more dilutive greater of the average
share price or end-of-period share price required by APB No. 15. The
adoption of SFAS No. 128 had no effect on the Company's March 30, 1997
EPS data.
Statement of Financial Accounting Standard (SFAS) No. 130, "Reporting
Comprehensive Income," effective beginning in fiscal 1998, establishes
standards of disclosure and financial statement display for reporting
total comprehensive income and the individual components thereof. The
adoption of SFAS No. 130 did not have a material impact on the Company's
financial position or results of oeprations as comprehensive income and
net income were the same for all periods presented.
During April 1998, the Accounting Standards Executive Committee of the
America Institute of Certified Public Accountants (AICPA) issued
Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-Up
Activities". SOP 98-5 requires companies to expense as incurred all
start-up and preopening costs that are not otherwise capitalizable as
long-lived assets. The Company has elected early implementation of the
accounting standard retroactive to the beginning of 1998. The effect of
this accounting change is a charge to operations for the unamortized
balance of preopening costs as of December 28, 1997 of $346,547.
4
<PAGE>
ITEM 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations
THIS DISCUSSION AND ANALYSIS CONTAINS CERTAIN FORWARD-LOOKING TERMINOLOGY
SUCH AS "BELIEVES," "ANTICIPATES," "EXPECTS," AND "INTENDS," OR COMPARABLE
TERMINOLOGY. 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 SECURITIES ARE CAUTIONED NOT TO PLACE
UNDUE RELIANCE ON SUCH FORWARD-LOOKING STATEMENTS, WHICH ARE QUALIFIED IN
THEIR ENTIRETY BY THE CAUTIONS AND RISKS DESCRIBED HEREIN. PLEASE REFER TO
THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB, FILED ON MARCH 23, 1998, FOR
ADDITIONAL FACTORS KNOWN TO THE COMPANY THAT MAY CAUSE ACTUAL RESULTS TO VARY.
OVERVIEW
The Company was capitalized in 1994 to develop, own and operate
microbrewery/restaurants with the name "Big Buck Brewery & Steakhouse" (each
a "Unit"). Until May 1995 when the Company opened its first Unit in Gaylord,
Michigan; it had no operations or revenues and its activities were devoted
solely to development. In March 1997, the Company opened its second Unit in
Grand Rapids, Michigan. The Grand Rapids Unit's seating capacity is
approximately 250 for the restaurant and bar combined. The brewing and
fermenting tanks of this Unit front directly on 28th Street, a street with an
average daily vehicle count of approximately 52,000. In October 1997, the
Company opened its third Unit in Auburn Hills, Michigan, a suburb of Detroit.
The Auburn Hills Unit, which houses a 15-barrel brewing system, encompasses
26,372 square feet including brewery, bar and restaurant, with a total
seating capacity of approximately 650.
Future revenues and profits will depend upon various factors, including
market acceptance of Big Buck Units and general economic conditions. The
Company's present sources of revenue are the Gaylord, Grand Rapids and Auburn
Hills Units. There can be no assurances that the Company will successfully
implement its expansion plans, in which case the Company will continue to be
dependent on the revenues from the existing Units. The Company also faces
all of the risks, expenses and difficulties frequently encountered in
connection with the expansion and development of a new business.
Furthermore, to the extent that the Company's expansion strategy is
successful, it must manage the transition to multiple site, higher volume
operations, control increased overhead expenses and hire additional personnel.
The Company's sales and results of operations are expected to fluctuate based
on seasonal patterns. The Company anticipates that its highest earnings will
occur in the second and third quarters. Quarterly results in the future are
likely to be substantially affected by the timing of new Unit openings.
Because of the seasonality of the Company's business and the impact of new
Unit openings, results for any quarter are not necessarily indicative of the
results that may be achieved for a full fiscal year and cannot be used to
indicate financial performance for the entire year.
5
<PAGE>
QUARTERS ENDED MARCH 29, 1998 AND MARCH 30, 1997
The following table is derived from the Company's statements of operations
and expresses the results from operations as a percent of total revenue:
<TABLE>
<CAPTION>
Three Months Ended
--------------------------
March 29, March 30,
1998 1997
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<S> <C> <C>
REVENUE:
Restaurant sales 96.2% 92.2%
Wholesale beer and gift shop sales 3.8 7.8
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Total revenue 100.0 100.0
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COSTS AND EXPENSES:
Cost of sales 34.3 32.7
Restaurant salaries and benefits 28.9 29.6
Operating expenses 20.3 27.6
Depreciation and amortization 4.7 8.7
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Total costs and expenses 88.2 98.6
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Restaurant operating income 11.8 1.4
General and administrative expenses 10.7 33.2
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Income (loss) from operations 1.1 (31.8)
OTHER INCOME (EXPENSE):
Interest expense (4.7) (5.3)
Interest income and other 0.1 5.2
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LOSS BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (3.5) 31.9
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CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE
FOR PREOPENING COSTS (8.7) -
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NET LOSS (12.2%) (31.9%)
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</TABLE>
RESULTS OF OPERATIONS FOR THE QUARTERS ENDED MARCH 29, 1998 AND MARCH 30, 1997
REVENUES
Revenues increased 255% to $3,964,935 in the quarter ended March 29, 1998
from $1,116,751 in the quarter ended March 30, 1997. The large increase is
attributable to the opening of the Grand Rapids Unit on March 17, 1997 and
the opening of the Auburn Hills Unit on October 1, 1997.
6
<PAGE>
COST OF SALES
Cost of sales, which consists of food, merchandise and brewery supplies,
increased $994,542 to $1,359,163 in the first quarter of 1998 compared to
$364,621 for the same period in 1997. The increase is due to the opening of
the Grand Rapids and Auburn Hills Units. As a percentage of revenues, cost of
sales increased to 34.3% in the first quarter of 1998 as compared to 32.7%
for the same period in 1997. The percentage increase is the result of higher
produce costs without a menu price increase and the different sales mix at
the new Auburn Hills Unit.
RESTAURANT SALARIES AND BENEFITS
Restaurant salaries and benefits, which consist of restaurant management and
hourly employee wages and benefits, payroll taxes and worker's compensation
insurance, increased $815,919 to $1,146,341 in the first quarter of 1998
compared to $330,422 for the first quarter in 1997. The large increase is
due to the opening of the Grand Rapids and Auburn Hills Units. As a
percentage of revenues, restaurant salaries and benefits decreased to 28.9%
in the first quarter of 1998 compared to 29.6% for the same period in 1997.
This decrease is due to more experienced staff, improved scheduling and a
reduction in workers' compensation insurance premiums.
OPERATING EXPENSES
Operating expenses, which include supplies, utilities, repairs and
maintenance, advertising and occupancy costs increased $497,693 to $805,737
in the first quarter of 1998 compared to $308,044 for the first quarter of
1997. As a percentage of revenues, operating expenses decreased to 20.3% in
the first quarter of 1998 as compared to 27.6% for the same period in 1997.
This decrease is due to a continued emphasis on cost controls, improved
management, reduction in insurance premiums and an increase in purchasing
power.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased $53,239 to $424,176 in the
first quarter of 1998 compared to $370,937 for the first quarter of 1997. As
a percentage of revenues, these expenses decreased to 10.7% for the first
quarter of 1998 as compared to 33.2% for the first quarter of 1997. The
decreased expenses as a percentage of revenues reflect the increase in total
sales. As additional Units are opened by the Company, management believes
that these expenses will continue to decrease as a percentage of revenues.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expenses increased $90,594 to $187,510 in the
first quarter of 1998 compared to $96,916 for the first quarter of 1997. As
a percentage of revenues, these expenses decreased to 4.7% in the first
quarter of 1998 as compared to 8.7% for the same period in 1997. The
decrease in these expenses as a percentage of revenues reflects the increase
in total sales and a decrease in depreciation as a percentage of revenues
for the Grand Rapids and Auburn Hills Units as compared to the Gaylord Unit.
INTEREST EXPENSE/INTEREST INCOME
Interest expense increased $129,085 to $188,026 in the first quarter of 1998
compared to $58,941 for the first quarter of 1997. As a percentage of
revenues, interest expense decreased to 4.7% in the first quarter of 1998
from 5.3% for the same period in 1997. The decrease as percentage of
revenues reflects the increase in total revenues. As new restaurants are
added, the Company anticipates it will incur additional interest expenses.
Interest income decreased $54,432 to $3,512 in the first quarter of 1998
compared to $57,944 for the first quarter of 1997. The decrease is due to the
use of the initial public offering proceeds for Unit development.
7
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LIQUIDITY AND CAPITAL RESOURCES
The Company used $151,644 in cash for the three months ended March 29, 1998
for operating activities, and generated $172,639 in cash for the three months
ended March 30, 1997, from operating activities. At March 29, 1998, the
Company had a working capital deficit of $510,286. The Company is exploring
the possible issuance of debt or equity financing to increase its working
capital. Since inception, the Company's principal capital requirements have
been the funding of (i) Company operations and promotion of the Big Buck
Brewery & Steakhouse format and (ii) the construction of the Gaylord, Grand
Rapids and Auburn Hills Units and the acquisition of furniture, fixtures and
equipment for such Units. Total capital expenditures for the Gaylord, Grand
Rapids and Auburn Hills Units were approximately $5.8 million, $3.2 million
and $9.7 million, respectively.
The Company generated $634,525 in cash from financing activities attributable
to the proceeds from capital lease obligations, partially offset by payments
of long-term debt. The Company spent approximately $360,000 for the payment
of final construction and equipment cost for the Auburn Hills Unit during the
first quarter of 1998.
The Company plans to develop and open additional Units and it will need to
obtain additional financing to fulfill 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 units 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 scaled back or eliminated.
8
<PAGE>
PART II
ITEM 6 Exhibits and Reports on Form 8-K
a. Exhibits
11 Computation of Net Loss Per Common Share
27 Financial Data Schedule
b. Reports on Form 8-K
The registrant filed no Current Reports on Form 8-K during the quarter
ended March 29, 1998.
9
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
BIG BUCK BREWERY & STEAKHOUSE, INC.
Date: May 13, 1998 By /s/ Anthony P. Dombrowski
--------------------------------
Anthony P. Dombrowski
Chief Financial Officer
10
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
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<S> <C>
11 Computation of Net Loss Per Common Share
27 Financial Data Schedule
</TABLE>
11
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EXHIBIT 11
BIG BUCK BREWERY & STEAKHOUSE, INC.
COMPUTATION OF NET LOSS PER COMMON SHARE
<TABLE>
<CAPTION>
Three Three
Months Months
Ended Ended
March 29, March 30,
1998 1997
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<S> <C> <C>
Weighted average number of issued
shares outstanding 5,285,000 5,275,000
Effect of:
Common shares issued during
1997 0 0
------------- -------------
Shares outstanding used to compute
net income (loss) per share 5,285,000 5,275,000
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Net loss $ (489,053) $ (355,174)
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Basic and diluted net loss per common share $ (0.09) $ (0.07)
------------- -------------
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1999
<PERIOD-END> MAR-29-1998
<CASH> 439,234
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 289,212
<CURRENT-ASSETS> 1,011,190
<PP&E> 18,509,945
<DEPRECIATION> 0
<TOTAL-ASSETS> 19,946,720
<CURRENT-LIABILITIES> 1,521,476
<BONDS> 7,210,215
0
0
<COMMON> 52,850
<OTHER-SE> 11,162,179
<TOTAL-LIABILITY-AND-EQUITY> 19,946,720
<SALES> 3,964,935
<TOTAL-REVENUES> 3,964,935
<CGS> 1,359,163
<TOTAL-COSTS> 3,498,751
<OTHER-EXPENSES> 424,176
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 188,026
<INCOME-PRETAX> (142,506)
<INCOME-TAX> 0
<INCOME-CONTINUING> (142,506)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (346,547)
<NET-INCOME> (489,053)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
