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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended September 28, 1997
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ____________________ to _________________
Commission file number 0-21625
FAMOUS DAVE'S OF AMERICA, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
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<S> <C> <C>
Minnesota 41-1782300
(State or other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
7279 Flying Cloud Drive, Eden Prairie, MN 55344
(Address of Principal Executive Offices)
(612) 833-9300
(Issuer's Telephone Number, Including Area Code)
12700 Industrial Park Boulevard, Suite #60, Plymouth, MN 55441
(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)
</TABLE>
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 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
--- ---
At November 3, 1997 there were 8,667,090 shares of common stock, $.01 par
value, outstanding.
1
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FAMOUS DAVE'S OF AMERICA, INC.
Form 10-QSB Index
September 28, 1997
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Page Number
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements 3
Condensed Consolidated Balance Sheets - 3
September 28, 1997 and December 29, 1996
Condensed Consolidated Statements of Operations - 4
for the thirteen weeks ended September 28, 1997 and September 29, 1996 and
for the thirty-nine weeks ended September 28, 1997 and September 29, 1996
Condensed Consolidated Statements of Cash Flows - 5
for the thirty-nine weeks ended September 28, 1997 and September 29, 1996
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of 8
Financial Condition and Results of Operations
PART II OTHER INFORMATION
Items 1, 4 and 6. 12
Signatures 13
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2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
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<CAPTION>
September 28, December 29,
1997 1996
------------ ------------
ASSETS (Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 10,162,105 $ 4,906,640
Available-for-sale securities 13,818,251 9,417,188
Inventories 268,349 166,594
Prepaid expenses and other current assets 895,861 653,511
------------- -----------
Total current assets 25,144,566 15,143,933
PROPERTY, EQUIPMENT AND LEASEHOLD
IMPROVEMENTS, NET 17,487,654 6,093,155
------------- -----------
$ 42,632,220 $21,237,088
============= ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,122,491 $ 445,910
Notes payable 0 389,673
Current portion of capital lease obligations 350,068 162,261
Other current liabilities 373,918 194,430
------------- -----------
Total current liabilities 1,846,477 1,192,274
CAPITAL LEASE OBLIGATIONS, NET OF CURRENT
PORTION 1,484,537 741,797
------------- -----------
Total liabilities 3,331,014 1,934,071
------------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value, 100,000,000 shares authorized,
8,667,090 and 6,001,250 shares issued and outstanding 86,671 60,013
Additional paid-in capital 41,935,257 19,586,515
Unrealized loss on securities available-for-sale 0 (11,850)
Accumulated deficit (2,720,722) (331,661)
------------- -----------
Total shareholders' equity 39,301,206 19,303,017
------------- -----------
$ 42,632,220 $21,237,088
============= ===========
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See accompanying notes to condensed consolidated financial statements.
3
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FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
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<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
----------------------------- ----------------------------
September 28, September 29, September 28, September 29
1997 1996 1997 1996
------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
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SALES, NET $6,102,009 $1,684,127 $12,140,154 $2,685,182
---------- ---------- ----------- ----------
COSTS AND EXPENSES:
Food and beverage costs 2,313,205 607,877 4,496,011 934,328
Labor and benefits 1,521,761 424,825 2,941,122 629,723
Restaurant operating expenses 1,068,684 282,653 2,218,813 470,383
Depreciation and amortization 207,560 45,715 396,572 69,921
Pre-opening expenses 377,647 19,050 709,566 22,131
General and administrative 1,676,223 343,224 4,241,028 963,625
---------- ---------- ----------- ----------
Total costs and expenses 7,165,080 1,723,344 15,003,112 3,090,111
---------- ---------- ----------- ----------
LOSS FROM OPERATIONS (1,063,071) (39,217) (2,862,958) (404,929)
Interest and other income (expense), net 214,688 (14,612) 473,897 (37,103)
---------- ---------- ----------- ----------
NET LOSS ($848,383) ($53,829) ($2,389,061) ($442,032)
========= ========== =========== =========
NET LOSS PER COMMON SHARE ($0.10) ($0.02) ($0.35) ($0.18)
========= ========== =========== =========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 8,215,564 3,136,673 6,884,010 2,510,712
========= ========== =========== =========
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See accompanying notes to condensed consolidated financial statements.
4
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FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
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<CAPTION>
Thirty-nine Weeks Ended
---------------------------
September 28, September 29,
1997 1996
------------ -------------
(Unaudited) (Unaudited)
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CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $ (2,389,061) $ (442,032)
Adjustments to reconcile net loss to
cash flows from operating activities:
Depreciation and amortization 534,596 110,009
Changes in working capital items -
Inventories (101,755) (138,182)
Prepaids and other current assets (242,350) (267,543)
Accounts payable 676,581 515,455
Other current liabilities 179,488 194,931
------------- -----------
Cash flows from operating activities (1,342,501) (27,362)
------------- -----------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase of property, equipment
and leasehold improvements (11,929,095) (2,614,025)
Net increase in securities available-for-sale (4,389,213) 0
------------- -----------
Cash flows from investing activities (16,318,308) (2,614,025)
------------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Advances (payments) on notes payable (389,673) 675,716
Proceeds from capital lease funding 1,097,261 0
Payments on capital lease obligations (166,714) (21,562)
Proceeds from exercise of Class A Warrants 22,334,900 0
Proceeds from exercise of stock options 40,500 0
Proceeds from issuance of common stock 0 4,746,875
Prepaid equity issuance costs paid 0 (647,094)
------------- -----------
Cash flows from financing activities 22,916,274 4,753,935
------------- -----------
INCREASE IN CASH AND
CASH EQUIVALENTS 5,255,465 2,112,548
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 4,906,640 100,297
------------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 10,162,105 $ 2,212,845
============= ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
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FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 28, 1997
(UNAUDITED)
(1) GENERAL
The business of Famous Dave's of America, Inc. and Subsidiaries (the
"Company") is to develop, own and operate American roadhouse-style barbeque
restaurants under the name "Famous Dave's." As of September 28, 1997, the
Company owned and operated eight restaurants. As of September 29, 1996, the
Company owned and operated three restaurants. As of September 28, 1997, the
Company had ten additional units in development. During October 1997, the
Company opened two of these units in Appleton, Wisconsin and Forest Lake,
Minnesota.
During September 1997, the Company also leased a site in the RiverNorth
area of Chicago for a BBQ and Blues Club which is scheduled to open by Fall of
1998 and commenced its national franchising program by filing its Uniform
Franchise Offering Circular (UFOC). As of September 28, 1997, the Company had
completed its franchising registrations in 38 of the 48 contiguous states and
was in the process of completing franchising registrations in the 10 remaining
contiguous states.
(2) BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared by the Company 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 management believes that the disclosures are adequate to
make the information presented not misleading, it is suggested that these
interim condensed financial statements be read in conjunction with the
Company's most recent audited financial statements and notes thereto included
in the Company's Annual Report on Form 10-KSB for the fiscal year ended
December 29, 1996. In the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary for a fair presentation of the
financial position, results of operations and cash flows for the interim
periods presented have been made. Operating results for the thirteen and
thirty-nine weeks ended September 28, 1997 are not necessarily indicative of
the results that may be expected for the fiscal year ending December 28, 1997.
Certain amounts in the fiscal 1996 financial statements have been
reclassified to conform to the fiscal 1997 presentation with no impact on
previously reported net loss or shareholders' equity.
(3) INITIAL PUBLIC STOCK OFFERING/EXERCISE OF CLASS A WARRANTS
During October and November 1996, the Company sold, in an initial public
offering, 2,645,000 units consisting of one share of common stock and one
Redeemable Class A Warrant for $6.50 per unit. Net proceeds to the Company
totaled approximately $15.2 million. Each Redeemable Class A Warrant entitled
the holder to purchase one share of common stock for $8.50 per share.
In June 1997, the Company called for the redemption of its Class A
Warrants, giving warrant holders 30 days notice to exercise their warrants
prior to redemption by the Company. During July 1997, the warrant call was
completed with 2,637,000 of the outstanding 2,645,000 warrants being exercised.
Net proceeds to the Company from such exercises totalled approximately $22.3
million. Unexercised warrants were redeemed for $.01 per warrant.
6
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FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 28, 1997
(UNAUDITED)
(4) INCOME (LOSS) PER COMMON SHARE
Income (loss) per common share is usually based on the weighted average
number of common shares outstanding during each period. However, pursuant to
certain rules of the Securities and Exchange Commission, the calculation also
includes equity securities, including options and warrants, issued within one
year of an initial public offering with an issue price less than the initial
public offering price, even if the effect is anti-dilutive. The treasury stock
approach was used in determining the dilutive effect of such issuances.
The Company will adopt in the fiscal year ending December 28, 1997,
Statement of Financial Accounting Standards No. 128 "Earnings per Share" (SFAS
No. 128), which was issued in February 1997. SFAS No. 128 requires disclosures
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 similar 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.
(5) PRE-OPENING COSTS
It is the Company's policy to capitalize direct and incremental costs
associated with opening a new Unit. These costs consist primarily of hiring
and training the initial workforce and other direct costs. Beginning March 31,
1997, these costs are charged to operations in the month the Unit opens. Prior
to March 31, 1997, the Company charged these costs to expense over no longer
than a twelve-month period following the opening of the Unit.
(6) RELATED PARTY TRANSACTIONS
S&D LAND HOLDINGS, INC. - The Company leases the real estate for four of
its current or proposed units from S&D Land Holdings, Inc., a company wholly
owned by the Company's founding Shareholder.
GRAND PINES RESORTS, INC. - Grand Pines Resorts, Inc. (Grand Pines) is a
company wholly owned by the founding shareholder of the Company. The Company
charges Grand Pines a royalty of 4% of its food sales and, through June 29,
1997, provided certain management services to Grand Pines for 3% of its food
sales. Royalty and management services income totaled $28,637 and $41,816 for
the thirteen weeks ended September 28, 1997 and September 29, 1996,
respectively. Royalty and management services income totaled $72,255 and
$71,593 for the thirty-nine weeks ended September 28, 1997 and September 29,
1996, respectively.
(7) INCOME TAXES
The Company was an S Corporation through March 3, 1996. Accordingly,
losses incurred through March 3, 1996 have been recognized by the Company's
founding shareholder. From March 4, 1996 though December 29, 1996, the Company
generated a net operating loss of approximately $330,000 which, if not used,
will expire in 2011. During the thirty-nine weeks ended September 28, 1997, an
additional net operating loss of approximately $2.4 million was generated
which, if not used, will expire in 2012. Future changes in the ownership of
the Company may place limitations on the use of these net operating loss
carryforwards. The Company has recorded a full valuation allowance against its
deferred tax asset due to the uncertainty of realizing the related benefit.
7
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FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The business of Famous Dave's of America, Inc. and Subsidiaries (the
"Company") is to develop, own and operate American roadhouse-style barbeque
restaurants under the name "Famous Dave's." As of September 28, 1997, the
Company owned and operated eight restaurants: its original unit located in the
Linden Hills neighborhood of Minneapolis (the "Linden Hills Unit"), a unit in
Roseville, Minnesota which opened in June 1996 (the "Roseville Unit"), a unit
in Calhoun Square in Minneapolis, Minnesota which opened in September 1996 (the
"Calhoun Blues Club"), a unit in Maple Grove, Minnesota which opened in April
1997 (the "Maple Grove Unit"), a unit in the Highland Park neighborhood of St.
Paul, Minnesota which opened in June 1997 (the "Highland Park Unit"), a unit in
Apple Valley, Minnesota which opened in July 1997 (the "Apple Valley Unit"), a
unit in Stillwater, Minnesota which opened in July 1997 (the "Stillwater
Unit"), and a unit in Madison, Wisconsin which opened in August 1997 (the
"Madison Unit"). The Calhoun Blues Club features live blues music nightly and
an authentic Chicago blues decor. As of September 29, 1996, the Company owned
and operated three restaurants: the Linden Hills Unit, the Roseville Unit and
the Calhoun Blues Club. As of September 28, 1997, the Company had ten
additional units in development. During October 1997, the Company opened two
of these units in Appleton, Wisconsin and Forest Lake, Minnesota.
Future additional revenues and profits, if any, will depend upon
various factors, including additional market acceptance of the Famous Dave's
concept, the quality of the restaurant operations, the ability to successfully
expand into new markets and general economic conditions. There can be no
assurances the Company will successfully implement its expansion plans, in
which case it will continue to be dependent on the revenues from existing
operations. The Company also faces all of the risks, expenses and difficulties
frequently encountered in connection with the expansion and development of an
expanding business. Furthermore, to the extent that the Company's expansion
strategy is successful, it must manage the transition to multiple-site and
higher-volume operations, the control of overhead expenses and the addition of
necessary personnel.
The following discussion and analysis of financial condition and results
of operations should be read in conjunction with the accompanying unaudited
condensed consolidated financial statements and notes thereto and the audited
consolidated financial statements and notes thereto included in the Company's
Form 10-KSB for the fiscal year ended December 29, 1996.
RESULTS OF OPERATIONS
The overall results of operations for the thirteen and thirty-nine weeks ended
September 28, 1997 reflect the opening of new units and the continued
development of the Company's infrastructure to support the Company's expansion.
The operating results of the Company expressed as a percentage of net sales
were as follows:
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<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
------------------------- -------------------------
SEPT. 28, SEPT. 29, SEPT. 28, SEPT. 29,
1997 1996 1997 1996
------- ------- -------- --------
<S> <C> <C> <C> <C>
SALES, NET 100.0% 100.0% 100.0% 100.0%
------ ------ ------ ------
UNIT-LEVEL COSTS AND EXPENSES:
Food and beverage costs 37.9% 36.1% 37.0% 34.8%
Labor and benefits 24.9% 25.2% 24.2% 23.5%
Restaurant operating expenses 17.5% 16.8% 18.3% 17.5%
Depreciation and amortization 3.4% 2.7% 3.3% 2.6%
Pre-opening expenses 6.2% 1.1% 5.8% 0.8%
----- ----- ----- -----
Total costs and expenses 90.0% 81.9% 88.6% 79.2%
----- ----- ----- -----
INCOME FROM UNIT-LEVEL OPERATIONS 10.0% 18.1% 11.4% 20.8%
General and administrative expenses 27.4% 20.4% 34.9% 35.9%
----- ----- ----- -----
LOSS FROM OPERATIONS (17.4%) (2.3%) (23.6%) (15.1%)
Interest and other income (expense),
net 3.5% (0.9%) 3.9% (1.4%)
----- ----- ----- -----
NET LOSS (13.9%) (3.2%) (19.7%) (16.5%)
===== ===== ===== =====
</TABLE>
8
<PAGE> 9
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
SALES, NET
Net sales for the thirteen weeks ended September 28, 1997 were $6,102,009
compared to $1,684,127 for the same period in 1996, a 262% increase. For the
thirty-nine weeks ended September 28, 1997, net sales were $12,140,154 compared
to $2,685,182 for the same period in 1996, a 352% increase. The increase in
net sales is primarily due to the opening of new units: the Roseville Unit in
June 1996, the Calhoun Blues Club in September 1996, the Maple Grove Unit in
April 1997, the Highland Park Unit in June 1997, the Apple Valley Unit and
Stillwater Unit in July 1997 and the Madison unit in August 1997.
FOOD AND BEVERAGE COSTS
Food and beverage costs for the thirteen weeks ended September 28, 1997
were $2,313,205 or 37.9% of net sales, compared to $607,877 or 36.1% of net
sales for the same period in 1996. For the thirty-nine weeks ended September
28, 1997, food and beverage costs were $4,496,011 or 37.0% of net sales,
compared to $934,328 or 34.8% of net sales for the same period in 1996. The
increase in food and beverage costs as a percent of sales in 1997 compared to
1996 was primarily due to higher pork prices.
LABOR AND BENEFITS
Labor and benefits for the thirteen weeks ended September 28, 1997 were
$1,521,761 or 24.9% of net sales, compared to $424,825 or 25.2% of net sales
for the same period in 1996. These costs reflect initial labor inefficiencies
accompanying the opening of three new units in the third quarter of 1997 (the
Apple Valley Unit and Stillwater Unit in July 1997 and the Madison Unit in
August 1997) and one new unit in the third quarter 1996 (the Calhoun Blues
Club) as well as higher labor and benefit costs associated with the Calhoun
Blues Club. For the thirty-nine weeks ended September 28, 1997, labor and
benefits were $2,941,122 or 24.2% of net sales, compared to $629,723 or 23.5%
of net sales for the same period in 1996. The increase in labor and benefits as
a percent of sales for 1997 compared to 1996 was primarily due to higher labor
and benefit costs associated with the Calhoun Blues Club which opened in
September 1996.
RESTAURANT OPERATING EXPENSES
Restaurant operating expenses for the thirteen weeks ended September 28,
1997 were $1,068,684 or 17.5% of net sales, compared to $282,653 or 16.8% of
net sales for the same period in 1996. For the thirty-nine weeks ended
September 28, 1997, restaurant operating expenses were $2,218,813 or 18.3% of
net sales, compared to $470,383 or 17.5% of net sales for the same period in
1996. The increase in restaurant operating expenses as a percent of sales for
1997 compared to 1996 was primarily due to higher operating costs associated
with the Calhoun Blues Club which opened in September 1996.
DEPRECIATION AND AMORTIZATION
Unit-level depreciation and amortization for the thirteen weeks ended
September 28, 1997 were $207,560 or 3.4% of net sales compared to $45,715 or
2.7% of net sales during the same period in 1996. Unit-level depreciation and
amortization for the thirty-nine weeks ended September 28, 1997 were $396,572
or 3.3% of net sales compared to $69,921 or 2.6% of net sales during the same
period in 1996. The increase in unit-level depreciation and amortization in
1997 compared to 1996 is due primarily to the opening of new units.
PRE-OPENING EXPENSES
Pre-opening expenses, which beginning in the second quarter of 1997 are charged
to expense in the month a new Unit opens, were $377,647 or 6.2% of net sales
for the thirteen weeks ended September 28, 1997 compared to $19,050 or 1.1% of
net sales during the same period in 1996 and $709,566 or 5.8% of net sales for
the thirty-nine weeks ended September 28, 1997 compared to $22,131 or 0.8% of
net sales during the same period in 1996. Prior to March 31, 1997, these
expenses were deferred and charged to expense over no longer than a
twelve-month period following the opening of the Unit. These expenses reflect
the opening of two new units in the second quarter of 1997 and three new units
in the third quarter of 1997 compared to the opening of one new unit in the
second quarter of 1996 and one new unit in the third quarter of 1996.
9
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FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
INCOME FROM UNIT-LEVEL OPERATIONS
Income from unit-level operations totaled $613,152, or 10.0 percent of net
sales, for the thirteen weeks ended September 28, 1997, compared to $304,007,
or 18.1 percent of net sales, in the corresponding period of 1996. Income from
unit-level operations totaled $1,378,070, or 11.4 percent of net sales, for the
thirty-nine weeks ended September 28, 1997, compared to $558,696, or 20.8
percent of net sales, in the corresponding period of 1996. Income from
unit-level operations represents income from operations before general and
administrative expenses. Although income from unit-level operations should not
be considered an alternative to income/loss from operations as a measure of the
Company's operating performance, such unit-level measurement is commonly used
as an additional measure of operating performance in the restaurant industry
and certain related industries. The change in income from unit-level
operations, both in amount and as a percent of sales, from 1996 to 1997 is
attributable to the increase in net sales from additional units opened, the
impact of pre-opening expenses, and the other changes in costs and expenses as
discussed above.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the thirteen weeks ended September
28, 1997 were $1,676,223 or 27.4% of sales, compared to $343,224 or 20.4% of
sales for the same period in 1996. For the thirty-nine weeks ended September
28, 1997, general and administrative expenses were $4,241,028 or 34.9% of
sales, compared to $963,625 or 35.9% of sales for the same period in 1996. The
increase in general and administrative expenses in 1997 compared to 1996 is
primarily attributable to costs associated with the development of the
Company's corporate and administrative infrastructure, primarily in the form of
personnel, to support the development of additional units.
LOSS FROM OPERATIONS
Loss from operations totaled $1,063,071, or 17.4 percent of net sales, for
the thirteen weeks ended September 28, 1997 compared to $39,217, or 2.3 percent
of net sales, in the corresponding period of 1996. Loss from operations
totaled $2,862,958, or 23.6 percent of net sales, for the thirty-nine weeks
ended September 28, 1997, compared to $404,929, or 15.1 percent of net sales,
in the corresponding period of 1996. The increase in loss from operations in
1997 compared to 1996 is primarily due to increased general and administrative
expenses which reflect the building of the infrastructure necessary to support
the Company's planned expansion, partially offset by increased income from
unit-level operations from new units opened.
INTEREST AND OTHER INCOME (EXPENSE), NET
Interest and other income (expense), net, primarily represents interest
income received from short-term investments offset by interest expense on
capital lease obligations. Interest and other income (expense), net, increased
to $214,688 and $473,897 for the thirteen and thirty-nine weeks ended September
28, 1997 from $(14,612) and $(37,103)for the same periods in 1996,
respectively. The increase in income in 1997 compared to 1996 was due
primarily to interest income received from the short-term investment of
proceeds from the initial public offering in October 1996 and the exercise of
Class A Warrants in July 1997.
NET LOSS/NET LOSS PER COMMON SHARE
Net loss for the thirteen weeks ended September 28, 1997 was $848,383, or
$.10 per share on 8,215,564 weighted average shares outstanding, compared to a
net loss of $53,829, or $.02 per share on 3,136,673 weighted average shares
outstanding, during the comparable period in 1996. For the thirty-nine weeks
ended September 28, 1997, the net loss was $2,389,061, or $.35 per share on
6,884,010 weighted average shares outstanding, compared to a net loss of
$442,032 or $.18 per share on 2,510,712 weighted average shares outstanding
during the comparable period in 1996. The increase in the net loss and the net
loss per share is primarily the result of increased general and administrative
expenses which reflect the building of the infrastructure necessary to support
the Company's planned expansion, partially offset by increased income from
unit-level operations from new units opened.
10
<PAGE> 11
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
As of September 28, 1997, the Company held cash and short-term investments
of approximately $24.0 million compared to $14.3 million as of December 29,
1996. As reflected in the accompanying condensed consolidated financial
statements, this increase in cash and short-term investments during the
thirty-nine weeks ended September 28, 1997 primarily represents cash flow from
the exercise of Class A Warrants and other financing activities (approximately
$22.9 million), offset by cash flow used for (i) the purchase and/or
development of property, equipment and leasehold improvements (approximately
$11.9 million) and (ii) operating activities, including the expansion of the
Company's corporate infrastructure (approximately $1.3 million).
In June 1997, the Company called for the redemption of the Class A
Warrants, giving warrant holders 30 days notice to exercise their warrants
prior to redemption by the Company. During July 1997, the warrant call was
completed with 2,637,000 of the outstanding 2,645,000 warrants being exercised.
Net proceeds to the Company from such exercises totalled approximately $22.3
million. Unexercised warrants were redeemed for $.01 per warrant.
As of September 28, 1997, the Company had a lease financing facility
available of up to $3.5 million for furniture, fixtures, equipment and
leasehold improvements, of which approximately $2.0 million had been funded.
Additional development and expansion will be funded or financed primarily
through cash and short-term investments currently held, proceeds from the sale
of additional equity and/or debt securities, and proceeds from other forms of
financing such as lease financing or other credit facilities. However, there
are no assurances that additional financing required will be available on terms
acceptable or favorable to the Company.
SEASONALITY
The Company's Units typically generate higher revenues in the second and
third quarters and lower revenues in the first and fourth quarters as a result
of seasonal traffic increases experienced during the summer months.
OTHER EVENTS
During September 1997, the Company leased a site in the RiverNorth area of
Chicago for a BBQ and Blues Club which is scheduled to open by Fall of 1998 and
commenced its national franchising program by filing its Uniform Franchise
Offering Circular (UFOC). As of September 28, 1997, the Company had completed
its franchising registrations in 38 of the 48 contiguous states and was in the
process of completing registrations in the 10 remaining contiguous states.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Form 10-QSB and other materials filed or to be filed by the Company with the
Securities and Exchange Commission (as well as information included in oral
statements or other written statements made or to be made by the Company)
contains statements that are forward-looking. A number of important factors
could, individually or in the aggregate, cause actual results to differ
materially from those expressed or implied in any forward-looking statements.
Such factors include, but are not limited to, the following: competition in the
casual dining restaurant market; additional market acceptance of the Company's
concept; consumer spending trends and habits; weather conditions in the regions
in which the Company develops and operates restaurants; and laws and
regulations affecting labor and employee benefit costs. For further
information regarding these and other factors, see the Company's Annual Report
on Form 10-KSB for the fiscal year ended December 29, 1996 and the registration
statement dated June 23, 1997 related to the offering of common stock issued
upon exercise of the Company's Class A Warrants.
11
<PAGE> 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not a party to any material litigation and is not aware of
any threatened litigation that would have a material adverse effect on its
business.
Item 4. Submission of Matters to a Vote of Security Holders
(a) On July 11, 1997, the Annual Meeting of Shareholders of the
Company (the "Annual Meeting") was held.
(b) At the Annual Meeting, all of management's nominees for
directors as listed in the proxy statement were elected with the
following vote:
Shares Voted "For" Shares "Withheld"
------------------ -----------------
David A. Anderson 5,063,363 4,300
Thomas J. Brosig 5,053,363 14,300
Douglas S. Lanham 5,063,363 4,300
Richard L. Monfort 5,063,263 4,400
Martin J. O'Dowd 5,053,363 14,300
(c) At the Annual Meeting, the Shareholders also approved an
amendment to the Company's 1995 Stock Option and Compensation
Plan to increase the number of shares of Common Stock reserved
for issuance thereunder from 500,000 shares to 900,000 shares.
3,856,934 votes were cast in favor of the amendment; 166,934
votes opposed; and 37,435 votes abstained. The broker non-vote
was 1,006,360 shares.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
None
12
<PAGE> 13
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
FAMOUS DAVE'S OF AMERICA, INC.
/s/ Douglas S. Lanham
---------------------
Douglas S. Lanham
Chief Executive Officer
and Chief Operating Officer
/s/ Mark A. Payne
-----------------
Mark A. Payne
President
/s/ Steven E. Opdahl
--------------------
Steven E. Opdahl
Vice President, Finance and
Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: November 11, 1997
13
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FAMOUS
DAVE'S OF AMERICA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 28, 1997 AS FILED ON FORM 10-QSB
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-START> DEC-30-1996
<PERIOD-END> SEP-28-1997
<CASH> 10,162,105
<SECURITIES> 13,818,251
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 268,349
<CURRENT-ASSETS> 25,144,566
<PP&E> 18,055,020
<DEPRECIATION> 567,366
<TOTAL-ASSETS> 42,632,220
<CURRENT-LIABILITIES> 1,846,477
<BONDS> 1,484,537
0
0
<COMMON> 42,021,928
<OTHER-SE> (2,720,722)
<TOTAL-LIABILITY-AND-EQUITY> 42,632,220
<SALES> 12,140,154
<TOTAL-REVENUES> 12,140,154
<CGS> 4,496,011
<TOTAL-COSTS> 15,003,112
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (473,897)
<INCOME-PRETAX> (2,389,061)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,389,061)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,389,061)
<EPS-PRIMARY> (.35)
<EPS-DILUTED> (.35)
</TABLE>
