<PAGE> 1
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 March 29, 1998
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
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Commission file number 0-21625
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FAMOUS DAVE'S OF AMERICA, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
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)
(Former Name, Former Address and Former
Fiscal Year, If Changed Since Last Report)
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 May 11, 1997 there were 8,827,590 shares of common stock, $.01 par value,
---------
outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
<PAGE> 2
FAMOUS DAVE'S OF AMERICA, INC.
Form 10-QSB Index
March 29, 1998
<TABLE>
<CAPTION>
Page Number
-----------
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - 3
March 29, 1998 and December 28, 1997
Condensed Consolidated Statements of Operations - 4
for the thirteen weeks ended March 29, 1998 and March 30, 1997
Condensed Consolidated Statements of Cash Flows - 5
for the thirteen weeks ended March 29, 1998 and March 30, 1997
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. 13
Signatures 14
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 29, DECEMBER 28,
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 3,578,000 $ 7,984,000
Available-for-sale securities 7,089,000 10,328,000
Inventories 603,000 471,000
Prepaids and other current assets 746,000 1,059,000
------------ ------------
Total current assets 12,016,000 19,842,000
PROPERTY, EQUIPMENT AND LEASEHOLD
IMPROVEMENTS, NET 27,870,000 26,179,000
------------ ------------
$ 39,886,000 $ 46,021,000
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 3,467,000 $ 5,718,000
Current portion of capital lease obligations 371,000 361,000
Other current liabilities 1,242,000 1,444,000
------------ ------------
Total current liabilities 5,080,000 7,523,000
CAPITAL LEASE OBLIGATIONS, NET OF CURRENT
PORTION 1,293,000 1,390,000
------------ ------------
Total liabilities 6,373,000 8,913,000
------------ ------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value, 100,000,000 shares authorized,
8,827,590 and 8,667,090 shares issued and outstanding 88,000 87,000
Additional paid-in capital 42,711,000 41,928,000
Accumulated deficit (9,286,000) (4,907,000)
------------ ------------
Total shareholders' equity 33,513,000 37,108,000
------------ ------------
$ 39,886,000 $ 46,021,000
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 4
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
---------------------------------
MARCH 29, MARCH 30,
1998 1997
------------ -------------
<S> <C> <C>
SALES, NET $ 7,734,000 $ 2,241,000
------------ ------------
COSTS AND EXPENSES:
Food and beverage costs 2,731,000 780,000
Labor and benefits 2,156,000 572,000
Operating expenses 1,651,000 456,000
Depreciation and amortization 436,000 75,000
Pre-opening expenses 510,000 49,000
General and administrative 3,055,000 1,067,000
Provision for loss on restaurants to be disposed 1,589,000 0
------------ ------------
Total costs and expenses 12,128,000 2,999,000
------------ ------------
LOSS FROM OPERATIONS (4,394,000) (758,000)
Interest and other income (expense), net 135,000 139,000
------------ ------------
NET LOSS BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (4,259,000) (619,000)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (120,000) 0
------------ ------------
NET LOSS $ (4,379,000) $ (619,000)
============ ============
BASIC AND DILUTED NET LOSS PER COMMON SHARE BEFORE
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE $ (0.49) $ (0.10)
============ ============
BASIC AND DILUTED NET LOSS PER COMMON SHARE $ (0.50) $ (0.10)
============ ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 8,761,074 6,012,613
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE> 5
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
---------------------------------
MARCH 29, MARCH 30,
1998 1997
--------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $(4,379,000) $ (619,000)
Adjustments to reconcile net loss to
cash flows from operating activities:
Depreciation and amortization 524,000 157,000
Provision for loss on restaurants to be disposed 1,589,000 0
Write-off of certain other non-operating assets 559,000 0
Cumulative effect of change in accounting principle 120,000
Changes in working capital items -
Inventories (132,000) (19,000)
Prepaids and other current assets 123,000 (4,000)
Accounts payable (2,251,000) 414,000
Other current liabilities (202,000) 147,000
----------- -----------
Cash flows from operating activities (4,049,000) 76,000
----------- -----------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase of property, equipment
and leasehold improvements (4,293,000) (1,023,000)
Net change in available-for-sale securities 3,239,000 (403,000)
Purchase of intangibles 0 (9,000)
Payment of pre-opening expenses 0 (8,000)
----------- -----------
Cash flows from investing activities (1,054,000) (1,443,000)
----------- -----------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Payments on capital lease obligations (87,000) (39,000)
Proceeds from exercise of stock options 784,000 14,000
Payments on notes payable 0 (82,000)
----------- -----------
Cash flows from financing activities 697,000 (107,000)
----------- -----------
DECREASE IN CASH AND
CASH EQUIVALENTS (4,406,000) (1,474,000)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 7,984,000 4,907,000
----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 3,578,000 $ 3,433,000
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE> 6
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 29, 1998
(UNAUDITED)
(1) GENERAL
The business of Famous Dave's of America, Inc. and subsidiaries (the
"Company") is to develop and operate American roadhouse-style barbeque
restaurants under the name "Famous Dave's." As of March 29, 1998, the Company
operated eighteen restaurants. As of March 30, 1997, the Company
operated three restaurants. As of March 29, 1998, the Company had seven
additional units in development. During April and May of 1998, the Company
opened three of these units in West Des Moines, Iowa, Naperville, Illinois, and
Des Moines, Iowa.
(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 28,
1997. 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 weeks ended March 29, 1998
are not necessarily indicative of the results that may be expected for the
fiscal year ending January 3, 1999.
Certain amounts in the fiscal 1997 financial statements have been
reclassified to conform to the fiscal 1998 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 totaled approximately $22.3 million.
6
<PAGE> 7
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 29, 1998
(UNAUDITED)
(4) INCOME (LOSS) PER COMMON SHARE
Basic earnings per share (EPS) is computed by dividing net loss by the
weighted average number of common shares outstanding during the quarter. Diluted
EPS is computed by dividing net loss by the weighted average common shares
outstanding and dilutive common equivalent shares assumed to be outstanding
during each period. Dilutive common equivalent shares have not been included in
the computation of diluted EPS because their inclusion would be antidilutive.
Antidilutive common equivalent shares issuable based on future exercise of stock
options or warrants could potentially dilute basic EPS in subsequent years.
(5) PRE-OPENING COSTS
In 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants (AICPA) issued Statement of Position
98-5 ("SOP 98-5") entitled "Reporting on the Costs of Start-Up Activities."
This accounting standard requires entities to expense as incurred all start-up
and pre-opening costs that are not otherwise capitalizable as long-lived
assets. This new accounting standard is effective for fiscal years beginning
after December 15, 1998 with early adoption encouraged. The Company elected to
adopt SOP 98-5 in fiscal 1998. The cumulative effect of this change in
accounting principle was $120,000 and is reflected in the thirteen weeks ended
March 29, 1998. Prior to the adoption of SOP 98-5, the Company deferred
pre-opening costs until the month the related unit opened and in certain cases
prior to March 31, 1997 deferred such costs over no longer than a 12-month
period.
(6) PROVISION FOR LOSS ON RESTAURANTS TO BE DISPOSED
In March 1998, the Company implemented a plan to close two restaurants. As
part of this plan, the Company has recorded a provision of $1,589,000 to reduce
the carrying value of the assets related to these restaurants to their estimated
net realizable value.
(7) 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.
(8) 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 28, 1997, the Company generated
a net operating loss of approximately $4,907,000 which, if not used, will expire
in 2012. During the thirteen weeks ended March 29, 1998, an additional net
operating loss of approximately $4,400,000 was generated which, if not used,
will expire in 2013. 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.
(9) NEW ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130"). SFAS 130 establishes standards for the reporting of comprehensive
income and its components in a full set of general-purpose financial
statements. The Company adopted SFAS 130 in fiscal 1998. Such adoption had no
material effect on the consolidated financial statements.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131, "Disclosures About Segments of An
Enterprise and Related Information" ("SFAS 131"). SFAS 131 revises information
regarding the reporting of operating segments. It also establishes standards for
related disclosures about products and services, geographic areas and major
customers. The Company will adopt SFAS 131 for annual 1998 financial reporting
and has not yet evaluated the impact of such adoption on the notes to its
annual consolidated financial statements.
7
<PAGE> 8
ITEM 2.
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 and operate American roadhouse-style barbeque
restaurants under the name "Famous Dave's." As of March 29, 1998, the Company
operated eighteen restaurants, thirteen in Minnesota, and five in
Wisconsin with seven additional units in development in Minnesota, Iowa and
Illinois. Three of these units opened in April and May of 1998.
The Company was formed in March 1994 and opened its first restaurant in the
Linden Hills neighborhood of Minneapolis in June 1995. Through March 29, 1998,
the Company had opened a total of eighteen restaurants as follows:
<TABLE>
<CAPTION>
APPROXIMATE
SQUARE
LOCATION FORMAT FOOTAGE DATE OPENED
-------- ------ ------- -----------
<S> <C> <C> <C>
Linden Hills, Minneapolis, MN Shack - Counter Service 2,900 June 1995
Roseville, MN Shack - Counter Service 4,800 June 1996
Calhoun Square, Minneapolis, MN Blues Club 10,500 September 1996
Maple Grove, MN Shack - Counter Service 5,200 April 1997
Highland Park, St. Paul, MN Shack - Counter Service 5,200 June 1997
Stillwater, MN Shack - Counter Service 5,200 July 1997
Apple Valley, MN Shack - Counter Service 3,800 July 1997
Madison, WI #1 Shack - Counter Service 4,800 August 1997
Grand Chute, WI Shack - Counter Service 2,900 October 1997
Forest Lake, MN Shack - Counter Service 4,500 October 1997
Winona, MN Shack - Counter Service 4,400 November 1997
Middleton, WI Shack - Counter Service 4,800 November 1997
LaCrosse, WI Shack - Counter Service 3,800 December 1997
Minnetonka, MN Lodge 5,500 December 1997
Plymouth, MN Take-Out 2,100 January 1998
West St. Paul, MN Shack - Counter Service 6,800 January 1998
Rochester, MN Shack - Full Service 5,200 March 1998
Janesville, WI Shack - Full Service 5,500 March 1998
</TABLE>
The 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, the ability of the Company to raise additional financing as
required 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.
Components of operating expenses include operating payroll and fringe
benefits, occupancy costs, repair and maintenance, and advertising and
promotion. Certain of these costs are variable and will increase with sales
volume. The primary fixed costs are corporate and restaurant management and
occupancy costs. The Company's experience is that when a new restaurant opens,
it incurs higher than normal levels of labor and food costs until operations
stabilize, usually during the first three months of operation. The Company
believes, however, that as restaurant management and staff gain experience,
labor scheduling, food cost management and operating expense control are
improved to levels similar to those at the Company's more established
restaurants.
General and administrative expenses include all corporate and administrative
functions that serve to support existing operations and provide an
infrastructure to support future growth. Management, supervisory and staff
salaries, employee benefits, travel, recruiting, training, rent and office
supplies are major items in this category.
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 28, 1997.
8
<PAGE> 9
RESULTS OF OPERATIONS
The operating results of the Company expressed as a percentage of net sales
were as follows:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
----------------------------
MARCH 29, MARCH 30,
1998 1997
----------- ------------
<S> <C> <C>
SALES, NET 100.0% 100.0%
----------- ------------
UNIT-LEVEL COSTS AND EXPENSES:
Food and beverage costs 35.3% 34.8%
Labor and benefits 27.9% 25.5%
Operating expenses 21.3% 20.3%
Depreciation and amortization 5.6% 3.3%
Pre-opening expenses 6.6% 2.3%
----------- -----------
Total costs and expenses 96.7% 86.2%
----------- -----------
INCOME FROM UNIT-LEVEL OPERATIONS 3.3% 13.8%
General and administrative expenses 39.5% 47.6%
Provision for loss on restaurants to be disposed 20.5% 0.0%
----------- -----------
LOSS FROM OPERATIONS (56.7%) (33.8%)
Cumulative effect of change in accounting principle (1.6%)
Interest and other income (expense), net 1.7% 6.2%
----------- -----------
NET LOSS (56.6%) (27.6)
=========== ==============
</TABLE>
9
<PAGE> 10
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 March 29, 1998 were $7,734,000
compared to $2,241,000 for the same period in 1997, a 245% increase. The
increase in net sales is primarily due to the addition of fifteen restaurants
opened during the four quarters subsequent to March 30, 1997, as well as an
increase in non-restaurant revenues. The restaurant openings were added to the
base of three restaurants open as of March 30, 1997.
SAME STORE SALES
It is the Company's policy to include in its same store sales base,
restaurants which have been open more than eighteen months. During the first
quarter of fiscal 1998, the only two restaurants included in this base are the
Linden Hills and Roseville units. Same store sales for the first quarter of
fiscal 1998 decreased approximately 14% compared to the same period in fiscal
1997. Management believes that this decrease reflects primarily the
redistribution of customer demand because of new units opened in the
Minneapolis/St. Paul market during 1997 and 1998.
FOOD AND BEVERAGE COSTS
Food and beverage costs for the thirteen weeks ended March 29, 1998 were
$2,731,000 or 35.3% of net sales, compared to $780,000 or 34.8% of net sales for
the same period in 1997. The increase in food and beverage costs as a percent of
net sales was primarily due to an increase in sales of lower margin retail
grocery items and initial operating inefficiencies associated with the opening
of new units, offset by reduced costs and expenses due to improved purchasing
economics, particularly contract pricing of certain pork items.
LABOR AND BENEFITS
Labor and benefits for the thirteen weeks ended March 29, 1998 were
$2,156,000 or 27.9% of net sales, compared to $572,000 or 25.5% of net sales for
the same period in 1997. The increase in labor and benefits as a percent of net
sales was primarily attributable to initial operating inefficiencies associated
with the opening of new units.
OPERATING EXPENSES
Operating expenses for the thirteen weeks ended March 29, 1998 were
$1,651,000 or 21.3% of net sales, compared to $456,000 or 20.3% of net sales for
the same period in 1997. The increase in operating expenses as a percent of net
sales is primarily attributable to initial distribution expenses related to
retail grocery items, as well as various increases in restaurant operating
expenses.
DEPRECIATION AND AMORTIZATION
Unit-level depreciation and amortization for the thirteen weeks ended March
29, 1998 were $436,000 or 5.6% of net sales compared to $75,000 or 3.3%
of net sales during the same period in 1997. The increase in unit-level
depreciation and amortization results from higher construction costs associated
with units opened in fiscal 1997 and 1998. Units opened in 1996 and prior were
conversions of existing structures which generally had lower levels of
investment in relation to sales and thus lower levels of depreciation expense.
10
<PAGE> 11
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
PRE-OPENING EXPENSES
Pre-opening expenses, which beginning in the first quarter of 1998 are
charged to expense as they are incurred, were $510,000 or 6.6% of net sales for
the thirteen weeks ended March 29, 1998 compared to $49,000 or 2.3% of net sales
during the same period in 1997. 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 four
new units and the initial development of seven additional locations during the
first quarter of 1998.
INCOME FROM UNIT-LEVEL OPERATIONS
Income from unit-level operations totaled $250,000 or 3.2% of net
sales, for the thirteen weeks ended March 29, 1998, compared to
$309,000, or 13.8% of net sales, in the corresponding period of 1997. 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 1997 to 1998 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 March
29,1998 were $3,055,000 or 39.5% of net sales, compared to $1,067,000 or 47.6%
of net sales for the same period in 1997. First quarter 1998 general and
administrative expenses include a provision totaling $1,146,000 for severance
and restructuring. This amount includes severance costs, real estate costs and a
provision for write-off of a discontinued point-of-sale system. This provision
reflects the Company's adjustment of its corporate infrastructure to a reduced
level which management believes is appropriate to support its current, more
controlled plans for expansion. Management expects a continued reduction in the
percentage of general and administrative expenses to net sales during fiscal
1998.
PROVISION FOR RESTAURANT CLOSINGS
In March 1998, the Company implemented a plan to close two restaurants. As
part of this plan, the Company has recorded a provision of $1,589,000 to lower
the carrying value of the assets of these restaurants to estimated net
realizable value.
LOSS FROM OPERATIONS
Loss from operations totaled $4,394,000, or 56.7% of net sales, for
the thirteen weeks ended March 29, 1998 compared to $758,000, or 33.8% of
net sales, in the corresponding period of 1997. The increase in loss from
operations in 1998 compared to 1997 is primarily due to severance and
restructuring charges of $1,146,000 or 14.8% of net sales and a
provision for restaurants to be disposed of $1,589,000 or 20.5% of net sales,
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, decreased
to $135,000 for the thirteen weeks ended March 29, 1998 from $139,000 for the
same period in 1997. The decrease in income in 1998 compared to 1997 was
primarily due to the reduced level of short-term investments in 1998.
11
<PAGE> 12
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
NET LOSS/NET LOSS PER COMMON SHARE
Net loss for the thirteen weeks ended March 29, 1998 was $4,379,000, or $.50
per share on 8,761,074 weighted average shares outstanding, compared to a net
loss of $619,000, or $.10 per share on 6,012,613 weighted average shares
outstanding, during the comparable period in 1997. The increase in the net loss
and the net loss per share is primarily the result of the severance and
restructuring charge of $1,146,000 or $.13 per share and a provision for loss
on restaurants to be disposed of $1,589,000 or $.18 per share, partially offset
by increased income from unit-level operations from new units opened and other
costs and expenses discussed above.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
As of March 29, 1998, the Company held cash and short-term investments of
approximately $10.7 million compared to $18.3 million as of December 28, 1997.
As reflected in the accompanying condensed consolidated financial statements,
this decrease in cash and short-term investments during the thirteen weeks ended
March 29, 1998 primarily represents cash used for the purchase and/or
development of property, equipment and leasehold improvements (approximately
$4.3 million) and operating activities (approximately $4.0 million) partially
offset by cash proceeds of stock option exercises (approximately
$800,000).
In June 1997, the Company called for redemption of it's 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 totaled approximately $22.3 million.
To continue the Company's expansion, the Company anticipates that additional
financing will be required during fiscal 1998. The Company anticipates that
future 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 sale leaseback, build to suit 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 during the second and
third quarters (which are summer months for the Company's locations) than in
the first and fourth quarters (which are winter months) as a result of its
concentration of locations in Minnesota and Wisconsin market areas.
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)
contain 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 28, 1997.
12
<PAGE> 13
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
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
None
13
<PAGE> 14
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
President, Chief Executive Officer
and Chief Operating Officer
/s/ Daniel F. Moorse
---------------------------------
Daniel F. Moorse
Corporate Controller and Acting
Chief Financial Officer
(Principal Financial and Accounting
Officer)
Date: May 13, 1998
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FAMOUS
DAVE'S OF AMERICA, INC. AND SUBSIDIARY CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS FOR THE THIRTEEN WEEKS ENDED MARCH 29, 1998 AS FILED ON FORM 10-QSB
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-QSB
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-03-1999
<PERIOD-START> DEC-29-1997
<PERIOD-END> MAR-29-1998
<CASH> 3,578,000
<SECURITIES> 7,089,000
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 603,000
<CURRENT-ASSETS> 12,016,000
<PP&E> 29,458,000
<DEPRECIATION> 1,588,000
<TOTAL-ASSETS> 39,886,000
<CURRENT-LIABILITIES> 5,080,000
<BONDS> 1,293,000
0
0
<COMMON> 42,799,000
<OTHER-SE> (9,286,000)
<TOTAL-LIABILITY-AND-EQUITY> 39,886,000
<SALES> 7,734,000
<TOTAL-REVENUES> 7,734,000
<CGS> 2,731,000
<TOTAL-COSTS> 12,128,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (135,000)
<INCOME-PRETAX> (4,259,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,259,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 120,000
<NET-INCOME> (4,379,000)
<EPS-PRIMARY> (.50)
<EPS-DILUTED> (.50)
</TABLE>
