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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-QSB
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 27, 1998
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
COMMISSION FILE NUMBER 0-20845
BIG BUCK BREWERY & STEAKHOUSE, INC.
(Exact Name of Registrant as Specified in its Charter)
MICHIGAN 38-3196031
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
550 SOUTH WISCONSIN STREET
GAYLORD, MICHIGAN 49735
(517) 731-0401
(Address of Principal Executive Offices, including Zip Code,
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 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
----- -----
As of November 12, 1998, there were outstanding 5,285,000 shares of Common
Stock, $0.01 par value, of the registrant.
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TABLE OF CONTENTS
Page
PART I FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . 1
ITEM 1. Financial Statements
Balance Sheets as of September 27, 1998 and December 28, 1997 . . . . 1
Statements of Operations for the three months ended September 27,
1998 and September 28, 1997 and for the nine months ended
September 27, 1998 and September 28, 1997 . . . . . . . . . . . . . . 2
Statements of Cash Flows for the nine months ended September 27,
1998 and September 28, 1997 . . . . . . . . . . . . . . . . . . . . . 3
Condensed Notes to Financial Statements . . . . . . . . . . . . . . . 4
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . 5
PART II OTHER INFORMATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
ITEM 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . 10
ITEM 6. Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . 10
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
EXHIBIT INDEX. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
PART I
ITEM 1. Financial Statements
BIG BUCK BREWERY & STEAKHOUSE, INC.
BALANCE SHEETS
SEPTEMBER 27, DECEMBER 28,
1998 1997
-------------- --------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 163,764 $ 354,015
Sale and leaseback financing receivable -- 749,650
Accounts receivable 124,872 170,460
Inventories 288,940 289,805
Preopening expenses -- 348,581
Prepaids and other 291,682 171,766
------------ ------------
Total current assets 869,258 2,084,277
PROPERTY AND EQUIPMENT, net 18,332,115 18,340,043
OTHER ASSETS, net 541,116 383,301
------------ ------------
$19,742,489 $20,807,621
------------ ------------
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,208,932 $ 843,430
Accrued expenses 498,304 735,727
Current maturities of long-term debt 245,830 249,824
------------ ------------
Total current liabilities 1,953,066 1,828,981
LONG-TERM DEBT, less current maturities 7,089,199 7,274,558
------------ ------------
Total liabilities 9,042,265 9,103,539
------------ ------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, $0.01 par value, 20,000,000 shares authorized;
5,285,000 shares issued and outstanding 52,850 52,850
Warrants 153,650 153,650
Additional paid-in capital 13,240,694 13,240,694
Accumulated deficit (2,746,970) (1,743,112)
------------ ------------
Total shareholders' equity 10,700,224 11,704,082
------------ ------------
$19,742,489 $20,807,621
------------ ------------
------------ ------------
The accompanying notes are an integral part of these balance sheets.
1
BIG BUCK BREWERY & STEAKHOUSE, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
THREE MONTHS NINE MONTHS
ENDED ENDED
---------------------------- ----------------------------
SEPTEMBER SEPTEMBER SEPTEMBER SEPTEMBER
27, 1998 28, 1997 27, 1998 28, 1997
------------ ------------- ------------- -------------
REVENUE:
Restaurant sales $ 3,871,472 $ 1,987,086 $ 11,127,951 $ 4,664,842
Wholesale beer and gift shop sales 217,721 175,513 537,937 390,108
----------- ----------- ------------ ------------
Total revenue 4,089,193 2,162,599 11,665,888 5,054,950
COSTS AND EXPENSES:
Cost of sales 1,393,785 746,588 4,001,458 1,725,603
Restaurant salaries and benefits 1,231,984 568,062 3,463,948 1,415,131
Operating expenses 819,916 385,032 2,464,924 1,050,886
Depreciation and amortization 187,811 131,695 563,129 357,791
----------- ----------- ------------ ------------
Total costs and expenses 3,633,496 1,831,377 10,493,459 4,549,411
Restaurant operating income 455,697 331,222 1,172,429 505,539
General and administrative expenses 412,283 457,292 1,271,226 1,178,961
----------- ----------- ------------ ------------
INCOME (LOSS) FROM OPERATIONS 43,414 (126,070) (98,797) (673,422)
----------- ----------- ------------ ------------
OTHER INCOME (EXPENSE):
Interest expense (190,699) (81,938) (565,769) (232,320)
Interest income 1,868 12,026 7,319 99,770
Loss on Sale of Property -- -- -- (3,100)
----------- ----------- ------------ ------------
Total other income (expense) (188,831) (69,912) (558,450) (135,650)
----------- ----------- ------------ ------------
LOSS BEFORE CUMULATIVE EFFECT OF
CHANGE IN ACCOUNTING PRINCIPLE (145,417) (195,982) (657,247) (809,072)
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE FOR
START-UP COSTS -- -- (346,547) --
----------- ----------- ------------ ------------
NET LOSS ($145,417) ($195,982) ($1,003,794) ($809,072)
----------- ----------- ------------ ------------
BASIC AND DILUTED NET LOSS PER
COMMON SHARE BEFORE CHANGE
IN ACCOUNTING PRINCIPLE ($0.03) ($0.04) ($0.12) ($0.15)
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE -- -- ($0.07) --
----------- ----------- ------------ ------------
BASIC AND DILUTED NET LOSS PER
COMMON SHARE ($0.03) ($0.04) ($0.19) ($0.15)
----------- ----------- ------------ ------------
BASIC AND DILUTED WEIGHTED
AVERAGE SHARES OUTSTANDING 5,285,000 5,275,000 5,285,000 5,275,000
----------- ----------- ------------ ------------
The accompanying notes are an integral part of these financial statements.
2
BIG BUCK BREWERY & STEAKHOUSE, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
NINE MONTHS
ENDED
-------------------------
SEPTEMBER SEPTEMBER
27, 1998 28, 1997
---------- ----------
OPERATING ACTIVITIES:
Net loss ($1,003,794) ($809,072)
Adjustments to reconcile net loss to cash flows used in
operating activities -
Depreciation and amortization 563,129 357,791
Loss on sale of property -- 3,100
Cumulative effect of change in accounting
for start-up costs 346,547 --
Change in operating assets and liabilities:
Accounts receivable 45,588 --
Inventories 865 (113,262)
Prepaids and other (119,916) (2,173,862)
Accounts payable 365,502 1,318,612
Accrued expenses (237,423) 259,567
------------ -----------
Net cash used in operating activities (39,502) (1,157,126)
------------ -----------
INVESTING ACTIVITIES:
Purchases of property and equipment, net (553,231) (8,461,460)
Increase in other assets (157,815) --
------------ -----------
Net cash used in investing activities (711,046) (8,461,460)
------------ -----------
FINANCING ACTIVITIES:
Payments on long-term debt (189,353) (187,859)
Proceeds from sale of short-term investments -- 4,910,000
Proceeds from capital lease obligations 749,650 5,400,000
------------ -----------
Net cash provided by financing activities 560,297 10,122,141
------------ -----------
INCREASE (DECREASE) IN CASH (190,251) 503,555
CASH, beginning of period 354,015 28,468
------------ -----------
CASH, end of period $163,764 $532,023
------------ -----------
------------ -----------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $573,330 $237,036
The accompanying notes are an integral part of these financial statements.
3
BIG BUCK BREWERY & STEAKHOUSE, INC.
CONDENSED NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 27, 1998
1. BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited financial statements included herein have been
prepared by Big Buck Brewery & Steakhouse, Inc. (the Company) in accordance
with generally accepted accounting principles for interim financial
information and pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to
such rules and regulations, although the Company believes that the
disclosures are adequate to make the information not misleading.
The unaudited balance sheet as of September 27, 1998 and the unaudited
statements of operations and cash flows for the three and the nine months
ended September 27, 1998 and September 28, 1997 include, in the opinion of
management, all adjustments, consisting solely of normal recurring
adjustments, necessary for a fair presentation of the financial results for
the respective interim periods and are not necessarily indicative of
results of operations to be expected for the entire fiscal year ending
January 3, 1999. The accompanying interim financial statements have been
prepared under the presumption that users of the interim financial
information have either read, or have access to, the audited financial
statements and notes in the Company's Form 10-KSB for the year ended
December 28, 1997. Accordingly, footnote disclosures which would
substantially duplicate the disclosures contained in the December 28, 1997
audited financial statements have been omitted from these interim financial
statements except for the disclosures below. It is suggested that these
interim financial statements should be read in conjunction with the
financial statements and the notes thereto included in the Company's Form
10-KSB for the fiscal year ended December 28, 1997.
2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Company adopted in the fiscal year ended December 28, 1997, Statement
of Financial Accounting Standards (SFAS) No. 128 "Earnings Per Share" which
requires disclosure of basic earnings per share (EPS) and diluted EPS,
which replaces the existing primary EPS and fully diluted EPS, as defined
by APB No. 15. Basic EPS is computed by dividing net income by the
weighted average number of shares of Common Stock outstanding during the
year. Dilutive EPS is computed similarly to EPS as previously reported,
provided that, when applying the treasury stock method to common equivalent
shares, the Company must use its average share price for the period rather
than the more dilutive greater of the average share price or end-of-period
price required by APB No. 15. The adoption of SFAS No. 128 had no effect
on the Company's September 28, 1997 EPS data.
SFAS No. 130, "Reporting Comprehensive Income," effective beginning in
fiscal 1998, establishes standards of disclosure and financial statement
display for reporting total comprehensive income and the individual
components thereof. The adoption of SFAS No. 130 did not have an impact on
the Company's financial position or results of operations as comprehensive
income and net income were the same for all periods presented.
During April 1998, the Accounting Standards Executive Committee of the
America Institute of Certified Public Accountants issued Statement of
Position (SOP) 98-5, "Reporting on the Costs of Start-Up Activities." SOP
98-5 requires companies to expense as incurred all start-up and preopening
costs that
4
are not otherwise capitalizable as long-lived assets. The Company has
elected early implementation of the new accounting standard retroactive
to the beginning of 1998. The effect of this accounting change was to
charge operations the unamortized balance of preopening costs as of
December 28, 1997 of $346,547.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
SOME OF THE INFORMATION IN THIS DOCUMENT MAY CONTAIN FORWARD-LOOKING
STATEMENTS. YOU CAN IDENTIFY SUCH STATEMENTS BY NOTING THE USE OF
FORWARD-LOOKING TERMS SUCH AS "BELIEVES," "EXPECTS," "PLANS," "ESTIMATES" AND
OTHER SIMILAR WORDS. CERTAIN RISKS, UNCERTAINTIES OR ASSUMPTIONS THAT ARE
DIFFICULT TO PREDICT MAY AFFECT SUCH STATEMENTS. THE CAUTIONS AND RISKS
DESCRIBED HEREIN, AND THOSE CONTAINED IN THE COMPANY'S ANNUAL REPORT ON FORM
10-KSB, FILED ON MARCH 23, 1998, COULD CAUSE THE COMPANY'S ACTUAL OPERATING
RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED IN ANY FORWARD-LOOKING
STATEMENT. THE COMPANY CAUTIONS YOU TO KEEP IN MIND SUCH RISK FACTORS AND
OTHER CAUTIONARY STATEMENTS AND TO REFRAIN FROM PLACING UNDUE RELIANCE ON ANY
FORWARD-LOOKING STATEMENTS, WHICH SPEAK ONLY AS OF THE DATE OF THIS DOCUMENT.
OVERVIEW
The Company was capitalized in 1994 to develop, own and operate
microbrewery/restaurants with the name "Big Buck Brewery & Steakhouse" (each
a "Unit"). Until May 1995, when the Company opened its first Unit in
Gaylord, Michigan, it had no operations or revenues and its activities were
devoted solely to development. The Gaylord Unit, which seats approximately
350 in the restaurant and bar combined, adjoins I-75 approximately 200 miles
north of Detroit. In March 1997, the Company opened its second Unit in Grand
Rapids, Michigan. The Grand Rapids Unit's seating capacity is approximately
250 in the restaurant and bar combined. The brewing and fermenting tanks of
this Unit front directly on 28th Street, a street with an average daily
vehicle count of approximately 52,000. In October 1997, the Company opened
its third Unit in Auburn Hills, Michigan, a suburb of Detroit. The Auburn
Hills Unit, which houses a 15-barrel brewing system, encompasses 26,372
square feet including brewery, bar and restaurant, with a total seating
capacity of approximately 650.
Future revenues and profits will depend upon various factors, including
market acceptance of Big Buck Units and general economic conditions. The
Company's present sources of revenue are the Gaylord, Grand Rapids and Auburn
Hills Units. There can be no assurance that the Company will successfully
implement its expansion plans, in which case the Company will continue to be
dependent on the revenues from the existing Units. The Company also faces
all of the risks, expenses and difficulties frequently encountered in
connection with the expansion and development of a new business.
Furthermore, to the extent that the Company's expansion strategy is
successful, it must manage the transition to multiple site, higher volume
operations, control increased overhead expenses and hire additional personnel.
The Company's sales and earnings are expected to fluctuate based on seasonal
patterns. The Company anticipates that its highest earnings will occur in the
second and third quarters. Quarterly results in the future are likely to be
substantially affected by the timing of new Unit openings. Because of the
seasonality of the Company's business and the impact of new Unit openings,
results for any quarter are not necessarily indicative of the results that may
be achieved for a full fiscal year and cannot be used to indicate financial
performance for the entire year.
5
The following table is derived from the Company's statements of operations and
expresses the results from operations as a percent of total revenue:
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
September September September September
27, 1998 28, 1997 27, 1998 28, 1997
------------ ----------- ---------- ----------
REVENUE:
Restaurant sales 94.7% 91.9% 95.4% 92.3%
Wholesale beer and gift shop sales 5.3% 8.1% 4.6% 7.7%
------- ------- ------- -------
Total revenue 100.0% 100.0% 100.0% 100.0%
------- ------- ------- -------
COST AND EXPENSES:
Cost of sales 34.1% 34.5% 34.3% 34.1%
Restaurant salaries and benefits 30.1% 26.3% 29.7% 28.0%
Operating expenses 20.1% 17.8% 21.1% 20.8%
Depreciation and amortization 4.6% 6.1% 4.8% 7.1%
------- ------- ------- -------
Total costs and expenses 88.9% 84.7% 89.9% 90.0%
------- ------- ------- -------
Restaurant operating income 11.1% 15.3% 10.1% 10.0%
General and administrative expenses 10.1% 21.1% 10.9% 23.3%
------- ------- ------- -------
INCOME (LOSS) FROM OPERATIONS 1.0% (5.8%) (0.8%) (13.3%)
------- ------- ------- -------
OTHER INCOME (EXPENSE):
Interest expense (4.7%) (3.8%) (4.8%) (4.6%)
------- ------- ------- -------
Interest income 0.0% 0.6% 0.1% 2.0%
Loss on sale of property 0.0% 0.0% 0.0% (0.1%)
------- ------- ------- -------
Total other income (expense) (4.7%) (3.2%) (4.7%) (2.7%)
------- ------- ------- -------
LOSS BEFORE CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE (3.7%) (9.0%) (5.5%) (15.9%)
CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE FOR
START-UP COSTS -- -- (3.0%) --
------- ------- ------- -------
NET LOSS (3.7%) (9.0%) (8.5%) (15.9%)
------- ------- ------- -------
------- ------- ------- -------
RESULTS OF OPERATIONS FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 27,
1998 AND SEPTEMBER 28, 1997
REVENUES
Revenues increased 89% to $4,089,193 in the quarter ended September 27, 1998
from $2,162,599 in the quarter ended September 28, 1997. Revenues increased
131% to $11,665,888 for the nine months ended September 27, 1998 from $5,054,950
for the comparable period in 1997. The large increases are attributable to the
opening of the Grand Rapids Unit on March 17, 1997 and the opening of the Auburn
Hills Unit on October 1, 1997.
6
COST OF SALES
Cost of sales, which consists of food, merchandise and brewery supplies,
increased 87% to $1,393,785 in the third quarter of 1998 compared to the third
quarter of 1997, and increased 132% to $4,001,458 for the nine months ended
September 27, 1998 compared to the same period in 1997. As a percentage of
revenues, cost of sales decreased to 34.1% for the third quarter of 1998 as
compared to 34.5% for the same period in 1997 and increased to 34.3% for the
nine months ended September 27, 1998 from 34.1% for the comparable period in
1997. The percentage decrease for the quarter is the result of an increase in
menu prices and volume purchasing during the quarter. The increase for the nine
months ended September 27, 1998 is due to higher produce costs incurred during
the first two quarters of 1998.
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, increased 117% to $1,231,984 in the third quarter of 1998 compared to
the third quarter of 1997, and increased 145% to $3,463,948 for the nine months
ended September 27, 1998 compared to the comparable period in 1997. The large
increases are due to the opening of the Grand Rapids and Auburn Hills Units. As
a percentage of revenues, restaurant salaries and benefits increased to 30.1% in
the third quarter of 1998 compared to 26.3% in the third quarter of 1997, and
increased to 29.7% for the nine months ended September 27, 1998 compared to
28.0% for the same period in 1997. The increase for the quarter is due to the
hiring of assistant managers for the Company's Manager-In-Training program,
which will provide the Company with trained managers for its expansion plans.
The increase for the quarter as a percentage of revenues was partially offset by
the large increase in revenue during the third quarter of 1998 due to summer
tourists. The opening of the Grand Rapids and Auburn Hills Units has reduced
the impact of such seasonality on a combined basis. The increase for the nine
months ended September 27, 1998 is the result of the implementation of a
discretionary Unit-level manager incentive bonus plan and the continuation of
the Company's staff training program.
OPERATING EXPENSES
Operating expenses, which include supplies, utilities, repairs and maintenance,
advertising and occupancy costs, increased 113% to $819,916 in the third quarter
of 1998 compared to the same quarter of 1997, and increased 135% to $2,464,924
for the nine months ended September 27, 1998 compared to the comparable period
in 1997. As a percentage of revenues, operating expenses increased to 20.1% in
the third quarter of 1998 as compared to 17.8% for the same period in 1997, and
decreased to 21.1% for the nine months ended September 27, 1998 from 20.8% for
the comparable period in 1997. The increases are the result of additional
spending on advertising and promotional programs and higher credit card fees as
a percentage of revenues from higher credit card usage by customers at the Grand
Rapids and Auburn Hills Units.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expenses increased 43% to $187,811 in the third
quarter of 1998 compared to the same quarter of 1997, and increased 57% to
$563,129 for the nine months ended September 27, 1998 compared to the same
period in 1997. As a percentage of revenues, these expenses decreased to 4.6%
in the third quarter of 1998 as compared to 6.1% for the same quarter in 1997,
and decreased to 4.8% for the nine months ended September 27, 1998 from 7.1% for
the comparable period in 1997. The decreases in these expenses as a percentage
of revenues reflect the increases in total sales.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses decreased 9.8% to $412,283 in the third
quarter of 1998 compared to the same quarter in 1997, and increased 7.8% to
$1,271,226 for the nine months ended September 27, 1998 compared
7
to the same period in 1997. As a percentage of revenues, these expenses
decreased to 10.1% in the third quarter of 1998 from 21.1% for the third
quarter of 1997, and decreased to 10.9% for the nine months ended September
27, 1998 from 23.3% for the comparable period in 1997. The decreased
expenses as a percentage of revenues reflect an increase in total sales. As
additional Units are opened by the Company, management believes that these
expenses will continue to decrease as a percentage of revenues.
INTEREST EXPENSE/INTEREST INCOME
Interest expense increased $108,761 to $190,699 in the third quarter of 1998
compared to third quarter of 1997, and increased $333,449 to $565,769 for the
nine months ended September 27, 1998 as compared to the same period in 1997. As
a percentage of revenues, interest expense increased to 4.7% for the third
quarter of 1998 as compared to 3.8% for the third quarter of 1997, and increased
to 4.8% for the nine months ended September 27, 1998 from 4.6% for the same
period in 1997. As additional Units are opened by the Company, management
believes that it will incur additional interest expense.
Interest income decreased $10,158 to $1,868 in the third quarter of 1998
compared to $12,026 for the third quarter of 1997 and decreased $92,451 to
$7,319 for the nine months ended September 27, 1998 from $99,770 for the same
period in 1997. The decreases are the result of the use of the initial public
offering proceeds for completion of the Grand Rapids and Auburn Hills Units.
CHANGE IN ACCOUNTING PRINCIPLE
The Company elected early adoption of Statement of Position (SOP) 98-5,
"Reporting on the Costs of Start-Up Activities." SOP 98-5 requires companies to
expense as incurred all start-up and preopening costs that are not otherwise
capitalizable as long-lived assets. The effect of this accounting change is to
charge to operations the unamortized balance of preopening costs as of December
28, 1997 of $346,547.
LIQUIDITY AND CAPITAL RESOURCES
The Company used $39,502 in cash for the nine months ended September 27, 1998,
and used $1,157,126 in cash for the nine months ended September 28, 1997, for
operating activities. At September 27, 1998, the Company had a working capital
deficit of $1,083,808. In order to fund operations in the short term, the
Company intends to use cash provided by the operations of its three existing
Units. The Company is also exploring the possible issuance of debt and equity
securities to increase its working capital.
Since inception, the Company's principal capital requirements have been the
funding of (i) Company operations and promotion of the Big Buck Brewery &
Steakhouse format and (ii) the construction of the Gaylord, Grand Rapids and
Auburn Hills Units and the acquisition of furniture, fixtures and equipment for
such Units. The total capital expenditures for the Gaylord, Grand Rapids and
Auburn Hills Units were approximately $5.8 million, $3.2 million and $9.7
million, respectively.
During the nine months ended September 27, 1998, the Company generated $560,297
in cash from the financing activities attributable to the proceeds from capital
lease obligations, partially offset by payments of long-term debt. During the
nine months ended September 27, 1998, the Company spent approximately $393,000
for final construction and equipment costs at the Auburn Hills Unit and the
Company spent approximately $318,000 in the form of deposits on new equipment
and for professional services in connection with the Company's expansion plans.
The Company has entered into a Limited Partnership Agreement with Bass Pro
Outdoor World, L.P. to construct and operate a new Unit in Grapevine, Texas, a
suburb of Dallas. Reference is made to the press release of the Company,
attached hereto as an exhibit, dated November 5, 1998. On or before November
20, 1998, the Company is obligated to make an initial capital contribution
totaling $891,000. Under the terms of the Limited Partnership
8
Agreement, the Company may be required to make additional capital
contributions of up to $4,509,000 to construct the Grapevine Unit. The
Company is seeking debt and equity financing for its capital contributions.
There can be no assurance that financing will be available on terms
acceptable or favorable to the Company, or at all.
The Company plans to develop and open additional Units and will need to obtain
additional financing to fulfill such expansion plans. The amount of financing
required for expansion depends on the locations, site conditions, construction
costs and size and type of Units to be built. There can be no assurance that
financing will be available on terms acceptable or favorable to the Company, or
at all. Without additional financing, the Company's development plans will be
scaled back or eliminated.
IMPACT OF YEAR 2000 ISSUEs
The term "Year 2000" is used to describe general problems that may result
from improper processing of dates and date-sensitive calculations by
computers or other machinery as the year 2000 is approached and reached.
This problem stems from the fact that many of the world's computer hardware
and software applications have historically used only the last two digits to
refer to a year. As a result, many of these computer programs do not or will
not properly recognize a year that begins with "20" instead of the familiar
"19." If not corrected, many computer applications could fail or create
erroneous results. The following information was prepared to comply with the
guidelines for Year 2000 disclosure that the Securities and Exchange
Commission issued in an Interpretative Release, effective August 4, 1998.
To operate its business, the Company relies on many third party information
technology ("IT") systems, including its point of sale, table seating and
reservation management, inventory management, credit card processing, payroll,
accounts payable, fixed assets, banking and general ledger systems. The Company
does not maintain any proprietary IT systems and has not made any modifications
to any of the IT systems provided to it by its IT vendors. The Company plans to
request each of the vendors providing hardware and software to run these systems
to complete a Year 2000 compliance questionnaire.
The Company also relies upon suppliers of raw materials and packaging for beer,
suppliers of food and retail products and other third party product and service
providers, over which it can assert little control. The Company's ability to
conduct its business may be negatively affected if its vendors are unable to
deliver products or services as a result of Year 2000 compliance problems.
The Company has begun an assessment of its vendor relationships to determine
risk and assist in the development of contingency plans. This effort is
expected to be completed by July 1, 1999.
The Company expenses costs associated with its Year 2000 compliance efforts as
the costs are incurred. The Company has not yet incurred expenses in connection
with its Year 2000 compliance efforts and estimates that future expenditures
required to complete its Year 2000 compliance efforts will be immaterial.
9
PART II
ITEM 4. Submission of Matters to a Vote of Security Holders
a. A Special Meeting of Shareholders was held on September 15, 1998.
b. Not applicable.
c. One proposal was submitted for shareholder approval, which passed
with voting results as follows:
(1) To approve an amendment to the Restated Articles of
Incorporation of the Company to increase the Company's
authorized capital stock and to authorize the issuance of
preferred stock.
For: 2,901,041 Against: 616,501
Abstain: 26,501 Non-Votes: 0
ITEM 6. Exhibits and Reports on Form 8-K
a. Exhibits
10.1 Limited Partnership Agreement by and among BBBP Management
Company, Bass Pro Outdoor World, L.P. and Big Buck Brewery &
Steakhouse, Inc., dated November 5, 1998.
10.2 Shareholders' Agreement by and among BBBP Management
Company, Bass Pro Outdoor World, L.P. and Big Buck Brewery &
Steakhouse, Inc., dated November 5, 1998.
10.3 Commercial Sublease Agreement by and between Bass Pro
Outdoor World, L.P. and Buck & Bass, L.P., dated November 5,
1998.
10.4 Common Stock Purchase Warrant issued by Big Buck Brewery &
Steakhouse, Inc. to Bass Pro Outdoor World, L.P., dated
November 5, 1998.
27.1 Financial Data Schedule.
99.1 Press Release, dated November 5, 1998.
b. Reports on Form 8-K
The Registrant filed no Current Reports on Form 8-K during the
quarter ended September 27, 1998.
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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 12, 1998 By /s/ Anthony P. Dombrowski
---------------------------------
Anthony P. Dombrowski
Chief Financial Officer
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EXHIBIT INDEX
Exhibit
Number Description
- -------- -----------
10.1 Limited Partnership Agreement by and among BBBP Management
Company, Bass Pro Outdoor World, L.P. and Big Buck Brewery &
Steakhouse, Inc., dated November 5, 1998.
10.2 Shareholders' Agreement by and among BBBP Management Company, Bass
Pro Outdoor World, L.P. and Big Buck Brewery & Steakhouse, Inc.,
dated November 5, 1998.
10.3 Commercial Sublease Agreement by and between Bass Pro Outdoor
World, L.P. and Buck & Bass, L.P., dated November 5, 1998.
10.4 Common Stock Purchase Warrant issued by Big Buck Brewery &
Steakhouse, Inc. to Bass Pro Outdoor World, L.P., dated November
5, 1998.
27.1 Financial Data Schedule.
99.1 Press Release, dated November 5, 1998.
12