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 30, 1997
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to
-------------------- -----------------
Commission file number 33-10675
--------
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)
12700 Industrial Park Boulevard, Suite #60, Plymouth, MN 55441
(Address of Principal Executive Offices)
(612) 557-5798
(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 2, 1997 there were 6,024,250 shares of common stock, $.01 par value,
outstanding.
1
2
FAMOUS DAVE'S OF AMERICA, INC.
Form 10-QSB Index
March 30, 1997
Page Number
-----------
PART I FINANCIAL INFORMATION
Item 1. Financial Statements 3
Condensed Consolidated Balance Sheets - 3
March 30, 1997 and December 29, 1996
Condensed Consolidated Statements of Operations - 4
for the thirteen weeks ended March 30, 1997 and
March 31, 1996
Condensed Consolidated Statements of Cash Flows - 5
for the thirteen weeks ended March 30, 1997 and
March 31, 1996
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of 8
Financial Condition and Results of Operations
PART II OTHER INFORMATION
Items 1 and 6. 12
Signatures 13
2
3
Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 30, DECEMBER 29,
1997 1996
------------- --------------
ASSETS (UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents $ 3,432,261 $ 4,906,640
Available-for-sale securities 9,837,197 9,417,188
Inventories 185,562 166,594
Prepaid expenses and other current assets 581,714 577,590
------------- ---------------
Total current assets 14,036,734 15,068,012
------------- ---------------
PROPERTY, EQUIPMENT AND LEASEHOLD
IMPROVEMENTS, NET 5,891,608 5,837,844
------------- ---------------
OTHER ASSETS:
Construction in progress 1,061,042 192,131
Pre-opening expenses, net 117,917 159,292
Other 64,539 63,180
------------- ---------------
Total other assets 1,243,498 414,603
------------- ---------------
$ 21,171,840 $ 21,320,459
============= ===============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 859,624 $ 445,910
Notes payable 390,580 473,044
Current portion of capital lease obligations 162,262 162,261
Other current liabilities 341,645 194,430
------------- ---------------
Total current liabilities 1,754,111 1,275,645
CAPITAL LEASE OBLIGATIONS, NET OF CURRENT
PORTION 702,649 741,797
------------- ---------------
Total liabilities 2,456,760 2,017,442
------------- ---------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $.01 par value, 100,000,000 shares authorized,
6,015,250 and 6,001,250 shares issued and outstanding 60,153 60,013
Additional paid-in capital 19,600,375 19,586,515
Unrealized gain (loss) on securities available-for-sale 5,500 (11,850)
Accumulated deficit (950,948) (331,661)
------------- ---------------
Total shareholders' equity 18,715,080 19,303,017
------------- ---------------
$ 21,171,840 $ 21,320,459
============= ===============
See accompanying notes to condensed consolidated financial statements.
3
4
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THIRTEEN WEEKS ENDED
----------------------------------
MARCH 30, MARCH 31,
1997 1996
-------- ---------
(UNAUDITED) (UNAUDITED)
SALES, NET $ 2,240,683 $ 290,388
------------- ------------
COSTS AND EXPENSES:
Food and beverage costs 780,026 94,743
Labor and benefits 572,320 75,400
Restaurant operating expenses 455,838 73,902
Depreciation and amortization 123,732 7,948
------------- ------------
Total costs and expenses 1,931,916 251,993
------------- ------------
INCOME FROM RESTAURANT OPERATIONS 308,767 38,395
------------- ------------
OTHER INCOME (EXPENSE):
General and administrative (1,067,010) (285,947)
Interest and other income (expense), net 138,956 (2,896)
------------- ------------
Total other (expense) (928,054) (288,843)
------------- ------------
NET LOSS $ (619,287) $ (250,448)
============= ============
NET LOSS PER COMMON SHARE $ (0.10) $ (0.11)
============= ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 6,217,422 2,214,423
============= ============
See accompanying notes to condensed consolidated financial statements.
4
5
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THIRTEEN WEEKS ENDED
------------------------------------------------
MARCH 30, MARCH 31,
1997 1996
---------------------- --------------------
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net loss $ (619,287) $ (250,448)
Adjustments to reconcile net loss to
cash flows from operating activities:
Depreciation and amortization 157,166 7,948
Changes in working capital items -
Inventories (18,968) (6,433)
Prepaids and other current assets (4,124) (56,459)
Accounts payable 413,714 213,823
Other current liabilities 147,215 71,869
--------------- -------------------
Cash flows from operating activities 75,716 (19,700)
--------------- -------------------
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase of property, equipment
and leasehold improvements (154,174) (115,770)
Increase in construction progress (868,911) (421,318)
Net increase in securities available-for-sale (402,659) 0
Purchase of intangibles (8,753) 0
Payment of pre-opening expenses (7,987) (7,180)
--------------- -------------------
Cash flows from investing activities (1,442,484) (544,268)
--------------- -------------------
CASH FLOWS FROM
FINANCING ACTIVITIES:
Advances (payments) on notes payable (82,464) 493,407
Payments on capital lease obligations (39,147) 0
Proceeds from exercise of stock options 14,000 0
--------------- -------------------
Cash flows from financing activities (107,611) 493,407
--------------- -------------------
DECREASE IN CASH AND CASH
EQUIVALENTS (1,474,379) (70,561)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 4,906,640 100,297
--------------- -------------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 3,432,261 $ 29,736
=============== ===================
See accompanying notes to condensed consolidated financial statements.
5
6
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 30, 1997
(Unaudited)
(1) GENERAL
The business of Famous Dave's of America, Inc. (the "Company") is to
develop, own and operate American roadhouse-style barbeque restaurants under
the name "Famous Dave's." During the thirteen weeks ended March 31, 1996, the
Company owned and operated one restaurant, located in the Linden Hills
neighborhood of Minneapolis (the "Linden Hills Unit"). During the thirteen
weeks ended March 30, 1997, the Company owned and operated three restaurants:
the Linden Hills Unit, a unit in Roseville, Minnesota which opened in June 1996
(the "Roseville Unit"), and a unit in Calhoun Square in Minneapolis which
opened in September 1996 (the "Calhoun Blues Club"). As of March 30, 1997 the
Company had five additional units in development in the Minneapolis/St. Paul
area and one unit in development in Madison, Wisconsin. During April 1997, the
Company opened one of these additional units in Maple Grove, Minnesota.
(2) BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared by the Company pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations. Although management believes that the disclosures are adequate to
make the information presented not misleading, it is suggested that these
interim condensed financial statements be read in conjunction with the
Company's most recent audited financial statements and notes thereto included
in the Company's Annual Report on Form 10-KSB for the fiscal year ended
December 29, 1996. In the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary for a fair presentation of the
financial position, results of operations and cash flows for the interim
periods presented have been made. Operating results for the thirteen weeks
ended March 30, 1997 are not necessarily indicative of the results that may be
expected for the fiscal year ending December 28, 1997.
Certain amounts in the fiscal 1996 financial statements have been
reclassified to conform to the fiscal 1997 presentation with no impact on
previously reported net loss or shareholders' equity.
(3) INITIAL PUBLIC STOCK OFFERING
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 $15,200,000. Each Redeemable Class A Warrant entitles
the holder to purchase one share of common stock for $8.50 per share.
(4) INCOME (LOSS) PER COMMON SHARE
Income (loss) per common share is usually based on the weighted average
number of common shares outstanding during each period. However, pursuant to
certain rules of the Securities and Exchange Commission, the calculation also
includes equity securities, including options and warrants, issued within one
year of an initial public offering with an issue price less than the initial
public offering price, even if the effect is anti-dilutive. The treasury stock
approach was used in determining the dilutive effect of such issuances.
6
7
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
MARCH 30, 1997
(UNAUDITED)
(5) 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. (S&D), a company
wholly owned by the Company's founding Shareholder.
GRAND PINES RESORTS, INC. - Grand Pines Resorts, Inc. (Grand Pines) is a
company wholly owned by the founding shareholder of the Company. The Company
charges Grand Pines a royalty of 4% of its food sales and provides certain
management services to Grand Pines for 3% of its food sales. Royalty and
management services income totaled $18,634 and $11,197 for the thirteen weeks
ended March 30, 1997 and March 31, 1996, respectively.
NOTE PAYABLE - SHAREHOLDER - The Company has a $2,000,000 revolving note
with its founding shareholder. The note bears interest at 8%, is unsecured and
is due on demand. There were no outstanding balances on the note at March 30,
1997.
(6) INCOME TAXES
The Company was an S Corporation through March 3, 1996. Accordingly,
losses incurred through March 3, 1996 have been recognized by the Company's
founding shareholder. From March 4, 1996 though December 29, 1996, the Company
generated a net operating loss of approximately $330,000 which, if not used,
will expire in 2011. During the thirteen weeks ended March 30, 1997, an
additional net operating loss of approximately $620,000 was generated which, if
not used, will expire in 2012. Future changes in the ownership of the Company
may place limitations on the use of these net operating loss carryforwards.
The Company has recorded a full valuation allowance against its deferred tax
asset due to the uncertainty of realizing the related benefit.
7
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. (the "Company") is to
develop, own and operate American roadhouse-style barbeque restaurants under
the name "Famous Dave's." During the thirteen weeks ended March 31, 1996, the
Company owned and operated one restaurant, located in the Linden Hills
neighborhood of Minneapolis (the "Linden Hills Unit"). During the thirteen
weeks ended March 30, 1997, the Company owned and operated three restaurants:
the Linden Hills Unit; a unit in Roseville, Minnesota which opened in June 1996
(the "Roseville Unit"); and a unit in Calhoun Square in Minneapolis which
opened in September 1996 (the "Calhoun Blues Club"). The Calhoun Blues Club
features live blues music nightly and an authentic Chicago blues decor. As of
March 30, 1997, the Company had five units in development in the
Minneapolis/St. Paul area (Maple Grove, St. Paul, Stillwater, Minnetonka and
Forest Lake) and one in Madison, Wisconsin. The unit in Maple Grove opened in
April 1997.
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 expand to multi-unit
locations and general economic conditions. The Company's present sources of
revenue are limited to existing operating units. 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 operating units.
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 operations, higher
volume operations, the control of overhead expenses and the addition of
necessary personnel.
The following discussion and analysis of financial condition and results
of operations should be read in conjunction with the accompanying unaudited
condensed consolidated financial statements and notes thereto and the audited
consolidated financial statements and notes thereto included in the Company's
Form 10-KSB for the fiscal year ended December 29, 1996.
RESULTS OF OPERATIONS
The operating results of the Company expressed as a percentage of net sales
were as follows:
THIRTEEN WEEKS ENDED
-------------------------------------
MARCH 30, 1997 MARCH 31, 1996
-------------- --------------
PERCENT PERCENT
------- -------
Sales, Net 100.0 100.0
----- -----
Costs and Expenses:
Food and beverage costs 34.8 32.6
Labor and benefits 25.5 26.0
Restaurant operating expenses 20.3 25.4
Depreciation and amortization 5.6 2.8
----- -----
Total Costs and Expenses 86.2 86.8
----- -----
Income from restaurant operations 13.8 13.2
----- -----
Other Income (Expense):
General and administrative (47.6) (98.4)
Interest and other income (expense),
net 6.2 (1.0)
----- -----
Total Other (Expense) (41.4) (99.4)
----- -----
Net Loss (27.6) (86.2)
----- -----
8
9
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Sales
Net sales for the thirteen weeks ended March 30, 1997 were $2,240,683
compared to $290,388 for the same period in 1996, a 671% increase. The
increase in sales is primarily due to the opening of the Roseville Unit in June
1996 and the Calhoun Blues Club in September 1996.
Food And Beverage Costs
Food and beverage costs for the thirteen weeks ended March 30, 1997 were
$780,026 or 34.8% of sales, compared to $94,743 or 32.6% of sales for the same
period in 1996. The increase in food and beverage costs as a percent of sales
for the thirteen weeks ended March 30, 1997 compared to 1996 was primarily due
to increased pork prices.
Labor And Benefits
Labor and benefits for the thirteen weeks ended March 30, 1997 were
$572,320 or 25.5% of sales, compared to $75,400 or 26% of sales for the same
period in 1996. The decrease in labor and benefits as a percent of sales for
the thirteen weeks ended March 30, 1997 compared to 1996 was primarily due to
improved operating efficiencies achieved.
Restaurant Operating Expenses
Restaurant operating expenses for the thirteen weeks ended March 30, 1997
were $455,838 or 20.3% of sales, compared to $73,902 or 25.4% of sales for the
same period in 1996. The increase in restaurant operating expenses is
primarily attributable to the opening of two restaurants in 1996. The decrease
in restaurant operating expenses as a percent of sales for the thirteen weeks
ended March 30, 1997 compared to 1996 was due to improved operating
efficiencies achieved and increased sales volume.
Depreciation And Amortization
Unit depreciation and amortization for the thirteen weeks ended March 30,
1997 increased to $123,732 or 5.6% of sales from $7,948 or 2.8% of sales during
the same period in 1996 due to the opening of the Roseville Unit and the
Calhoun Blues Club. First quarter 1997 depreciation and amortization includes
approximately $50,000 (2.2% of sales) representing amortization of pre-opening
expenses related to the Roseville and Calhoun Units.
Income From Restaurant Operations
Income from restaurant operations totaled $308,767, or 13.8 percent of net
sales, for the thirteen weeks ended March 30, 1997, compared to $38,935, or
13.2 percent of net sales, in the corresponding period of 1996. The increase
in income from restaurant operations, both in amount and as a percent of sales,
is due to the increase in sales from additional units opened and the changes in
costs and expenses as discussed above.
General And Administrative Expenses
General and administrative expenses for the thirteen weeks ended March 30,
1997 were $1,067,010 or 47.6% of sales, compared to $285,947 or 98.4% of sales
for the same period in 1996. The increase in general and administrative
expenses is largely attributable to additional expenses incurred as the Company
expands its corporate and administrative infrastructure to support the
development of additional units. First quarter 1997 general and administrative
expenses include approximately $150,000 of non-recurring expenses, primarily
relating to recruiting costs; however, the Company expects overall general and
administrative expenses to continue to increase during the remainder of 1997.
The decrease in general and administrative expenses as a percent of sales for
the thirteen weeks ended March 30, 1997 compared to 1996 was primarily due to
increased sales volume and the resulting improved leveraging of the cost of
corporate and administrative infrastructure.
9
10
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Interest And Other Income (Expense), Net
Interest and other income (expense), net primarily represents interest
income received from short-term investments offset by interest expense on
capital lease obligations. Interest and other income (expense), net increased
to $138,956 for the thirteen weeks ending March 30, 1997 from $(2,896) for the
same period in 1996. The increase was due primarily to interest income
received from the short-term investment of proceeds from the initial public
offering in October 1996.
Net Loss/Net Loss Per Common Share
Net Loss for the thirteen weeks ended March 30, 1997 was $619,287 or $.10
per share compared to a net loss of $250,448 or $.11 per share during the
comparable period in 1996. The increase in the net loss is primarily the
result of increased general and administrative expenses which reflect the
building of the infrastructure necessary to support plans for future growth,
partially offset by increased income from restaurant operations as a result of
the two new units opened during 1996. The decrease in net loss per common
share relates primarily to the increase in weighted average number of common
shares outstanding, which increased from 2,214,423 in first quarter 1996 to
6,217,422 in first quarter 1997.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
As of March 30, 1997, the Company held cash and short-term investments of
approximately $13.3 million compared to $14.3 million as of December 29, 1996.
As reflected in the accompanying condensed consolidated financial statements,
this decrease in cash and short-term investments during the thirteen weeks
ended March 30, 1997 primarily represents cash flow used for (i) investing
activities (site acquisition, development and construction) and (ii) the
expansion of the Company's corporate infrastructure.
For the six units in development as of March 30, 1997, the Company had
incurred approximately $2.4 million in property, site acquisition, development
and construction costs through March 30,1997. When completed, the Company
estimates that total capital expenditures for these additional units, including
furniture, fixtures and equipment, will be approximately $9.8 million. It is
expected that these units will be completed in 1997.
Additional development and expansion will be funded or financed primarily
through cash and short-term investments currently held, the sale of additional
equity and debt securities, and other forms of financing such as lease
financing or other credit facilities. There are no assurances that additional
financing required will be available on terms acceptable or favorable to the
Company.
As of March 30,1997, the Company had the following financing and credit
facilities available:
(a) Lease financing of up to $3,500,000 for furniture, fixtures,
equipment and leasehold improvements, of which approximately
$970,000 had been funded as of March 30, 1997.
(b) $1,000,000 revolving note with a bank due June 26, 1997, accruing
interest at the prime rate (effective rate of 8.50%) and secured by
all the assets of the Company and the personal guaranty of the
Company's founding shareholder, of which the balance outstanding at
March 30, 1997 was $0.
(c) Revolving promissory note with its founding shareholder, with
interest at 8%, due on demand and allowing for advances of up to
$2,000,000, of which the balance outstanding at March 30, 1997 was $0.
In addition, the Company has 2,645,000 Redeemable Class A Warrants
outstanding. These warrants were issued as part of the units sold in the
Company's initial public offering and have a four-year term. Each warrant
allows the holder the right to purchase one share of Common Stock at $8.50 per
share. These warrants are redeemable by the Company, on not less than 30 days
notice, at a price of $.01 per warrant at any time following a period of 10
consecutive trading days where the per share average closing bid price of the
Company's Common
10
11
FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Stock exceeds $10.20 (120% of the exercise price.) These conditions were met
on May 5, 1997 and therefore the Company may, at its option, redeem these
warrants at any time through October 21, 2000. However, there are no
assurances that all, or any, of these warrants will be exercised should the
Company decide to redeem them. Upon exercise, these warrants provide for up to
a maximum of approximately $22 million in additional proceeds to the Company.
Holders of these Class A Warrants will be able to exercise the warrants only if
a current prospectus relating to the shares of Common Stock underlying the
Class A Warrants is in effect.
SEASONALITY
The Company's Units typically generate higher revenues in the second and
third quarters and lower revenues in the first and fourth quarters as a result
of seasonal traffic increases experienced during the summer months.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. Certain information included in this
Form 10-QSB and other materials filed or to be filed by the Company with the
Securities and Exchange Commission (as well as information included in oral
statements or other written statements made or to be made by the Company)
contains statements that are forward-looking. A number of important factors
could, individually or in the aggregate, cause actual results to differ
materially from those expressed or implied in any forward-looking statements.
Such factors include, but are not limited to, the following: competition in the
casual dining restaurant market; additional market acceptance of the Company's
concept; consumer spending trends and habits; weather conditions in the regions
in which the Company develops and operates restaurants; and laws and
regulations affecting labor and employee benefit costs. For further
information regarding these and other factors, see the Company's Annual Report
on Form 10-KSB for the fiscal year ended December 29, 1996.
11
12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See the Company's Annual Report on Form 10-KSB for the fiscal year ended
December 29, 1996.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
None
12
13
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
FAMOUS DAVE'S OF AMERICA, INC.
__________________________________
Douglas S. Lanham
Chief Executive Officer
and Chief Operating Officer
__________________________________
Mark A. Payne
President
__________________________________
Steven E. Opdahl
Vice President, Finance and
Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: May 9, 1997
13