<Page>
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 30, 2001
/ / 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 Small Business Issuer 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 49734
(989) 731-0401
(Address of Principal Executive Offices and Issuer'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 November 14, 2001, the issuer had outstanding 6,068,882 shares of
Common Stock and 2,550,000 Class A Warrants.
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TABLE OF CONTENTS
<Table>
<Caption>
Page
PART I FINANCIAL INFORMATION................................................................................1
Item 1 Financial Statements...........................................................................1
Balance Sheets as of September 30, 2001 and December 31, 2000..................................1
Statements of Operations for the three and nine months ended September 30, 2001
and October 1, 2000............................................................................2
Statements of Cash Flows for the nine months ended September 30, 2001
and October 1, 2000............................................................................3
Condensed Notes to Financial Statements........................................................4
Item 2 Management's Discussion and Analysis or Plan of Operation......................................5
PART II OTHER INFORMATION...................................................................................15
Item 1 Legal Proceedings.............................................................................15
Item 2 Changes in Securities and Use of Proceeds.....................................................17
Item 3 Defaults upon Senior Securities...............................................................18
Item 4 Submission of Matters to a Vote of Security Holders...........................................18
Item 5 Other Information.............................................................................18
Item 6 Exhibits and Reports on Form 8-K..............................................................18
SIGNATURES......................................................................................................19
INDEX TO EXHIBITS...............................................................................................20
</Table>
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PART I
ITEM 1 Financial Statements
BIG BUCK BREWERY & STEAKHOUSE, INC.
Balance Sheets
<Table>
<Caption>
September 30, December 31,
2001 2000
------------------ -----------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 46,934 $ 22,901
Accounts receivable 44,940 385,536
Inventories 247,007 309,906
Prepaids and other 712,586 384,669
------------------ ----------------
Total current assets 1,051,467 1,103,012
PROPERTY AND EQUIPMENT 24,072,030 24,030,987
OTHER ASSETS, net 830,471 1,094,367
------------------ ----------------
$ 25,953,968 $ 26,228,366
================== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 2,403,177 $ 2,972,225
Accrued expenses 551,218 676,555
Current maturities of long-term obligations 1,970,484 949,657
------------------ ----------------
Total current liabilities 4,924,879 4,598,437
LONG-TERM OBLIGATIONS, less current maturities 14,571,880 14,379,594
------------------ ----------------
Total liabilities 19,496,759 18,978,031
------------------ ----------------
MINORITY INTEREST 451,320 463,811
SHAREHOLDERS' EQUITY:
Common stock, $0.01 par value, 20,000,000
shares authorized; 5,993,882 and 5,474,562
shares issued and outstanding 59,939 54,746
Warrants 153,650 153,650
Additional paid-in capital 14,644,840 14,153,174
Accumulated deficit (8,852,540) (7,575,046)
------------------ -----------------
Total shareholders' equity 6,005,889 6,786,524
------------------ ----------------
$ 25,953,968 $ 26,228,366
================== ================
</Table>
The accompanying notes are an integral part of these balance sheets.
1
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BIG BUCK BREWERY & STEAKHOUSE, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<Table>
<Caption>
Three Months Ended Nine Months Ended
------------------------------- -------------------------------
September October September October
30, 2001 1, 2000 30, 2001 1, 2000
-------------- ------------ -------------- --------------
REVENUE:
Restaurant sales $ 4,288,490 $ 4,336,353 $ 12,936,888 $ 11,292,609
Wholesale and retail sales 84,150 124,067 230,971 297,609
-------------- ------------ ------------- -------------
Total revenue 4,372,640 4,460,420 13,167,859 11,590,218
-------------- ------------ ------------- -------------
COSTS AND EXPENSES:
Cost of sales 1,420,918 1,537,874 4,344,775 3,884,330
Restaurant salaries and benefits 1,108,273 1,389,193 3,499,137 3,560,081
Operating expenses 973,976 1,073,641 2,728,947 2,639,505
Depreciation 349,509 214,969 989,637 594,946
Preopening expenses - 438,151 - 484,483
General and administrative expenses 415,265 350,520 1,322,112 1,094,979
-------------- ------------ ------------- -------------
Total costs and expenses 4,267,941 5,004,348 12,884,608 12,258,324
-------------- ------------ ------------- -------------
INCOME (LOSS) FROM OPERATIONS 104,699 (543,928) 283,251 (668,106)
OTHER EXPENSE:
Interest expense (392,876) (379,012) (1,219,660) (1,113,199)
Amortization of financing cost (178,798) (109,416) (353,981) (282,074)
-------------- ------------ -------------- -------------
Other expense, net (571,674) (488,428) (1,573,641) (1,395,273)
-------------- ------------ -------------- -------------
MINORITY INTEREST SHARE OF
JOINT VENTURE LOSS (INCOME) 4,525 57,763 (546) 66,938
-------------- ------------ -------------- -------------
NET LOSS $ (462,450) $ (974,593) $ (1,290,937) $ (1,996,441)
============== ============ ============== =============
BASIC AND DILUTED LOSS PER
COMMON SHARE $ (0.08) $ (0.18) $ (0.23) $ (0.37)
============== ============ ============== =============
OUTSTANDING WEIGHTED
AVERAGE SHARES 5,970,805 5,421,972 5,737,193 5,410,978
============== ============ ============== =============
</Table>
The accompanying notes are an integral part of these financial statements.
2
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BIG BUCK BREWERY & STEAKHOUSE, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<Table>
<Caption>
Nine Months Ended
----------------------------------------
September 30, October 1,
2001 2000
--------------------- ---------------
OPERATING ACTIVITIES:
Net loss $ (1,290,937) $ (1,996,441)
Adjustments to reconcile net loss to cash flows used in
operating activities-
Depreciation and amortization 1,266,521 983,025
Minority Interest's share of joint venture income 546 -
Interest expense paid for with common stock 303,170 -
Consulting services paid for with common stock 23,698 -
Change in operating assets and liabilities:
Accounts receivable 340,596 (75,368)
Inventories 62,899 (110,798)
Prepaids and other (237,865) (162,618)
Accounts payable (569,048) (202,947)
Accrued expenses (124,934) 333,161
--------------- --------------
Net cash used in operating activities (225,353) (1,231,986)
--------------- --------------
INVESTING ACTIVITIES:
Purchases of property and equipment (615,218) (4,453,601)
Leasehold improvements purchase with tenant allowance (340,000) -
Decrease (increase) in other assets (42,949) (70,683)
--------------- --------------
Net cash used in investing activities (998,167) (4,524,284)
--------------- --------------
FINANCING ACTIVITIES:
Borrowings under long-term debt 1,096,000 9,200,000
Proceeds from sale of common stock 10,000 22,258
Tenant allowance 340,000 -
Payments on long-term debt and capital lease obligations (198,447) (3,084,482)
Payment of deferred financing costs - (602,288)
Proceeds from minority partner - 355,811
-------------- -------------
Net cash provided by financing activities 1,247,553 5,871,299
--------------- --------------
INCREASE (DECREASE) IN CASH 24,033 115,029
CASH, beginning of period 22,901 369,228
--------------- --------------
CASH, end of period $ 46,934 $ 484,257
============== ==============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 916,490 $ 1,047,885
Income taxes paid - -
NON-CASH TRANSACTIONS:
Issuance of common stock, stock options and
warrants for property, services and interest and debt $ 486,860 386,614
Conversion of long-term debt to common stock - 50,000
Account payable assumed for purchase of equipment - 600,000
</Table>
The accompanying notes are an integral part of these financial statements.
3
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BIG BUCK BREWERY & STEAKHOUSE, INC.
Condensed Notes to Financial Statements
September 30, 2001
(1) Basis of Financial Statement Presentation
The accompanying unaudited financial statements included herein have
been prepared by Big Buck Brewery & Steakhouse, Inc. 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 Big Buck believes that
the disclosures made are adequate to make the information not
misleading.
The financial statements for the three and nine months ended September
30, 2001, include the results of operations for the joint venture
described in Big Buck's Annual Report on Form 10-KSB/A for the fiscal
year ended December 31, 2000.
The unaudited balance sheet as of September 30, 2001 the unaudited
statements of operations for the three and nine months ended September
30, 2001 and October 1, 2000, and the unaudited statements of cash
flows for the nine months ended September 30, 2001 and October 1, 2000
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 December 30, 2001. 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
Big Buck's Annual Report on Form 10-KSB/A for the fiscal year ended
December 31, 2000. Accordingly, footnote disclosures which would
substantially duplicate the disclosures contained in the December 31,
2000, 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 Big
Buck's Annual Report on Form 10-KSB/A for the fiscal year ended
December 31, 2000.
4
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ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION CONTAINS VARIOUS FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 21E OF THE EXCHANGE ACT. ALTHOUGH WE BELIEVE THAT, IN MAKING
ANY SUCH STATEMENT, OUR EXPECTATIONS ARE BASED ON REASONABLE ASSUMPTIONS, ANY
SUCH STATEMENT MAY BE INFLUENCED BY FACTORS THAT COULD CAUSE ACTUAL OUTCOMES AND
RESULTS TO BE MATERIALLY DIFFERENT FROM THOSE PROJECTED. WHEN USED IN THE
FOLLOWING DISCUSSION, THE WORDS "ANTICIPATES," "BELIEVES," "EXPECTS," "INTENDS,"
"PLANS," "ESTIMATES" AND SIMILAR EXPRESSIONS, AS THEY RELATE TO US OR OUR
MANAGEMENT, ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING STATEMENTS. THESE
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO NUMEROUS RISKS AND UNCERTAINTIES THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE ANTICIPATED. FACTORS
THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE ANTICIPATED,
CERTAIN OF WHICH ARE BEYOND OUR CONTROL, ARE SET FORTH IN THIS DOCUMENT AND IN
OUR ANNUAL REPORT ON FORM 10-KSB/A FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000,
UNDER THE CAPTION "MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION --
CAUTIONARY STATEMENT."
OUR ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS COULD DIFFER MATERIALLY FROM
THOSE EXPRESSED IN, OR IMPLIED BY, FORWARD-LOOKING STATEMENTS. ACCORDINGLY, WE
CANNOT BE CERTAIN THAT ANY OF THE EVENTS ANTICIPATED BY FORWARD-LOOKING
STATEMENTS WILL OCCUR OR, IF ANY OF THEM DO OCCUR, WHAT IMPACT THEY WILL HAVE ON
US. WE CAUTION YOU TO KEEP IN MIND THE CAUTIONS AND RISKS DESCRIBED IN THIS
DOCUMENT AND IN OUR CAUTIONARY STATEMENT AND TO REFRAIN FROM ATTRIBUTING UNDUE
CERTAINTY TO ANY FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE OF
THE DOCUMENT IN WHICH THEY APPEAR.
OVERVIEW
We develop and operate microbrewery restaurants under the name "Big Buck Brewery
& Steakhouse." Until May 1995 when we opened our first unit in Gaylord,
Michigan, we had no operations or revenues and our activities were devoted
solely to development. In March 1997, we opened our second unit in Grand Rapids,
Michigan, and in October 1997, we opened our third unit in Auburn Hills,
Michigan, a suburb of Detroit. In August 2000, we opened our fourth unit in
Grapevine, Texas, a suburb of Dallas. This unit is owned and operated by Buck &
Bass pursuant to our joint venture agreement with Bass Pro. Subject to obtaining
the necessary financing, we plan to open our next unit in Nashville, Tennessee,
adjacent to the Grand Ole Opry.
Future revenues and profits will depend upon various factors, including market
acceptance of the Big Buck Brewery & Steakhouse concept and general economic
conditions. Our present sources of revenue are the Gaylord, Grand Rapids, Auburn
Hills and Grapevine units. We cannot assure you that we will successfully
implement our expansion plans, in which case we will continue to depend on
revenues from our existing units. We also face 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 our expansion
strategy is successful, we must manage the transition to multiple site, higher
volume operations, control increased overhead expenses and hire additional
personnel.
Our operating results are expected to fluctuate based on seasonal patterns.
Based on our existing units, we anticipate that our highest revenues will occur
in the second and third calendar quarters due to the milder climate during those
quarters in Michigan. We believe, however, that additional expansion into
markets outside Michigan will mitigate the effect of seasonality on our
business. Quarterly results in the future are likely to be substantially
affected by the timing of new unit openings. Because of the seasonality of our
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 a full fiscal
year.
5
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QUARTERS ENDED SEPTEMBER 30, 2001 AND OCTOBER 1, 2000
Our operating results, expressed as a percentage of total revenue, were as
follows:
<Table>
<Caption>
Three Months Ended Nine Months Ended
------------------------------- -------------------------------
September 30, October 1, September October 1,
2001 2000 30, 2001 2000
--------------- ------------ ----------- ------------
REVENUE:
Restaurant sales 98.1% 97.2% 98.2% 97.4%
Wholesale and retail sales 1.9 2.8 1.8 2.6
------------- ---------- --------- ----------
Total revenue 100.0 100.0 100.0 100.0
------------- ---------- --------- ----------
COSTS AND EXPENSES:
Cost of sales 32.5 34.5 33.0 33.5
Restaurant salaries and benefits 25.3 31.1 26.6 30.7
Operating expenses 22.3 24.1 20.7 22.8
Depreciation 8.0 4.8 7.5 5.1
Preopening expenses 0.0 9.8 0.0 4.2
General and administrative expenses 9.5 7.9 10.0 9.4
------------- ---------- --------- ----------
Total costs and expenses 97.6 112.2 97.8 105.7
------------- ---------- --------- ----------
INCOME (LOSS) FROM OPERATIONS 2.4 (12.2) 2.2 (5.7)
------------- ---------- --------- ----------
OTHER EXPENSE:
Interest expense (9.0) (8.5) (9.3) (9.6)
Other (4.1) (2.5) (2.7) (2.4)
Minority interest's share of subsidiary's
loss (income) 0.1 1.3 0.0 0.6
------------- ---------- --------- ----------
NET LOSS (10.6)% (21.8)% (9.8)% (17.2)%
============= ========== ========= ==========
</Table>
RESULTS OF OPERATIONS FOR THE QUARTERS ENDED SEPTEMBER 30, 2001 AND
OCTOBER 1, 2000
REVENUES
Revenues decreased 2.0% to $4,372,640 in the quarter ended September 30, 2001
from $4,460,420 in the quarter ended October 1, 2000, and increased 13.6% to
$13,167,859 for the first nine months of 2001 from $11,590,218 for the first
nine months of 2000. The decrease for the quarter was the result of lower
revenue from the existing units in Michigan and a weaker economy. The increase
for the first nine months was primarily due to the opening of the Grapevine unit
on August 31, 2000. We believe that we can attain continued revenue growth
through additional expansion.
6
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COSTS OF SALES
Cost of sales, which consists of food, merchandise and brewing supplies,
decreased 7.6% to $1,420,918 in the third quarter of 2001 compared to $1,537,874
for the third quarter of 2000, and increased 11.9% to $4,344,775 for the first
nine months of 2001 compared to the first nine months of 2000. The decrease for
the quarter was due to lower revenues. The increase for the first nine months
was primarily due to the addition of the Grapevine unit in August 2000. As a
percentage of revenues, costs of sales decreased to 32.5% in the third quarter
of 2001 compared to 34.5% for the third quarter of 2000, and decreased to 33.0%
for the first nine months of 2001 compared to 33.5% for the first nine months of
2001. The percentage decreases were due to limiting portion sizes to
specifications and entering into food purchasing contracts, both components of
the cost-saving strategy we implemented late in the first quarter of 2001.
RESTAURANT SALARIES AND BENEFITS
Restaurant salaries and benefits, which consist of restaurant management and
hourly employee wages and benefits, payroll taxes and workers' compensation
insurance, decreased 20.2% to $1,108,273 in the third quarter of 2001 compared
to $1,389,193 for the third quarter of 2000, and decreased 1.7% to $3,499,137
for the first nine months of 2001 compared to the first nine months of 2000. The
decrease for the quarter was primarily due to the lower staffing requirements
and improved scheduling. The decrease for the first nine months was the result
of the added cost of operating an additional restaurant. As a percentage of
revenues, restaurant salaries and benefits decreased to 25.3% in the third
quarter of 2001 as compared to 31.1% in the third quarter of 2000, and decreased
to 26.6% for the first nine months of 2001 compared to 30.7% for the first nine
months of 2000. The percentages decreases were due to the implementation of
lower staffing levels and more efficient scheduling.
OPERATING EXPENSES
Operating expenses, which include supplies, utilities, repairs and maintenance,
advertising and occupancy costs, decreased 9.3% to $973,976 in the third quarter
of 2001 compared to $1,073,641 in the third quarter of 2000, and increased 3.4%
to $2,728,947 for the first nine months of 2001 compared to the first nine
months of 2000. The decrease for the quarter was the result of lower revenue as
well as a reduction of certain in-store promotions. The increase for the first
nine months was primarily due to the added operating expenses from the Grapevine
unit. As a percentage of revenues, operating expenses decreased to 22.3% in the
third quarter of 2001 as compared to 24.1% in the third quarter 2000, and
decreased to 20.7% for the first nine months of 2001 compared to 22.8% for the
same period in 2000. The percentage decreases were due to reduced discounting,
the elimination of certain in-store promotions and reduced laundry expenses
resulting from a dress code modification, each a component of the cost-saving
strategy we implemented in the first quarter of 2001.
PREOPENING EXPENSES
Preopening expenses consist of expenses incurred prior to the opening of a new
unit, including but not limited to wages and benefits, relocation costs,
supplies, advertising expenses and training costs. There were no preopening
expenses for the first nine months of 2001 compared to $484,483 for the first
nine months of 2000.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased 18.5% to $415,265 in the third
quarter of 2001 compared to $350,520 in the third quarter of 2000, and increased
20.7% to $1,322,112 for the first nine months of 2001 compared to the first nine
months of 2000. The increases reflected the added professional fees incurred in
connection with our dispute with the general contractor of the Grapevine unit,
travel expenses related to the Grapevine unit and consulting fees relating to
obtaining a liquor license for our future unit in Nashville. As a percentage of
revenue, these expenses increased to 9.5% in the third quarter of 2001 as
compared to 7.9% in
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the third quarter of 2000, and increased to 10.0% for the first nine months of
2001 compared to 9.4% for the first nine months of 2000.
DEPRECIATION
Depreciation expenses increased 62.6% to $349,509 in the third quarter of 2001
compared to $214,696 in the third quarter of 2000, and increased 66.3% to
$989,637 for the first nine months of 2001 compared to the same period in 2000.
The increases were due the additional depreciation from the Grapevine unit. As a
percentage of revenues, these expenses increased to 8.0% in the third quarter of
2001 from 4.8% in the third quarter of 2000, and increased to 7.5% for the first
nine months of 2001 from 5.1% for the first nine months of 2000. The increases
were due to the Grapevine unit having a higher amount of depreciation as a
percentage of revenue as the result of the leasehold for this unit being
depreciated over a 15-year term without considering renewals.
INTEREST EXPENSE
Interest expense increased 3.7% to $392,876 in the third quarter of 2001
compared to $379,012 in the third quarter of 2000, and increased 9.6% to
$1,219,660 for the first nine months of 2001 compared to the first nine months
of 2000. The increases reflected additional borrowings for the completion of the
Grapevine unit and working capital purposes. As a percentage of revenues,
interest expense increased to 9.0% in the third quarter of 2001 from 8.5% in the
third quarter of 2000, and decreased to 9.3% for the first nine months of 2001
compared to 9.6% for the same period in 2000. The decrease for the first nine
months of 2001 as a percentage of revenues reflected the fact that interest
expense was offset by the additional revenues from the Grapevine unit. As new
units are added, we anticipate that we will incur additional interest expense.
OTHER EXPENSE
Other expense consists primarily of amortization expense. Other expenses
increased $69,382 to $178,798 in the third quarter of 2001 compared to $109,416
in the third quarter of 2000, and increased $71,907 during the first nine months
of 2001 as compared to the first nine months of 2000. These changes were the
result of the amortization of financing costs from the WCERS financing and
warrants issued during 2000.
LIQUIDITY AND CAPITAL RESOURCES
OVERVIEW
We used $225,353 in cash for operating activities for the first nine months of
2001, and used $1,231,986 in cash for operating activities for the first nine
months of 2001. We had a working capital deficit of $3,873,412 at September 30,
2001, and a working capital deficit of $3,495,425 at October 1, 2000. We spent
$998,167 in the first nine months of 2001 for fixed assets, including
approximately $371,000 in payments to subcontractors on the Grapevine unit and
$437,000 in architectural fees, construction cost, deposits and project
consulting relating to the development of our future unit in Nashville. During
the first nine months of 2001 we secured a line of credit for up to $1.0 million
from Crestmark Bank, of which we had borrowed approximately $996,000 as of
September 30, 2001. During the first nine months of 2001, we used funds borrowed
under the credit line to fund a portion of the remaining balance from the
Grapevine construction, to repay $75,000 to one holder of a convertible
subordinated promissory note and for working capital purposes.
In general, we have experienced losses in each quarterly and annual period since
inception. We incurred net losses of $462,450 for the third quarter of 2001 and
$974,593 for the third quarter of 2000. As of September 30, 2001, we had an
accumulated deficit of $8,852,540. We currently depend upon our existing units
for all of our revenues. In connection with our plans to open additional units,
we expect increased pre-opening expenses. Consequently, we expect to incur
significant losses for the foreseeable future. We will need to generate
significant increases in our revenues to achieve and maintain profitability. If
our revenues fail to
8
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grow or grow more slowly than we anticipate, or our operating expenses exceed
our expectations, our losses could significantly increase, which would harm our
business, operating results, cash flows and financial condition. In addition,
our failure to become and remain profitable may adversely affect the market
price of our securities and our ability to raise capital and continue
operations. The report of our independent public accountants for the year ended
December 31, 2000, includes an explanatory paragraph expressing doubt about our
ability to continue as a going concern.
Since inception, our principal capital requirements have been the funding of
(a) our operations and promotion of the Big Buck Brewery & Steakhouse format and
(b) the construction of 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 $6.2 million, $3.2 million and
$10.2 million, respectively. Total capital expenditures of Buck & Bass for the
Grapevine unit were approximately $7.6 million. Pursuant to our joint venture
agreement with Bass Pro, we funded approximately $6.4 million of that cost,
including our $1.5 million loan to Buck & Bass.
FINANCINGS ACTIVITIES DURING 2000
In January 2000, we generated $237,500 in net proceeds from the private
placement of $250,000 principal amount of convertible subordinated promissory
notes. In February 2000, we generated $7,017,000 in net proceeds from the
private placement of $7,500,000 principal amount convertible secured promissory
notes to WCERS. We used these funds to repay $2,495,000 due Bank One (f/k/a NBD
Bank) and Crestmark Bank and to make a required capital contribution to Buck &
Bass. In August 2000, we generated $1,425,000 in net proceeds from the private
placement of a $1,500,000 principal amount non-convertible secured promissory
note to WCERS. We used these funds and working capital to lend $1,500,000 to
Buck & Bass in August 2000. Buck & Bass applied such funds to the construction
of the Grapevine unit. In October 2000, we agreed with WCERS to extend the
maturity dates of certain promissory notes held by WCERS, with an aggregate
principal amount of approximately $7,500,000, to October 2002. Also in October
2000, we entered into a first amendment and acknowledgment of partial payment
with the holder of one of our convertible subordinated promissory notes with a
principal amount of $50,000. Pursuant to such agreement, we repaid $25,000 of
principal, extended the maturity date on the remaining $25,000 of principal from
January 2001 to June 2001, and adjusted the conversion price on such note from
$1.9125 to $1.50 per share. In addition, we entered into a first amendment with
the holder of two of our convertible subordinated promissory notes with an
aggregate principal amount of $150,000. Pursuant to such amendment, we extended
the maturity date on $100,000 of principal from October 2000 to October 2001,
and adjusted the conversion price on such note from $1.5252 to $1.50 per share.
In December 2000, we generated $100,000 in net proceeds from the private
placement of a $100,000 principal amount non-convertible subordinated promissory
note to one of our shareholders, Michael G. Eyde. We used the funds provided by
the subordinated debt financings for working capital purposes.
FINANCINGS ACTIVITIES DURING 2001
In February 2001, we agreed with WCERS to extend the maturity dates of certain
promissory notes held by WCERS, with an aggregate principal amount of
approximately $7,400,000, to February 2003. As a consequence, each of our
outstanding promissory notes held by WCERS has a maturity date of February 1,
2003. In March 2001, we obtained a line of credit from Crestmark Bank for up to
$1,000,000. The collateral on this line of credit is a $1,000,000 million letter
of credit from WCERS. This letter of credit is valid through March 2002. As of
September 30, 2001, we had borrowed $996,000 under the line of credit to fund a
portion of the remaining balance from the Grapevine construction, to repay
$75,000 to one holder of a convertible subordinated promissory note and for
working capital purposes. In March 2001, we entered into a first amendment and
acknowledgment of partial payment with the holder of one of our convertible
subordinated promissory notes with a principal amount of $250,000. Pursuant to
such agreement, we repaid $75,000 of principal, agreed to a repayment schedule
involving monthly payments of principal and interest commencing May 1, 2001, and
adjusted the conversion price on such note from $1.4752 to $0.73 per share. Also
in March 2001, we amended two promissory notes held by Michael G. Eyde, one of
our shareholders. We made his
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$100,000 principal amount non-convertible note convertible into shares of our
common stock at a conversion price of $1.00 per share and extended the maturity
date of such note until October 2001. We also extended the maturity date of his
$100,000 principal amount convertible note until October 2001 and adjusted the
conversion price from $1.9188 to $1.00 per share. In April 2001, we entered into
a first amendment with the holder of one of our convertible subordinated
promissory notes with a principal amount of $50,000. Pursuant to such agreement,
the maturity date of such note was extended until January 2002 and the
conversion price was adjusted from $1.9125 to $0.73 per share. In April 2001, we
entered into a first amendment with the holder of one of our convertible
subordinated promissory notes with a principal amount of $250,000. Pursuant to
such agreement, the maturity date of such note was extended until October 2001
and the conversion price was adjusted from $1.4752 to $0.73 per share. In July
2001, we generated $100,000 in net proceeds from the private placement of a
$100,000 principal amount convertible subordinated promissory note to an
accredited investor. We used the funds provided by this subordinated debt
financing for working capital purposes. In October 2001, we entered into a
second amendment with the holder of one of our convertible subordinated
promissory notes with a principal amount of $250,000. Pursuant to such
agreement, we agreed to a repayment schedule involving monthly payments of
principal and interest commencing November 1, 2001.
ADDITIONAL FINANCING IS REQUIRED FOR DEBT REPAYMENT
Without additional financing, our leveraged position, requirements for payments
to the holders of our secured and subordinated debt and requirements for
payments on our line of credit may require us to liquidate all or a portion of
our assets. We had working capital deficits of approximately $3.6 million at
December 31, 2000 and approximately $3.9 million at January 2, 2000. As of
November 14, 2001, we had outstanding (1) convertible secured debt aggregating
$7.5 million, (2) non-convertible secured debt of $1.5 million, (3) a line of
credit for up to $1.0 million, of which we had borrowed $996,000, and (4)
convertible subordinated debt aggregating $867,674. Of such amounts, $400,000
had matured as of November 14, 2001. Such funds must be repaid in full as
follows:
<Table>
<Caption>
Type of Debt Principal Amount Maturity Date
- -----------------------------------------------------------------------------
Convertible Secured Debt $7,500,000 February 2003
Non-Convertible Secured Debt $1,500,000 February 2003
Line of Credit $996,000 March 2002
Convertible Subordinated Debt $400,000 Immediate
Convertible Subordinated Debt $72,674 *
Convertible Subordinated Debt $245,000 **
Convertible Subordinated Debt $50,000 January 2002
Convertible Subordinated Debt $100,000 July 2002
</Table>
- --------------------
* Pursuant to an agreement with the note holder, we will make three
additional monthly payments of $18,161 (commencing December 1, 2001)
and one monthly payment of $1,584 (on March 1, 2002) to repay this note
in full.
** Pursuant to an agreement with the note holder, we will make three
additional monthly payments of $5,000 plus accrued interest (commencing
December 1, 2001), 12 monthly payments of $18,000 plus accrued interest
and one monthly payment of $14,000 plus accrued interest to repay this
note in full.
To fund the maturity of the outstanding debt, we will be required to obtain
additional financing or refinance the debt. However, we cannot assure you that
we will be able to obtain the required funds or refinance the debt, which could
materially adversely affect our business, operating results, cash flows and
financial condition.
WCERS COVENANT VIOLATIONS AND PAYMENT DEFAULTS
Our agreements with WCERS, the holder of approximately $9.0 million of our
secured debt, require that (1) we will not create, incur or suffer to be created
or incurred or to exist, any lien of any kind upon any of our property or assets
of any character whether then owned or thereafter acquired, or upon the income
or profits
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therefrom except for certain permitted liens, (2) we will keep and maintain
tangible net worth plus subordinated debt in an amount not less than $8.5
million, (3) we will keep and maintain a minimum debt coverage ratio of 1.25 to
1.0 (excluding Grapevine pre-opening and financing costs), (4) we will maintain
our then current cash flow position, and (5) we will not permit the difference
between our current assets and our current liabilities (other than subordinated
debt) to be less than $500,000. We have notified WCERS that we have violated
each of the foregoing covenants. On April 3, 2001, we entered into a letter
agreement with WCERS pursuant to which the forgoing covenants were modified to
provide that (1) we must maintain tangible net worth plus subordinated debt in
an amount not less than $6.25 million and (2) we have until January 1, 2002 to
meet all other covenants set forth in the loan documents (unless modified by the
parties in writing). We cannot assure you that we will maintain or regain
compliance with the foregoing covenants or be able to repay or refinance our
indebtedness to WCERS.
Our agreements with WCERS require us to make payments of principal and interest
aggregating approximately $80,000 per month. We did not make the payments due on
June 1, 2001 and July 1, 2001. Because we did not make timely payments of
principal and interest on our indebtedness to WCERS, we are in default under our
agreements with WCERS. As a result, WCERS may, by notice in writing to us,
declare all amounts owing with respect to the agreements to be immediately due
and payable without presentment, demand, protest or other notice of any kind,
all of which we previously waived. On October 1, 2001, we established a
repayment schedule for the two missed payments whereby we will pay 1/6 of the
amount due each month over a six-month period. These payments are in addition to
all other amounts as they become due under the loan documents.
Our agreements with WCERS define an event of default to include our failure to
perform any term, covenant or agreement contained in our agreements with WCERS.
In the event of a default which is not waived under our agreements with WCERS,
our assets would be at risk. Foreclosure by WCERS would force us to cease all
operations.
ADDITIONAL FINANCING IS REQUIRED FOR GRAPEVINE
In September 1999, Bass Pro declared the limited partnership agreement of Buck &
Bass and the commercial sublease agreement for the Grapevine site to be breached
and in default due to, among other things, our failure to make our required
capital contribution. In February 2000, we made all required capital
contributions and satisfied all subcontractors' liens and claims. In March 2000,
we agreed with Bass Pro in writing to the reinstatement of the limited
partnership agreement and the sublease. In August 2000, we generated
approximately $1.4 million from the private placement of a $1.5 million secured
promissory note to WCERS. We used these funds and working capital to lend $1.5
million to Buck & Bass in August 2000. These funds were applied by Buck & Bass
to the construction of the Grapevine unit.
During the first quarter of 2001, certain contractors of Buck & Bass filed liens
and made demands for payment of additional sums aggregating approximately $1.4
million in connection with the construction of the Grapevine unit. In February
2001, as guarantor of the obligations of Buck & Bass, we arranged to have filed
of record a bond with respect to each lien for which we had received notice. In
March 2001, we obtained approximately $1.0 million in debt financing from
Crestmark Bank, guaranteed by WCERS, for working capital purposes including the
payment of such contractors. In May 2001, Knoebel Construction, Inc., the
general contractor of the Grapevine unit, brought suit against us to recover
amounts alleged due in connection with the construction of the Grapevine unit.
In June 2001, Bass Pro declared that we were in default of the commercial
sublease and other documents executed between the parties. Bass Pro has demanded
that we (1) secure and file of record a bond against the lien filed by Knoebel
which has the effect of replacing the bond secured and filed by Bass Pro, or,
alternatively, make payment to Knoebel for the work performed and cause the lien
filed by Knoebel to be discharged of record, and (2) cause each of the other
outstanding liens filed against the leased premises and all other outstanding
claims for payment to be discharged of record.
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Buck & Bass disputes the amount of Knoebel's claims and has sought to have the
case moved from District Court to mediation or binding arbitration. On behalf of
Buck & Bass, we have settled directly with and obtained releases from
substantially all of the subcontractors on the Grapevine unit, other than
Turtlecreek Landscape Services, Inc., as well as the project's architect. As of
November 14, 2001, we had paid approximately $371,000 to such subcontractors.
Knoebel has asserted that it may dispute the validity of some or all of the
claims of the subcontractors and, therefore, will dispute the amount of any
offset that we would apply to Knoebel's claim based upon our payments to the
subcontractors. We cannot assure you that we will be able to fully and finally
discharge all outstanding liens and claims. If we fail to do so, we may be in
material default under the limited partnership agreement and the commercial
sublease agreement.
GRAPEVINE COVENANT VIOLATIONS
The declaration of default pursuant to the existence of such encumbrances and
the failure of Buck & Bass to perform quarterly customer satisfaction surveys
give Bass Pro the ability to terminate the sublease and demand all unpaid and
reasonably calculable future rent over the balance of the sublease term.
Pursuant to the limited partnership agreement, a material default under the
sublease would also entitle Bass Pro to purchase our interest in the joint
venture at 40% of book value, thereby eliminating our interest in the Grapevine
unit. Further, Bass Pro has the right to purchase up to 15% of our interest in
the joint venture, at 100% of our original cost, on or before August 31, 2002;
provided, however, that our interest in the joint venture may not be reduced
below 51%. We presently have an 89.1% interest in the Buck & Bass joint venture.
The termination of the sublease or the elimination of our interest in the
Grapevine unit would have a material adverse effect on our business, operating
results, cash flows and financial condition.
ADDITIONAL FINANCING IS REQUIRED FOR NASHVILLE
Without additional financing, we will be unable to develop and open the
Nashville unit. We anticipate that construction of the Nashville unit will
require approximately $4.0 million, including approximately $2.0 million in the
form of tenant allowances provided by Opry Mills Limited Partnership, our
landlord. Our lease agreement for the Nashville site requires us to make annual
minimum base rent payments of approximately $520,000. Under the terms of the
lease agreement, we were required to begin making such payments on August 19,
2001. These payments are required whether or not we have the financing required
to develop and open the Nashville unit. In the absence of necessary financing,
we will be unable to make payments required by the lease and Opry Mills would
have the ability to declare an event of default under the lease, terminate the
lease and demand all unpaid and reasonably calculable future rent over the
balance of the lease term.
On September 17, 2001, Opry Mills brought suit against us for breach of this
lease. Opry Mills asserts claims for breach of contract, fraud and
misrepresentation and breach of the duty of good faith and fair dealing based on
two essential allegations: (1) that we have allegedly failed to complete our
build-out work on the premises and open for business within the time required by
the lease and (2) that one of our representatives allegedly falsely represented
to Opry Mills that we would supply a line of credit to Opry Mills in the amount
of $650,000, in reliance on which representation Opry Mills agreed to advance a
portion of the tenant's allowance for the build-out work before Opry Mills was
allegedly obligated to do so under the terms of the lease. In connection with
this action, Opry Mills seeks $340,000 in compensatory damages; $340,000 in
punitive damages; interest; attorneys' fees and litigation expenses; declaratory
relief requiring that we return the tenant's allowance previously funded,
declaring that we have materially breached the lease, and ordering us to comply
with our alleged obligations regarding opening the restaurant to the public. On
October 30, 2001, Opry Mills brought a second suit against us for breach of this
lease. In this action, Opry Mills seeks eviction, the recovery of $114,361.20
for rents allegedly due under the lease and attorneys' fees and expenses. You
can learn more about these matters, including our response to these claims,
by reviewing "Legal Proceedings--Nashville Unit" beginnning on page 15 of this
report.
We cannot assure you that we will successfully resolve these matters with Opry
Mills. The termination of the Nashville lease or the elimination of our interest
in the Nashville unit would have a material adverse effect on our business,
operating results, cash flows and financial condition.
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ADDITIONAL FINANCING REQUIRED FOR FUTURE EXPANSION
We expect that we will continue to require significant capital resources to fund
new unit development and construction. The development of any additional units
will require us to obtain additional financing. The amount of financing required
for new units depends on the definitive locations, site conditions, construction
costs and size and type of units to be built. We cannot assure you that
financing will be available on terms acceptable or favorable to us, or at all.
Without such financing, our development plans will be slower than planned or
even unachievable.
LIMITATIONS ON ABILITY TO INCUR ADDITIONAL INDEBTEDNESS
We granted the following security interests to WCERS in connection with the
February 2000 convertible secured debt financing and the August 2000
non-convertible secured debt financing:
- a pledge of our limited partnership interest in Buck & Bass,
- a pledge of our shares of the issued and outstanding common stock of
BBBP Management Company, and
- a security interest, assignment or mortgage, as applicable, in our
interest in all assets now or hereafter owned, ownership interests,
licenses, and permits, including, without limitation, a mortgage
encumbering the Gaylord site and the Auburn Hills site.
We also granted to WCERS a right of first refusal pursuant to which WCERS may,
for so long as the approximately $5.9 million promissory note is outstanding or
WCERS owns more than 15% of our common stock, elect to purchase securities
offered by us, within 45 days of the receipt of notice by WCERS, at the same
price and on the same terms and conditions as are offered to a third party.
Our agreement with WCERS imposes limitations on our ability to incur additional
indebtedness. We agreed that we would not create, incur, assume, guarantee or be
or remain liable, contingently or otherwise, with respect to any indebtedness,
except for indebtedness incurred in the ordinary course of business not to
exceed at any time $1.5 million in the aggregate. Any indebtedness not in the
ordinary course of business or in excess of $1.5 million requires the approval
of WCERS. These restrictions may impede our ability to secure financing for
future expansion and continued operations. Our failure to raise capital when
needed would have a material adverse effect on our business, operating results,
cash flows and financial condition.
SHORT-TERM LIQUIDITY PLANS
We are exploring the possibility of refinancing our Gaylord unit to provide us
with the liquidity required to repay current maturities of existing
indebtedness, to discharge outstanding liens and claims in connection with the
Grapevine unit and to fund initial construction of the Nashville unit. We
anticipate that WCERS will provide us with approval for such refinancing.
Assuming that we obtain such refinancing, we intend to seek to have WCERS
convert its convertible secured promissory note with a principal amount of
approximately $1.6 million into shares of our common stock. We believe that the
elimination of certain WCERS debt service obligations would provide us with
additional working capital for operations. Should we be unable to pay off
current maturities of existing indebtedness, discharge outstanding liens and
claims in connection with the Grapevine unit or fund initial construction of the
Nashville unit, our business, operating results, cash flows and financial
condition would be materially adversely affected.
Assuming that we successfully resolve the claims of Opry Mills arising under the
Nashville lease, we plan to explore the possibility of expanding our
relationship with the Mills Corporation to develop and open Big Buck Brewery &
Steakhouses adjacent to Bass Pro Outdoor World superstores in several other
cities, including, but not limited to, each of the following markets: Atlanta,
Ft. Lauderdale and the Washington, D.C. area. We
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cannot assure you that we will enter into agreements to develop and open
additional units. We must raise substantial proceeds to finance any expansion.
Within the limitations on our ability to incur additional indebtedness, we are
exploring the possible issuance of additional convertible subordinated
promissory notes to fund our working capital requirements.
SEASONALITY
Our sales and earnings are expected to fluctuate based on seasonal patterns.
Based on our existing units, we anticipate that our highest earnings will occur
in the second and third calendar quarters due to the milder climate during those
quarters in Michigan. We believe, however, that additional expansion into
markets outside Michigan will mitigate the effect of seasonality on our
business. Quarterly results in the future are also likely to be substantially
affected by the timing of new unit openings. Because of the effect of
seasonality on our 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 a full
fiscal year.
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PART II OTHER INFORMATION
ITEM 1 Legal Proceedings
FORMER EMPLOYEES
In November 2000, two claimants, who were then employees of
our company, brought sexual harassment claims against another
of our former employees. In connection with their allegations
of discrimination, the claimants sought monetary damages from
our company. In August 2001, we reached an agreement to settle
such claims out of court in exchange for the payment of
$52,000 to each claimant. On August 31, 2001, we paid half of
such amount to the claimants. We are currently finalizing a
payment scheduled for the balance due.
GRAPEVINE UNIT
On May 3, 2001, Knoebel Construction, Inc., the general
contractor of the Grapevine unit, brought suit against Buck &
Bass, BBBP Management Company, Bass Pro, St. Paul Fire &
Marine Insurance Company, Grapevine II, L.P. and our company
in the 352nd District Court of Tarrant County, Texas, for
breach of contract and quantum meruit, as well as claims under
the Texas Property Code for alleged failure to make prompt
payment and alleged misapplication of statutory construction
trust funds. Our company owns an 89.1% interest in Buck &
Bass. The proceeding is a lawsuit that arises out of the
construction of the Grapevine unit. Buck & Bass, as owner, and
Knoebel, as construction manager, signed an AIA "Standard Form
of Agreement Between Owner and Construction Manager" dated
March 31, 2000. Under the agreement, Buck & Bass hired Knoebel
to construct the Grapevine unit. Knoebel alleges that it
performed its obligations under the agreement but is still
owed $1,174,516 that Buck & Bass has failed to pay. Buck &
Bass disputes the amount of Knoebel's claims and has sought to
have the case moved from District Court to mediation or
binding arbitration. Knoebel also seeks recovery under St.
Paul's bond and foreclosure of a statutory lien. In addition
to its alleged damages of $1,174,516, Knoebel's petition asks
for attorneys' fees, court costs, and pre-judgment and
post-judgment interest.
On June 1, 2001, Turtlecreek Landscape Services, Inc., a
subcontractor on the construction of the Grapevine unit,
alleged a suit on a sworn account against Knoebel, St. Paul
and our company in the 141st District Court of Tarrant County,
Texas. Turtlecreek alleges that it was a subcontractor on the
construction of the Grapevine unit and that it is owed $35,244
in connection with its work on the project. Turtlecreek seeks
recovery under a bond issued by St. Paul. In addition, it also
seeks attorneys' fees, court costs, and pre-judgment and
post-judgment interest.
On behalf of Buck & Bass, we have settled directly with and
obtained releases from substantially all of the other
subcontractors on the Grapevine unit, as well as the project's
architect. Knoebel has asserted that it may dispute the
validity of some or all of the claims of the subcontractors
and, therefore, will dispute the amount of any offset that we
would apply to Knoebel's claim based upon our payments to the
subcontractors.
NASHVILLE UNIT
On September 17, 2001, Opry Mills Limited Partnership, the
landlord of the Nashville unit, brought suit against our
company in the Circuit Court for Davidson County, Tennessee,
for breach of a commercial lease agreement. This case was
removed to the U.S. District Court for the Middle District of
Tennessee (Nashville Division) on October 17, 2001.
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Opry Mills is the landlord and we are the tenant under a
November 9, 2000 Shopping Center Lease, which governs the
lease to us of space in the Opry Mills Mall in Nashville,
Tennessee, for the operation of a restaurant. Opry Mills
asserts claims for breach of contract, fraud and
misrepresentation and breach of the duty of good faith and
fair dealing based on two essential allegations: (1) that we
have allegedly failed to complete our build-out work on the
premises and open for business within the time required by the
lease and (2) that one of our representatives allegedly
falsely represented to Opry Mills that we would supply a line
of credit to Opry Mills in the amount of $650,000, in reliance
on which representation Opry Mills agreed to advance a portion
of the tenant's allowance for the build-out work before Opry
Mills was allegedly obligated to do so under the terms of the
lease.
We admit that one of our representatives had a discussion with
a representative of Opry Mills regarding obtaining a letter of
credit. However, there was no requirement for a letter of
credit incorporated into the lease, and the lease provides
that no change or modification is valid or enforceable unless
it is in writing and signed by the parties. We otherwise deny
that any enforceable promise to obtain a letter of credit was
made, and we therefore deny that the discussion between our
representative and Opry Mills provides the basis for a
contract or fraud/misrepresentation claim. Further, although
the restaurant is not yet open for business, we deny that we
have breached the terms of the lease.
In connection with this action, Opry Mills seeks $340,000 in
compensatory damages; $340,000 in punitive damages; interest;
attorneys' fees and litigation expenses; declaratory relief
requiring that we return the tenant's allowance previously
funded, declaring that we have materially breached the lease,
and ordering us to comply with our alleged obligations
regarding opening the restaurant to the public.
On October 30, 2001, Opry Mills brought suit against us in
General Sessions Court for Davidson County, Tennessee (at
Nashville) for breach of a commercial lease agreement. In this
action, Opry Mills seeks eviction, the recovery of $114,361.20
for rents allegedly due under the lease and attorneys' fees
and expenses. We deny that we have breached the terms of the
lease and deny that Opry Mills is entitled to possession of
the premises.
It is likely that we will seek to remove the state court case
to federal court and to consolidate the two cases.
GENERAL
In addition, we are involved in routine legal actions in the
ordinary course of our business. Although the outcomes of any
such legal actions cannot be predicted, in the opinion of
management these routine legal proceedings are unlikely to
have a material adverse effect upon our business, operating
results, cash flows and financial condition.
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ITEM 2 Changes in Securities and Use of Proceeds
We entered into a consulting agreement with Morgan James &
Associates, a management consulting firm, effective July 12,
2001. We agreed to issue up to 250,000 shares of our common
stock to Morgan James as consideration for the services to be
rendered under the agreement. Among other things, the
agreement provides that Morgan James will provide us with the
following services:
- present to us prospective acquisition targets,
business opportunities, joint ventures and any other
form of revenue enhancements;
- assist us in the implementation of short-range and
long-term strategic planning to fully develop and
enhance our assets, resources, products and services;
- support us in the implementation of a marketing
program to assist us in broadening the markets for
our business and services and promote our image,
business and services;
- assist us in the monitoring of services provided by
our advertising firm, public relations firm, and
other professionals to be employed by us;
- advise us relative to the continued development for a
customer relations program and stimulate interest in
our company by institutional investors and other
members of the financial community;
- advise us relative to the recruitment and employment
of key executives consistent with the expansion of
our operations; and
- advise and recommend additional services relating to
our business and services as well as new products
that may be provided by us.
As of November 14, 2001, we had issued 200,000 shares of
common stock payable under the consulting agreement to Morgan
James.
On July 20, 2001, we issued a convertible subordinated
promissory note in the principal amount of $100,000 to an
accredited investor. The note matures on July 20, 2002. It may
be converted into 115,473 shares of common stock at a
conversion price of $0.866 per share.
As disclosed in our periodic report for the quarter ended
April 1, 2001, we issued a warrant for the purchase of 50,000
shares of our common stock to Columbia Construction Company as
compensation for field audit services provided by such entity
to us in connection with the Grapevine unit. This five-year
warrant was to be exercisable at any time upon payment of the
exercise price of $1.32 per share. On July 19, 2001, our board
of directors clarified that it had intended to authorize the
issuance of 50,000 shares of common stock to Columbia
Construction Services - Michigan, Inc. rather than the
issuance of a warrant to purchase 50,000 shares of common
stock to Columbia Construction Company. On that basis, the
warrant was canceled and we issued 50,000 shares of common
stock to Columbia Construction Services - Michigan, Inc.,
effective as of February 9, 2001, as compensation for field
audit services provided by such entity to us in connection
with the Grapevine unit.
The foregoing issuances were made in reliance upon the
exemption provided in Section 4(2) of the Securities Act. Such
securities are restricted as to sale or transfer, unless
registered under the Securities Act, and certificates
representing such securities contain restrictive
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legends preventing sale, transfer or other disposition unless
registered under the Securities Act. In addition, the
recipients of such securities received, or had access to,
material information concerning us, including, but not limited
to, our reports on Form 10-KSB, Form 10-QSB and Form 8-K, as
filed with the SEC. No underwriting commissions or discounts
were paid with respect to the issuance of such securities.
ITEM 3 Defaults upon Senior Securities
Our agreements with WCERS require us to make payments of
principal and interest aggregating approximately $80,000 per
month. We did not make the payments due on June 1, 2001 and
July 1, 2001. Because we did not make timely payments of
principal and interest on our indebtedness to WCERS, we are in
default under our agreements with WCERS. As a result, WCERS
may, by notice in writing to us, declare all amounts owing
with respect to the agreements to be immediately due and
payable without presentment, demand, protest or other notice
of any kind, all of which we previously waived. On October 1,
2001, we established a repayment schedule for the two missed
payments whereby we will pay 1/6 of the amount due each month
over a six-month period. These payments are in addition to all
other amounts as they become due under the loan documents.
See "Management's Discussion and Analysis or Plan of
Operation-Liquidity and Capital Resources" for a discussion of
certain covenant violations.
ITEM 4 Submission of Matters to a Vote of Security Holders
Not applicable.
ITEM 5 Other Information
Not applicable.
ITEM 6 Exhibits and Reports on Form 8-K
(a) Exhibits
See "Index to Exhibits."
(b) Reports on Form 8-K
The registrant filed no Current Reports on Form 8-K
during the quarter ended September 30, 2001.
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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: November 14, 2001 By /s/ Anthony P. Dombrowski
-----------------------------------------
Anthony P. Dombrowski
Chief Financial Officer
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INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
10.1 Consulting Agreement between Big Buck and Morgan James &
Associates, effective July 12, 2001.
10.2 Second Amendment to Convertible Subordinated Promissory Note
by and between Big Buck and Steven G. Balan, dated
October 17, 2001.
10.3 Letter Agreement by and between Big Buck and Wayne County
Employees' Retirement System, dated October 1, 2001.
10.4 Form of Subscription and Investment Representation Agreement
for 10% Convertible Subordinated Promissory Note (including
form of note) (incorporated by reference to our Annual Report
on Form 10-KSB, filed on March 31, 2000 (File No. 0-20845)).
20