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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
 FORM 10-Q [X]
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
            OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period Ended April 3, 2005 [  ]
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
            OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File No. 0-21625   FAMOUS DAVES of AMERICA, INC.  Minnesota
(State or other jurisdiction of
incorporation or organization)
    
    41-1782300
(I.R.S. Employer
Identification No.)
 8091 Wallace Road
Eden Prairie, Minnesota 55344 (Address of principal executive offices) (Zip code) Registrants telephone number, including area code (952) 294-1300 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act (the Act) of 1934 during the preceding 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 Indicate by check mark whether the Registrant is an accelerated filer (as defined by Rule 12-b-2 of the Act).
Yes X No The aggregate market value of the Registrants Common Stock held by non-affiliates on June 25, 2004
(the last business day of the Registrants most recently completed second quarter), based upon the
last sale price of the Common Stock as reported on the NASDAQ National Market on June 25, 2004 was
$78,768,109. As of May 10, 2005, 10,941,826 shares of the Registrants Common Stock were
outstanding. - 1 -




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FAMOUS DAVES OF AMERICA, INC.
TABLE OF CONTENTS 
 PagePART I
    
    FINANCIAL INFORMATIONItem 1
    
    Consolidated Financial StatementsConsolidated Balance SheetsAs of April 3, 2005 and January 2, 2005
    
    
    3Consolidated Statements of Operations
    
    
    4For the three months ended April 3, 2005 and March 28, 2004Consolidated Statements of Cash Flows
    
    
    5For the three months ended April 3, 2005 and March 28, 2004Notes to Consolidated Financial Statements
    
    
    6Item 2
    
    Managements Discussion and Analysis of Financial Condition and
    
    
    11Results of OperationsItem 3
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    20Item 4
    
    Controls and Procedures
    
    
    20PART II
    
    OTHER INFORMATIONItem 1
    
    Legal Proceedings
    
    
    21Item 2
    
    Purchases of Equity Securities by the Issuer
    
    
    22Item 5
    
    Other Information
    
    
    23Item 6
    
    Exhibits
    
    
    23SIGNATURESCERTIFICATIONSForm of Amended/Restated 2004-2006 Performance Share AgreementSchedule of Grants made under Amended/Restated 2004-2006 Performance Share AgreementForm of Amended/Restated 2005-2007 Performance Share AgreementSchedule of Grants made under Amended/Restated 2005-2007 Performance Share AgreementCertification of CEO Pursuant to Section 302Certification of CFO Pursuant to Section 302Certification of CEO & CFO to 18 U.S.C. Section 1350
  - 2 -




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FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
APRIL 3, 2005 AND JANUARY 2, 2005(in thousands, except share and per-share data) April 3,
    
    
    January 2,2005
    
    
    2005(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    6,674
    
    
    $
    11,170Restricted cash
    
    
    359
    
    
    
    39Accounts receivable, net
    
    
    1,576
    
    
    
    2,289Inventories
    
    
    1,502
    
    
    
    1,523Prepaid expenses and other current assets
    
    
    4,910
    
    
    
    4,747Total current assets
    
    
    15,021
    
    
    
    19,768Property, equipment and leasehold improvements, net
    
    
    44,366
    
    
    
    44,664Other assets:Notes receivable, less current portion
    
    
    2,092
    
    
    
    2,156Deferred tax asset, less current portion
    
    
    4,458
    
    
    
    4,458Other assets
    
    
    933
    
    
    
    867$
    66,870
    
    
    $
    71,913LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Line of credit
    
    $
    
    
    
    
    Current portion of long-term debt
    
    
    402
    
    
    
    424Current portion of capital leases
    
    
    85
    
    
    
    97Accounts payable
    
    
    2,269
    
    
    
    4,138Other current liabilities
    
    
    5,269
    
    
    
    4,352Total current liabilities
    
    
    8,025
    
    
    
    9,011Long-term liabilities:Long-term debt, less current portion
    
    
    11,831
    
    
    
    11,937Capital leases, less current portion
    
    
    
    
    
    
    16Financing leases
    
    
    4,500
    
    
    
    4,500Other liabilities, net
    
    
    3,214
    
    
    
    3,106Total liabilities
    
    
    27,570
    
    
    
    28,570Shareholders equity:Common stock, $.01 par value, 100,000,000
shares authorized,
11,101,000 and 11,340,000 shares issued and
outstanding
    
    
    111
    
    
    
    113Additional paid-in capital
    
    
    45,100
    
    
    
    49,674Accumulated deficit
    
    
    (5,911
    )
    
    
    (6,444
    )Total shareholders equity
    
    
    39,300
    
    
    
    43,343$
    66,870
    
    
    
    71,913
 See accompanying notes to consolidated financial statements. - 3 -




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FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
APRIL 3, 2005 AND MARCH 28, 2004(in thousands, except share and per share data)
(Unaudited) Three Months EndedApril 3,
    
    
    March 28,2005
    
    
    2004Revenue:Restaurant sales, net
    
    $
    20,743
    
    
    $
    20,573Franchise royalty revenue
    
    
    2,143
    
    
    
    1,584Franchise fee revenue
    
    
    395
    
    
    
    438Licensing and other revenue
    
    
    215
    
    
    
    52Total revenue
    
    
    23,496
    
    
    
    22,647Costs and expenses:Food and beverage costs
    
    
    6,349
    
    
    
    6,407Labor and benefits
    
    
    6,293
    
    
    
    6,336Operating expenses
    
    
    5,066
    
    
    
    5,004Depreciation and amortization
    
    
    1,123
    
    
    
    1,118General and administrative
    
    
    3,373
    
    
    
    2,498Total costs and expenses
    
    
    22,204
    
    
    
    21,363Income from operations
    
    
    1,292
    
    
    
    1,284Other income (expense):Interest expense
    
    
    (480
    )
    
    
    (481
    )Interest income
    
    
    94
    
    
    
    75Other expense, net
    
    
    (47
    )
    
    
    (11
    )Total other expense
    
    
    (433
    )
    
    
    (417
    )Income before income taxes
    
    
    859
    
    
    
    867Income tax provision
    
    
    (326
    )
    
    
    (340
    )Net income
    
    $
    533
    
    
    $
    527Basic and diluted net income per common share
    
    $
    0.05
    
    
    $
    0.04Weighted average common shares outstanding  basic
    
    
    11,329,000
    
    
    
    12,279,000Weighted average common shares outstanding  diluted
    
    
    11,720,000
    
    
    
    12,641,000
 See accompanying notes to consolidated financial statements. - 4 -




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FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
APRIL 3, 2005 AND MARCH 28, 2004(in thousands)
(Unaudited) Three Months EndedApril 3,
    
    
    March 28,2005
    
    
    2004Cash flows from operating activities:Net income
    
    $
    533
    
    
    $
    527Adjustments to reconcile net income to cash flows provided by operations:Depreciation and amortization
    
    
    1,123
    
    
    
    1,118Amortization of deferred financing costs
    
    
    14
    
    
    
    11Loss on disposal of property
    
    
    4
    
    
    
    6Deferred tax asset
    
    
    286
    
    
    
    337Deferred rent
    
    
    108
    
    
    
    117Deferred compensation
    
    
    206
    
    
    
    52Other non-cash items affecting earnings
    
    
    
    
    
    
    10Changes in operating assets and liabilities:Restricted cash
    
    
    (320
    )
    
    
    (287
    )Accounts receivable, net
    
    
    205
    
    
    
    521Inventories
    
    
    21
    
    
    
    12Prepaids and other current assets
    
    
    101
    
    
    
    (60
    )Deposits
    
    
    5
    
    
    
    (42
    )Accounts payable
    
    
    (1,869
    )
    
    
    821Other current liabilities
    
    
    663
    
    
    
    (1,621
    )Cash flows provided by operations
    
    
    1,080
    
    
    
    1,522Cash flows from investing activities:Purchases of property, equipment and leasehold improvements
    
    
    (829
    )
    
    
    (367
    )Payments received on notes receivable
    
    
    70
    
    
    
    44Cash flows used for investing activities
    
    
    (759
    )
    
    
    (323
    )Cash flows from financing activities:Payments for debt issuance costs
    
    
    (85
    )
    
    
    Payments on long-term debt
    
    
    (128
    )
    
    
    (88
    )Payments on capital lease obligations
    
    
    (28
    )
    
    
    (136
    )Proceeds from exercise of stock options
    
    
    394
    
    
    
    464Repurchase of common stock
    
    
    (4,970
    )
    
    
    Cash flows (used for) provided by financing activities
    
    
    (4,817
    )
    
    
    240(Decrease) increase in cash and cash equivalents
    
    
    (4,496
    )
    
    
    1,439Cash and cash equivalents, beginning of period
    
    
    11,170
    
    
    
    9,964Cash and cash equivalents, end of period
    
    $
    6,674
    
    
    $
    11,403Supplemental cash flow information:Interest paid during the period
    
    $
    516
    
    
    $
    436Income taxes paid during the period
    
    $
    206
    
    
    $
    4Non-Cash items:Reclass of accounts receivable to other current assets
    
    $
    508
    
    
    $
    
 See accompanying notes to consolidated financial statements. - 5 -




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FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  (1)
    Basis of Presentation We, Famous Daves of America, Inc. (Famous Daves or the Company), were incorporated in
Minnesota on March 14, 1994. We develop, own, operate and franchise restaurants under the name
Famous Daves. As of April 3, 2005, there were 109 restaurants operating in 25 states, including
38 company-owned restaurants and 71 franchise-operated restaurants. An additional 171 franchise
restaurants were committed to be developed through signed area development agreements at April 3,
2005. We prepared these consolidated financial statements in accordance with Securities and Exchange
Commission (SEC) Rules and Regulations. These unaudited financial statements represent the
consolidated financial statements of Famous Daves and its subsidiaries as of April 3, 2005 and
January 2, 2005 and for the three-month periods ended April 3, 2005 and March 28, 2004. The
information furnished in these financial statements includes normal recurring adjustments and
reflects all adjustments, which are, in our opinion, necessary for a fair presentation. Certain
information and footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States of America have been
condensed or omitted. These consolidated financial statements should be read in conjunction with
the audited consolidated financial statements and notes thereto included in our fiscal 2004 Form
10-K as filed with the SEC. Certain
reclassifications have been made to prior periods to conform to the
current presentations. Due to the seasonality of our business, revenue and operating results for the three months
ended April 3, 2005 are not necessarily indicative of the results to be expected for the full year.  (2)
    Net Income Per Common Share Basic net income per common share (EPS) is computed by dividing the net income by the
weighted average number of common shares outstanding for the reporting period. Diluted EPS equals
net income divided by the sum of the weighted average number of shares of common stock outstanding
plus all additional common stock equivalents relating to stock options and warrants when dilutive. Following is a reconciliation of basic and diluted net income per common share: (in thousands, except per share data)
    
    Three Months EndedApril 3,
    
    
    March 28,2005
    
    
    2004Net income per common share  basic:Net income
    
    $
    533
    
    
    $
    527Weighted average shares outstanding
    
    
    11,329
    
    
    
    12,279Net income per common share  basic
    
    $
    0.05
    
    
    $
    0.04Net income per common share  diluted:Net income
    
    $
    533
    
    
    $
    527Weighted average shares outstanding
    
    
    11,329
    
    
    
    12,279Dilutive impact of common stock equivalents outstanding
    
    
    391
    
    
    
    362Adjusted weighted average shares outstanding
    
    
    11,720
    
    
    
    12,641Net income per common share  diluted
    
    $
    0.05
    
    
    $
    0.04
 - 6 -




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FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  (2)
    Net Income Per Common Share (continued) All options outstanding as of April 3, 2005 were used in the computation of diluted earnings
per common share as of April 3, 2005. Options and warrants to purchase approximately 209,000
shares of common stock with a weighted average exercise price of $7.13 were outstanding at March
28, 2004, but were not included in the computation of diluted net earnings per share because the
exercise price exceeded the average market price of the common shares during the period.  (3)
    Public Relations and Marketing Development Fund Beginning in fiscal 2004, we established a system-wide public relations and marketing fund.
Company-owned restaurants, in addition to franchise-operated restaurants whose franchise agreements
were signed after January 1, 2004, are required to contribute a percentage of sales, currently
1.0%, to the fund that will be used for public relations and marketing development efforts
throughout the system. Additionally, certain payments received from various vendors are deposited
into the public relations and marketing fund. The assets held by this fund are considered
restricted. Accordingly, we reflected the cash related to this fund in restricted cash and the
liability is included in accounts payable on our consolidated balance sheets as of April 3, 2005
and January 2, 2005.  (4)
    Credit Facility On January 28, 2005 we entered into a five-year credit agreement with Wells Fargo Bank,
National Association, as administrative agent and lender, which establishes a revolving credit
facility of $10.0 million. Principal amounts outstanding under the facility will bear interest
either at an adjusted Eurodollar rate plus 3.50% or Wells Fargos prime rate plus 2.0% (7.75% at
April 3, 2005). Unused portions of the facility will be subject to an unused facility fee equal to
0.5% of the unused portion. We had no borrowings under this agreement as of April 3, 2005. We expect to use any borrowings under the credit agreement for general working capital
purposes and for the repurchase of shares under our share repurchase program. Under the credit
agreement, we granted Wells Fargo a security interest in all of our current and future personal
property. The credit agreement contains certain financial covenants and customary affirmative and
negative covenants for credit facilities of this type, including limitations on the Company with
respect to indebtedness, liens, investments, distributions, mergers and acquisitions, dispositions
of assets and transactions with affiliates of the Company, among others. The credit agreement also
includes financial covenants. We were in compliance with all of the covenants under this credit
facility as of April 3, 2005.  (5)
    Stock-Based Compensation In accordance with Accounting Principles Board (APB) Opinion No. 25, we use the intrinsic
value-based method for measuring stock-based compensation cost which measures compensation cost as
the excess, if any, of the quoted market price of Famous Daves common stock at the date of grant
over the amount the employee must pay for the stock. Our policy is to grant stock options at the
quoted market price at the date of grant. No compensation expense has been recognized for options
issued to employees during the three month periods ended April 3, 2005 or March 28, 2004. The
following table illustrates the effect on net income and net income per common share if we had
applied the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based
Compensation, to stock-based employee compensation. - 7 -




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FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  (5)
    Stock-Based Compensation (continued) (in thousands, except per share data)
    
    Three Months EndedApril 3,
    
    
    March 28,2005
    
    
    2004Net income as reported
    
    $
    533
    
    
    $
    527Less: Compensation expense determined
under the fair valuemethod, net of tax
    
    
    (147
    )
    
    
    (300
    )Pro forma net income
    
    $
    386
    
    
    $
    227Net income per common share:Basic EPS as reported
    
    $
    0.05
    
    
    $
    0.04Basic EPS pro forma
    
    
    0.03
    
    
    
    0.02Diluted EPS as reported
    
    $
    0.05
    
    
    $
    0.04Diluted EPS pro forma
    
    
    0.03
    
    
    
    0.02
 In determining the compensation cost of the options granted during the first quarter of fiscal
2005 and 2004, the fair value of each option grant has been estimated on the date of grant using
the Black-Scholes option pricing model with the following assumptions: Three Months Ended2005
    
    
    2004Risk free interest rate
    
    
    4.0
    %
    
    
    4.4
    %Expected life of options
    
    6 years
    
    10 yearsExpected volatility
    
    
    68.7
    %
    
    
    56.7
    %Dividend yield
    
    
    0.0
    %
    
    
    0.0
    %
  (6)
    Compensation Arrangements We have an Executive Elective Deferred Stock Unit Plan (Deferred Stock Unit Plan), in which
executives can elect to defer all or part of their bonus compensation for a specified period of
time. The amount of compensation that is deferred is converted into a number of stock units, as
determined by the share price of our common stock on the date the bonuses are approved by the Board
of Directors. Accordingly, we recognize compensation expense throughout the deferral period to the
extent that the share price of our common stock increases, and reduce compensation expense
throughout the deferral period to the extent that the share price of our common stock decreases. In accordance with the plan discussed above, on February 18, 2004, David Goronkin, our
President and CEO, elected to defer his 2003 bonus of $93,750 for a one-year timeframe. As a
result of the increase in the share price of our common stock during fiscal 2004, we recognized
approximately $68,000 of compensation expense in fiscal 2004, of which approximately $30,000 was
recognized in the first quarter of 2004. Mr. Goronkins fiscal 2003 bonus, including the original
amount deferred and the appreciation was paid to him during first quarter of 2005. - 8 -




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FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  (6)
    Compensation Arrangements (continued) On February 25, 2005, several of our executives elected to defer a portion of their 2004
bonuses, totaling approximately $77,000, in accordance with the Deferred Stock Unit Plan discussed
above. As a result of the increase in the share price of our common stock during the first quarter
2005, we have recognized approximately $15,000 of compensation expense in our consolidated
statement of operations for the first quarter ended April 3, 2005 as related to this plan. We also have a program under which management and certain director-level employees may be
granted performance shares under the 1995 Stock Option and Compensation Plan and the 1997 Employee
Stock Option Plan, subject to certain contingencies. Issuance of the shares underlying the
performance share grants are contingent upon the Company achieving a specified minimum percentage
of the cumulative earnings per share goals (as determined by the Compensation Committee) for each
of the three fiscal years following the grant. Upon achieving the minimum percentage, and provided
that the recipient remains an employee during the entire three-year performance period, the Company
will issue the recipient a percentage of the performance shares that is equal to the percentage of
the cumulative earnings per share goals achieved. No portion of the shares will be issued if the
specified percentage of earnings per share goals is achieved in any one or more fiscal years but
not for the cumulative three-year period. No recipient will have any rights as a shareholder based on the performance share grants
unless and until the conditions have been satisfied and the shares have been issued to the
recipient. In accordance with this program, we recognize as compensation expense, the value of
these stock grants as they are earned in our consolidated statement of operations throughout the
performance period. We currently have two performance programs in progress. On February 18, 2004 our board of
directors awarded 33,500 performance share grants to eligible employees for the fiscal 2004 -
fiscal 2006 timeframe and on February 25, 2005, our board of directors awarded 134,920 performance
share grants to eligible employees for the fiscal 2005 - fiscal 2007 timeframe. We recognized
approximately $39,000 and $152,000 of compensation expense in our consolidated statement of
operations for the first quarter ended April 3, 2005 related to the fiscal 2004-2006 and fiscal
2005-2007 programs, respectively. We recognized approximately $22,000
of compensation expense in our consolidated statement of operations
for the first quarter ended March 28, 2004 related to the fiscal
2004-2006 program. On February 25, 2005, the Company entered into a new employment agreement with David Goronkin,
its Chief Executive Officer. It replaces the previous employment agreement that was scheduled to
expire in August 2005. The new agreement is effective January 1, 2005, has a one-year term, and
will automatically renew for successive one-year terms. Pursuant to the new agreement, Mr. Goronkin
receives an annualized base salary of $472,500 (subject to increase at the discretion of the Board)
and is eligible for a bonus of up to 75% of his base salary, as determined by the Compensation
Committee of the Board of Directors, based on Mr. Goronkins satisfaction of certain
performance-based criteria.  (7)
    Common Share Repurchases On November 2, 2004, our Board of Directors authorized a stock repurchase plan that authorized
the repurchase of up to 1.0 million shares of our common stock. The shares may be repurchased from
time-to-time in both the open market or through privately negotiated transactions and are expected
to be funded from our available working capital and cash flow. As of April 3, 2005, we had
repurchased 407,700 outstanding shares under this program at an
average market price of $13.24,
excluding commissions. During the first quarter of fiscal 2005, we repurchased 362,600 outstanding
shares under this program at an average market price of $13.68, excluding commissions. - 9 -




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FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)  (8)
    Other Current Assets During the fourth quarter of 2004, a subsidiary of the Company was named as a defendant in a
lawsuit filed in the Court of Common Pleas, Warren County, Ohio. The lawsuit related to, among
other things, various alleged defaults by a franchisee of the Company under its Middletown, Ohio
lease and defaults by the Companys subsidiary under a guaranty agreement pursuant to which the
subsidiary guaranteed the franchisees performance under the lease. On January 25, 2005, we entered into a settlement agreement in which the plaintiffs released
all claims asserted against us and our subsidiaries in exchange for a payment of $325,000. In
addition, the plaintiffs released and terminated the subject guaranty and all rights thereunder.
Pursuant to certain indemnity and guaranty agreements, we have a right to recover the settlement
payment amount and related costs from the franchisee and its affiliates. On May 11, 2005, we
entered into an asset purchase agreement with the franchisee and its lender under which we would
acquire from the franchisee the assets comprising our franchised location in Florence, Kentucky for
a purchase price amount that is net of the settlement amount and related costs, as well as other
amounts due to us from the franchisee. The consummation of this transaction is contingent upon,
among other things, completion of due diligence to our satisfaction. Because the franchisee has
filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code,
consummation of the transaction will also be contingent upon approval by the United States
Bankruptcy Court. Subject to consummation of the transaction, the amounts to be recovered from the
franchisee will be fully realized and, as a result, we have reclassified $508,000 from accounts
receivable to other current assets on our balance sheet as of April 3, 2005.  (9)
    Recently Issued Accounting Pronouncements In December 2004, the Financial Accounting Standards Board (FASB) issued its final statement
SFAS No. 123r, Share-Based Payment, an Amendment of FASB Statements No. 123 and 95. This
statement requires companies to recognize compensation cost for share-based awards, including
options, granted to employees and would eliminate the use of accounting for employee options under
APB Opinion No. 25, Accounting for Stock Issued to Employees. On April 14, 2005, the Securities
and Exchange Commission announced the adoption of a rule that amends the compliance dates for SFAS
No. 123r. We will now be required to implement this standard effective with the beginning of our
2006 fiscal year. We are currently determining the impact this pronouncement will have on our
consolidated financial position and results of operations.  (10)
    Subsequent Events On May 12, 2005, The Companys shareholders approved the adoption of the Famous Daves of
America, Inc. 2005 Stock Incentive Plan (the 2005 Plan). The 2005 Plan authorizes the granting
of stock based awards to purchase up to 450,000 shares of the Companys common stock. Under the
2005 Plan, the Companys board of directors or a committee of two or more non-employee directors
designated by our board will administer the 2005 Plan and will have the power to grant awards, to
determine when and to whom awards will be granted, the form of each award, the amount of each
award, and any other terms or conditions of each award consistent with the terms of the 2005 Plan.
Awards may be made to our employees, directors and consultants. The types of awards that may be
granted under the 2005 Plan will include performance shares, incentive and non-qualified stock
options, restricted and unrestricted stock appreciation rights and other stock-based awards. Each
award agreement will specify the number and type of award, together with any other terms and
conditions as determined by the board of directors or committee in their sole discretion. - 10 -




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FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANYALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 
 Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
              RESULTS OF OPERATIONS OVERVIEW Famous Daves of America, Inc. was incorporated as a Minnesota corporation in March 1994 and
opened its first restaurant in Minneapolis in June 1995. As of April 3, 2005, there were 109
Famous Daves restaurants operating in 25 states, including 38 company-owned restaurants and 71
franchise-operated restaurants. An additional 171 franchise restaurants were in various stages of
development as of April 3, 2005. Fiscal Year Our fiscal year ends on the Sunday closest to December 31st. Our fiscal year is
generally 52 weeks; however, it periodically consists of 53 weeks. Fiscal 2005, which ends on
January 1, 2006, will consist of 52 weeks. Revenue Our revenue consists of restaurant sales, franchise-related revenue, and licensing and other
revenue. Our franchise-related revenue is comprised of area development fees, initial franchise
fees, and continuing royalty payments. Our area development fee consists of a non-refundable
payment equal to $10,000 per unit upon the signing of the area development agreement. Since the fee
to secure the territory is non-refundable, we recognize this fee upon receipt. Our initial
franchise fee is typically $40,000 per restaurant, of which $5,000 is recognized immediately when a
franchise agreement is signed, reflecting the commission earned and the expenses incurred, as
related to the sale. The remaining $35,000 is recognized upon either the signing of a lease or
upon receipt of a builders permit, and at which time we have substantially performed all of our
services. Franchise royalties are equal to a percentage of weekly net franchise-operated
restaurant sales, currently at 4% to 5%. Licensing revenue includes royalties from a retail line
of business, including sauces and seasonings. Other revenue includes opening assistance and
training we provide to our franchise partners. Costs and expenses associated with the franchise
program are contained in general and administrative expense. Comparable sales represent net sales
for restaurants open year-round for 18 months or more. Costs and Expenses Restaurant costs and expenses include food and beverage costs, operating payroll and employee
benefits, occupancy costs, repair and maintenance costs, supplies, advertising and promotion, and
restaurant depreciation and amortization. Certain of these costs and expenses are variable and
will increase or decrease with sales volume. The primary fixed costs are corporate and restaurant
management salaries and occupancy costs. Our experience is that when a new restaurant opens, it
incurs higher than normal levels of labor and food costs until operations stabilize, usually during
the first three months of operation. As restaurant management and staff gain experience following a
restaurants opening, labor scheduling, food cost management and operating expense control are
improved to levels similar to those at our more established restaurants. - 11 -




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FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANYALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS General and Administrative Expenses General and administrative expenses include all corporate and administrative functions that
provide an infrastructure to support existing operations and support future growth. Salaries,
employee benefits, legal fees, consulting fees, travel, rent and general insurance are major items
in this category. The Company also incurs expenses associated with new franchise-operated
restaurant openings, for which the franchisee is required to reimburse. The revenue associated
with the opening assistance and training is reflected in other revenue and the corresponding
expenses are included in general and administrative costs. The following table presents items in our Consolidated Statements of Operations as a
percentage of total revenue or restaurant sales, as indicated, for the following
periods(1): Three Months EndedApril 3,
    
    
    March 28,2005
    
    
    2004Restaurant sales, net
    
    
    88.3
    %
    
    
    90.8
    %Other revenue
    
    
    11.7
    
    
    
    9.2Total revenue
    
    
    100.0
    
    
    
    100.0Restaurant costs and expenses:Food and beverage costs (2)
    
    
    30.6
    
    
    
    31.1Labor and benefits (2)
    
    
    30.3
    
    
    
    30.8Operating expenses (2)
    
    
    24.4
    
    
    
    24.3Depreciation and amortization (restaurant level)
(2)
    
    
    5.0
    
    
    
    5.1Total costs and expenses (2)
    
    
    90.3
    
    
    
    91.3Income from restaurant operations (2)
    
    
    9.7
    
    
    
    8.7General and administrative (3)
    
    
    14.4
    
    
    
    11.0Depreciation and amortization (corporate) (3)
    
    
    0.4
    
    
    
    0.3Income from operations (3)
    
    
    5.5
    %
    
    
    5.7
    %
    (1)
    Data regarding our restaurant operations as presented in the table above,
includes sales, costs and expenses associated with our Rib Team, which netted to a
loss of $19,000 and $121,000 for the first quarter of 2005 and 2004, respectively.
Our Rib Team travels the country introducing people to our brand of barbeque and
builds brand awareness.(2)
    As a percentage of restaurant sales, net.(3)
    As a percentage of total revenue. - 12 -




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FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANYALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of financial condition and results of operations should
be read in conjunction with the accompanying unaudited consolidated financial statements and notes,
and the audited consolidated financial statements and notes included in our Form 10-K for the
fiscal year ended January 2, 2005. Total Revenue Total revenue of approximately $23.5 million for the first quarter of fiscal 2005 increased
approximately $849,000 or 3.7% over revenue of approximately $22.6 million for the comparable
quarter in fiscal 2004. Restaurant Sales Restaurant sales for the first quarter of 2005 were $20.7 million compared to $20.6 million
for the same period in 2004, reflecting a 0.8% increase. Franchise-Related Revenue Franchise-related revenue consists of royalty revenue and franchise fees, which include
initial franchise fees and area development fees. Franchise-related revenue was $2.5 million for
the first quarter of 2005, representing a 25.5% increase over the comparable period of 2004,
primarily reflecting increased royalties. Royalties, which are based on a percent of
franchise-operated restaurant net sales, increased 35.3% reflecting the annualization of 13
franchise restaurants that opened in fiscal 2004 in addition to the 5 new franchise restaurants
opened in the first quarter of fiscal 2005. There were 71 franchise-operated restaurants opened at
April 3, 2005 compared to 54 at March 28, 2004. Licensing and Other Revenue Licensing revenue includes royalties from a retail line of business, including sauces and
seasonings. Other revenue includes opening assistance and training we provide to our franchise
partners. For the first quarter of fiscal 2005, the licensing royalty income was $77,000 compared
to $52,000 for the comparable period of fiscal 2004. Other revenue for the fiscal 2005 first
quarter was approximately $138,000, compared to zero for the comparable prior year quarter. The
amount of other revenue is expected to grow based on the level of opening assistance we may be
required to provide during the remaining 20-25 franchised openings planned for 2005. Same Store Net Sales It is our policy to include in our same store net sales base, restaurants that are open year
round and have been open at least 18 months. Same store net sales for company-owned restaurants
for the first quarter of fiscal 2005 increased approximately 1.1%, compared to fiscal 2004s first
quarter decline of approximately 2.2%. For the first quarter of 2005, there were 38 restaurants
included in the company-owned base as compared to 35 restaurants in the first quarter of 2004. We
believe that the increase in same store net sales reflects of the success of our limited time
offerings, a focus on operational excellence and execution in our restaurants, and two price
increases of approximately 2.0% in July of 2004, and approximately 1.0% in January of 2005. These
items were particularly offset by the 0.4% negative impact from Easter falling in the first quarter
of 2005 compared to Easter falling in the second quarter of 2004, severe weather that occurred on
two separate weekends during the first quarter of 2005 that swept through our core markets,
negatively impacting sales. - 13 -




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FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANYALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS Same Store Net Sales (continued) Same store net sales for franchise-operated restaurants for the first quarter of 2005
decreased 1.9%, compared to a decrease of 2.6% for the first quarter of fiscal 2004. For the first
quarter of 2005 and 2004 there were 38 and 28 restaurants, respectively, included in the
franchise-operated comparable sales base. Average Weekly Net Sales Weighted average weekly net sales for our company-owned and franchise-operated restaurants
during the first three months of fiscal 2005 were $41,960 and $51,929 respectively. During the
first three months of fiscal 2004, weighted average weekly net sales for our company-owned and
franchise-operated restaurants were $41,633 and $49,640 respectively. The weighted average weekly
volume for our full-service restaurants was $43,257, while the average weekly volume for our
counter-service restaurants was $36,215. The favorable trend in average weekly sales for both
company-owned and franchise-operated restaurants reflects the success of our total brand building
efforts. Food and Beverage Costs Food and beverage costs for the first three months of fiscal 2005 were approximately $6.3
million or 30.6% of net restaurant sales, compared to approximately $6.4 million or 31.1% of net
restaurant sales for the first three months of fiscal 2004. The decrease in food costs as a percentage of net restaurant sales reflects the menu price
increases implemented in the third quarter of 2004 and the first quarter of 2005 totaling
approximately 3.0%, operational efficiencies and our ability to leverage our menu and offset higher
food costs through usage of our limited time offerings. Our brisket contract renews in July 2005
and we are watching the beef market closely. We anticipate that food costs, as a percent of net
restaurant sales, will remain relatively flat as we continue to work towards offsetting contract
pricing increases through menu mix and margin opportunities. We believe that we have an
opportunity to continue to mitigate the impact that the recently renewed food contracts have on our
margin through menu engineering such as with the use of our limited time offerings, which typically
have higher margin, and leveraging adult beverage sales. Additionally, we will evaluate taking a
price increase as appropriate. We believe that we have opportunities in margin as a result of our adult beverage program,
which consists of expanded drink offerings, a new wine list and an updated selection of tap and
bottled beers. In addition to new barware and media support, we have also invested in training
resources in support of the program. Our adult-beverage sales as a percentage of our dine-in sales
are approximately 11%. While we dont intend to become a destination bar, we believe we can move
this percentage to the low to mid-teens over time, and these sales carry on average 500 to 800
basis points more margin then many of our core product offerings. In order to capitalize on this opportunity, our summer promotions will highlight a variety of
food and beverage pairings. We will be featuring the Ultimate BBQ Burger, which is a half pound
hamburger that is topped with two ounces of Georgia chopped pork, jalapeno bacon, cheddar cheese,
and slathered with our new Beam and Cola BBQ Sauce. This sandwich will be paired with a promotion
that features our assortment of beer, served in a bucket. We will also be promoting our Sticky
Wings appetizer, which are chicken wings that are first skewered, grilled, and then caramelized in
the Beam & Cola sauce. Our adult beverage pairing with the sticky wings is our watermelon
lemonade, which also includes Jim Beam bourbon and Midori liquor as key ingredients. - 14 -




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FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS Labor and Benefits Labor and benefits at the restaurant level for the three months ended April 3, 2005 were
approximately $6.3 million or 30.3% of net restaurant sales, compared to approximately $6.3 million
or 30.8% of net restaurant sales for the three months ended March 28, 2004. The decrease in labor
and benefits as a percentage of net restaurant sales reflects higher sales volume in 2005 and
favorable hourly labor productivity offset by higher payroll taxes and workers compensation.
During fiscal 2005, we are expecting labor and benefits as a percentage of net restaurant sales to
remain relatively flat to fiscal 2004. Operating Expenses Operating expenses for the first quarter of fiscal 2005, were approximately $5.1 million or
24.4% of net restaurant sales, compared to operating expenses of approximately $5.0 million or
24.3% of net restaurant sales for the first quarter of fiscal 2004. The increase in operating
expense was due to increases in supplies, repairs and maintenance and higher utility costs
particularly offset by lower levels of advertising year over year. During the remainder of fiscal
2005, operating expenses as a percentage of net restaurant sales are expected to decrease from the
percentage in fiscal 2004, primarily due to further leveraging of fixed costs. Depreciation and Amortization Depreciation and amortization expense for the first quarter of 2005 was approximately $1.1
million or 4.8% of total revenue, essentially flat to depreciation and amortization expense for the
first quarter of 2004. During fiscal 2005, depreciation and amortization is expected to remain
relatively flat to fiscal 2004 levels as depreciation from asset additions are offset by assets
that will be fully depreciated during fiscal 2005. Pre-opening Expenses No new company-owned restaurants were opened during the three months ending April 3, 2005 or
March 28, 2004. We plan to open up to two company-owned restaurants towards the end of fiscal 2005
with pre-opening costs estimated at approximately $300,000. General and Administrative Expenses General and administrative expenses for the first quarter of 2005 were approximately $3.4
million or 14.4% of total revenue, compared to approximately $2.5 million or 11.0% of total revenue
for the first quarter of 2004. This percentage is higher in the first fiscal quarter due to lower
revenue in the first quarter, typically. The increase in general and administrative expenses year
over year reflects an increase in infrastructure, primarily at the corporate office to support our
growth, in addition to expenses related to our stock-based compensation programs. General and
administrative expenses as a percent of total revenue, excluding franchise-related services and
stock based compensation was 13% for the first quarter of 2005. On an annual basis for fiscal
2005, we expect general and administrative expenses to increase approximately 150-200 basis points
as a percentage of total revenue, as a result of the increased cost of the performance share
program, and as a result of the services we expect to provide to the remaining 20-25 expected 2005
franchise-operated openings. -15-




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FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS Interest Expense Interest expense was approximately $480,000 or 2.0% of total revenue for the first three
months of 2005, compared to approximately $481,000 or 2.1% of total revenue for the comparable
first three months of 2004. This line item represents interest expense from capital lease
obligations, notes payable and financing lease obligations partially offset by interest income
received on short-term cash and cash equivalents balances. We continue to expect interest
expense to increase moderately from fiscal 2004 levels due to the newly available $10.0 million
line of credit obtained in early 2005, which carries a variable rate as well as a 0.5% non-use fee,
and the increased amortization of deferred financing costs related to this line. Interest Income Interest income was approximately $94,000 and $75,000 for the first three months of 2005 and
2004, respectively. We expect interest income to decrease slightly due to lower cash balances
resulting from our stock buy back plan. Other Expense, net During the first quarter of 2005, we recorded other expense, net, of approximately $47,000,
which compares to other expense, net, of approximately $11,000 for the first quarter of 2004. Income Tax Provision For the first quarter of 2005, we recorded a provision for income taxes of approximately
$326,000, or approximately 38.0% of income before taxes, compared to a tax provision of
approximately $340,000, or 39% of income before taxes for the first quarter of 2004. We estimate a
38% tax provision for fiscal 2005. Basic and Diluted Net Income Per Common Share Net income for the three months ended April 3, 2005 was approximately $533,000 or $0.05 per
basic and diluted share on approximately 11,720,000 weighted average diluted shares outstanding,
as compared to a net income of approximately $527,000 or $0.04 per basic and diluted share on
approximately 12,641,000 weighted average diluted shares outstanding for the three months ended
March 28, 2004. Recently Issued Accounting Pronouncements In December 2004, the Financial Accounting Standards Board (FASB) issued its final statement
SFAS No. 123r, Share-Based Payment, an Amendment of FASB Statements No. 123 and 95. This
statement requires companies to recognize compensation cost for share-based awards, including
options, granted to employees and would eliminate the use of accounting for employee options under
APB Opinion No. 25, Accounting for Stock Issued to Employees. On April 14, 2005, the Securities
and Exchange Commission announced the adoption of a rule that amends the compliance dates for SFAS
No. 123r. We will now be required to implement this standard effective with the beginning of our
2006 fiscal year. We are currently determining the impact this pronouncement will have on our
consolidated financial position and results of operations. -16-




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##### Table of Contents



FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS Financial Condition, Liquidity and Capital Resources During the first quarter of 2005, our balance of cash and cash equivalents was approximately
$6.7 million, a decrease of approximately $4.5 million from the fiscal 2004 year-end balance of
approximately $11.2 million. The decrease in cash was largely due to the repurchase of
approximately $5.0 million of common stock. Our working capital was approximately $7.0 million as of April 3, 2005 as compared to
approximately $10.8 million as of January 2, 2005. Our quick ratio, which measures our immediate
short-term liquidity, was 1.03 at April 3, 2005 compared to 1.49 at January 2, 2005. The quick
ratio is computed by adding cash and cash equivalents with accounts receivable, net and dividing by
total current liabilities. The change in our working capital and quick ratio was primarily due to
cash used during the first quarter of 2005 for the repurchase of common stock. Net cash provided by operations for the first quarter of 2005 was approximately $1.1 million,
compared to approximately $1.5 million for the first quarter of 2004. Cash generated in the first
quarter of 2005 reflects a $205,000 decrease in accounts receivable, a decrease of $101,000 in
prepaids and other current assets and an increase of $663,000 in other current liabilities, offset
by a decrease in accounts payable of $1,869,000, due to the timing of quarter-end. Cash generated
in the first quarter of 2004 reflects a decrease of $521,000 in accounts receivable, an increase of
$821,000 in accounts payable, partially offset by a decrease of $1,621,000 in other current
liabilities. Net cash used for investing activities for the first quarter of 2005 was approximately
$759,000 reflecting capital expenditures of approximately $829,000 partially offset by payments of
$70,000 on notes receivable. Net cash used for investing activities for the first quarter of 2004
was approximately $323,000, reflecting capital expenditures of $367,000 offset by payments of
$44,000 on notes receivable. Net cash used for financing activities was approximately $4.8 million for the first three
months of 2005, compared to cash provided by financing activities of approximately $240,000 for the
first quarter of 2004. The use of cash during the first three months of fiscal 2005 was primarily
due to the share repurchase program where approximately 363,000 shares were repurchased for
approximately $5.0 million. This was partially offset by approximately $400,000 in proceeds from
the exercise of stock options. Additionally, there were payments on long-term debt and capital
lease obligations of approximately $156,000 and payments of $85,000 for debt issuance costs related
to the new credit line financing. During the first quarter of fiscal 2004, proceeds of $464,000
from stock option exercises were the primary source of cash, partially offset by payments of
$224,000 on long-term debt and capital lease obligations. On January 28, 2005, we entered into a five-year credit agreement with Wells Fargo Bank,
National Association, as administrative agent and lender, which provides us with a revolving credit
facility of $10.0 million. Principal amounts outstanding under the facility will bear interest
either at an adjusted Eurodollar rate plus 3.50% or Wells Fargos prime rate plus 2.0% (7.75% as of
April 3, 2005). Unused portions of the facility will be subject to an unused facility fee equal to
0.5% of the unused portion. We had no borrowings under this agreement as of April 3, 2005. -17-




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FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS Financial Condition, Liquidity and Capital Resources (continued) The credit agreement is available for general working capital purposes and for the repurchase
of shares under our share repurchase program. Under the credit agreement, we granted Wells Fargo a
security interest in all of our current and future personal property. The credit agreement contains
financial covenants as well as customary affirmative and negative covenants including limitations
with respect to indebtedness, liens, investments, distributions, mergers and acquisitions,
dispositions of assets and transactions with affiliates of the Company among others. We were in
compliance with all covenants under this credit facility as of April 3, 2005. We anticipate that
future development and expansion will be funded primarily through currently held cash and cash
equivalents, cash flow generated from operations, and from sources such as our recently acquired
credit facility. Future minimum lease payments existing at April 3, 2005 including renewal options are: (in thousands) Operating
    
    
    CapitalFiscal Year
    
    Leases
    
    
    Leases2005
    
    $
    2,504
    
    
    $
    742006
    
    
    3,408
    
    
    
    172007
    
    
    3,417
    
    
    
    2008
    
    
    3,338
    
    
    
    2009
    
    
    3,341
    
    
    
    Thereafter
    
    
    40,234
    
    
    
    Total future minimum lease commitments
    
    $
    56,242
    
    
    $
    91Less: sublease income
    
    
    (9,386
    )
    
    
    Less:
interest at 12.95%
    
    
    
    
    
    
    (6
    )Total operating and capital lease
obligations
    
    $
    46,856
    
    
    $
    85
 The following table provides aggregate information about our remaining contractual payment
obligations and the periods in which payments are due: Payments Due by Period(in thousands) ContractualObligations
    
    Total
    
    
    2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    ThereafterLong Term Debt
    
    $
    12,233
    
    
    $
    296
    
    
    $
    426
    
    
    $
    465
    
    
    $
    505
    
    
    $
    548
    
    
    $
    9,993Financing Leases
    
    
    4,500
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,500Capital Leases
    
    
    85
    
    
    
    69
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Operating Leases
    
    
    56,242
    
    
    
    2,504
    
    
    
    3,408
    
    
    
    3,417
    
    
    
    3,338
    
    
    
    3,341
    
    
    
    40,234Less: Sublease
rental income
    
    
    (9,386
    )
    
    
    (376
    )
    
    
    (502
    )
    
    
    (502
    )
    
    
    (440
    )
    
    
    (441
    )
    
    
    (7,125
    )Total
    
    $
    63,674
    
    
    $
    2,493
    
    
    $
    3,348
    
    
    $
    3,380
    
    
    $
    3,403
    
    
    $
    3,448
    
    
    $
    47,602
 Under the agreements governing our long-term debt obligations, we are subject to two main
financial covenants. We must maintain a 1.5 to 1.0 fixed charge coverage ratio and a 3.5 to 1.0
leverage ratio during each fiscal year. As of April 3, 2005 and January 2, 2005, the Company was
in compliance or had obtained waivers for all of its covenants. -18-




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##### Table of Contents



FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS Critical Accounting Policies Our significant accounting policies are described in Note One to the consolidated financial
statements included in our annual report for the year ended January 2, 2005. The accounting
policies used in preparing our interim 2005 consolidated financial statements are the same as those
described in our annual report. Forward-Looking Information Famous Daves makes written and oral statements from time to time, including statements
contained in this Form 10-Q regarding its business and prospects, such as projections of future
performance, statements of managements plans and objectives, forecasts of market trends and other
matters that are forward-looking statements within the meaning of Sections 27A of the Securities
Act of 1933 and Section 21E of the Securities Act of 1934. Statements containing the words or
phrases will likely result, anticipates, are expected to, will continue, is anticipated,
estimates, projects, believes, expects, intends, target, goal, plans, objective,
should or similar expressions identify forward-looking statements which may appear in documents,
reports, filings with the Securities and Exchange Commission, news releases, written or oral
presentations made by our officers or other representatives to analysts, shareholders, investors,
news organizations, and others, and discussions with our management and other Company
representatives. For such statements, we claim the protection of the safe harbor for
forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Our future results, including results related to forward-looking statements, involve a number
of risks and uncertainties. No assurance can be given that the results reflected in any
forward-looking statements will be achieved. Any forward-looking statements made by us or on our
behalf speak only as of the date on which such statement is made. Our forward-looking statements
are based upon assumptions that are sometimes based upon estimates, data, communications and other
information from suppliers, government agencies and other sources that may be subject to revision.
We do not undertake any obligation to update or keep current either (i) any forward-looking
statements to reflect events or circumstances arising after the date of such statement, or (ii) the
important factors that could cause our future results to differ materially from historical results
or trends, results anticipated or planned by us, or which are reflected from time to time in any
forward-looking statement which may be made by us or on our behalf. In addition to other matters identified or described by us from time to time in filings with
the SEC, there are several important factors that could cause our future results to differ
materially from historical results or trends, results anticipated or planned by us, or results that
are reflected from time to time in any forward-looking statement that may be made by us or on our
behalf. Additional Information on Famous Daves We are currently subject to the informational requirements of the Exchange Act of 1934, as
amended. As a result, we are required to file periodic reports and other information with the SEC,
such as annual, quarterly and current reports, proxy and information statements. You are advised
to read this Form 10-Q in conjunction with the other reports, proxy statements and other documents
we file from time to time with the SEC. If you would like more information regarding Famous
Daves, you may read and copy the reports, proxy and information statements and other documents we
file with the SEC, at prescribed rates, at the SECs public reference room at 450 Fifth Street, NW,
Washington, DC 20549. You may obtain information regarding the operation of the SECs public
reference rooms by calling the SEC at 1-800-SEC-0330. Our SEC filings are also available to the
public free of charge at the SECs website. The address of this website is http://www.sec.gov.
Our most current SEC filings, such as our annual, quarterly and current reports, proxy statements
and press releases are available to the public free of charge on our Website. -19-




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##### Table of Contents



FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS Additional Information on Famous Daves (continued) The address of our Website is www.famousdaves.com. Our Website is not intended to be, and is
not, a part of this Quarterly Report on Form 10-Q. We will provide electronic or paper copies of
our SEC filings (excluding exhibits) to any Famous Daves shareholder free of charge upon receipt
of a written request for any such filing. All requests for our SEC filings should be sent to the
attention of Investor Relations at Famous Daves, Inc., 8091 Wallace Road, Eden Prairie, MN 55344. The Company has adopted a Code of Ethics applicable to all of its
employees (except its CEO, CFO and Controller) and a separate Code of
Ethics applicable specifically to its CEO, CFO and Controller. These two
Code of Ethics documents are available on our website at
www.famousdaves.com and a copy is available free of charge to anyone
requesting them. 
 Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our Companys financial instruments include cash and cash equivalents and long-term debt. Our
Company includes as cash and cash equivalents investments with original maturities of three months
or less when purchased and which are readily convertible into known amounts of cash. Our Companys
cash and cash equivalents are not subject to significant interest rate risk due to the short
maturities of these instruments. We have no derivative financial instruments or derivative
commodity instruments in our cash and cash equivalents. The total outstanding long-term debt of our
Company as of April 3, 2005 was approximately $16.3 million, including financing lease obligations.
Of the outstanding long-term debt, approximately $1.3 million consists of a variable interest rate
while the remainder was subject to a fixed interest rate. On January 28, 2005, we entered into a
five-year credit agreement with Wells Fargo Bank, National Association, as administrative agent and
lender, which provides us with a revolving credit facility of $10.0 million. Principal amounts
outstanding under the facility will bear interest either at an adjusted Eurodollar rate plus 3.50%
or Wells Fargos prime rate plus 2.00%. Unused portions of the facility will be subject to an unused facility fee equal to 0.5% of the
unused portion. We do not see the variable interest rate long-term debt as a significant interest
rate risk. Some of the food products purchased by us are affected by commodity pricing and are,
therefore, subject to price volatility caused by weather, production problems, delivery
difficulties and other factors that are outside our control. To control this risk in part, we have
fixed-priced purchase commitments for food from vendors. In addition, we believe that
substantially all of our food is available from several sources, which helps to control food
commodity risks. We believe we have the ability to increase menu prices, or vary the menu options
offered, if needed, in response to a food product price increase. 
 Item 4. CONTROLS AND PROCEDURES Under the supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure
controls and procedures, as such, term is defined under Rule 13a-15(c) promulgated under the
Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report.
Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that
our disclosure controls and procedures are effective. There have been no significant changes (including corrective actions with regard to
significant deficiencies or material weaknesses) in our internal controls or in other factors that
could significantly affect these controls subsequent to the end of the periods covered by this
report. -20-




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FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 
 PART II. OTHER INFORMATION 
 Item 1. LEGAL PROCEEDINGS During the fourth quarter of 2004, a subsidiary of the Company was named as a defendant in a
lawsuit filed in the Court of Common Pleas, Warren County, Ohio. The lawsuit related to, among
other things, various alleged defaults by a franchisee of the Company under its Middletown, Ohio
lease and defaults by the Companys subsidiary under a guaranty agreement pursuant to which the
subsidiary guaranteed the franchisees performance under the lease. On January 25, 2005, we entered into a settlement agreement in which the plaintiffs released
all claims asserted against us and our subsidiaries in exchange for a payment of $325,000. In
addition, the plaintiffs released and terminated the subject guaranty and all rights thereunder.
Pursuant to certain indemnity and guaranty agreements, we have a right to recover the settlement
payment amount and related costs from the franchisee and its affiliates. On May 11, 2005, we
entered into an asset purchase agreement with the franchisee and its lender under which we would
acquire from the franchisee the assets comprising our franchised location in Florence, Kentucky for
a purchase price amount that is net of the settlement amount and related costs, as well as other
amounts due to us from the franchisee. The consummation of this transaction is contingent upon,
among other things, completion of due diligence to our satisfaction. Because the franchisee has
filed a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code,
consummation of the transaction will also be contingent upon approval by the United States
Bankruptcy Court. Subject to consummation of the transaction, the amounts to be recovered from the
franchisee will be fully realized and, as a result, we have reclassified $508,000 from accounts
receivable to other current assets on our balance sheet as of April 3, 2005. -21-




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FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 
 Item 2. PURCHASES OF EQUITY SECURITIES BY THE ISSUER On November 2, 2004, our Board of Directors authorized a stock repurchase plan that authorized
the repurchase of up to an additional 1.0 million shares of our common stock. The shares may be
repurchased from time-to-time in both the open market or through privately negotiated transactions
and are expected to be funded from the Companys available working capital. As of April 3, 2005, we had purchased 407,700 outstanding shares under this program at an
average market price of $13.24, excluding commissions. During the first quarter of fiscal 2005, we
repurchased 362,600 outstanding shares under this program at an average market price of $13.68,
excluding commissions. Except as otherwise noted below, all share repurchases were made pursuant
to open-market transactions under the publicly announced repurchase program approved by our Board
of Directors. The following table includes information about our share repurchases for the quarter ended
April 3, 2005.  Maximum NumberTotal Number of
    
    
    
    (or ApproximateShares
    
    
    
    Dollar Value) ofTotal
    
    
    
    
    
    
    
    
    (or Units)
    
    
    
    SharesNumber of
    
    
    
    Average
    
    
    
    Purchased as
    
    
    
    (or Units)Shares
    
    
    
    Price Paid
    
    
    
    Part of Publicly
    
    
    
    that May Yet be(or Units)
    
    
    
    per Share(1)
    
    
    
    Announced Plans
    
    
    
    Purchased Under thePeriod
    
    
    Purchased
    
    
    
    (or Unit)
    
    
    
    or Programs
    
    
    
    Plans or Programs(2)Month #1 (January 3, 2005  January 30, 2005)
    
    
    
    8,500
    

   
    
    $
    10.00
    
    
    
    
    53,600
    
    
    
    
    946,400Month #2
(January 31, 2005  February 27,
2005)
    
    
    
    
    

   
    
    $
    
    
    
    
    
    53,600
    
    
    
    
    946,400Month #3
(February 28, 2005  April 3, 2005)
    
    
    
    354,100
    

   
    
    $
    13.77
    
    
    
    
    407,700
    
    
    
    
    592,300(1)Excluding Commissions(2) On November 2, 2004, we announced the approval of a repurchase program under which we may repurchase up to 1,000,000 shares
of our common stock. From November 2, 2004 until January 2, 2005, we had repurchased 45,100 shares of common stock.
 -22-




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FAMOUS DAVES OF AMERICA, INC. AND SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 
 Item 5. OTHER INFORMATION During the first quarter of 2005, the Companys Board of Directors
adopted Corporate Governance Principles and Practices applicable to the
Board of Directors. This document is available on our website at
www.famousdaves.com and a copy is available free of charge to anyone
requesting it. On May 12, 2005, The Companys shareholders approved the adoption of the Famous Daves of
America, Inc. 2005 Stock Incentive Plan (the 2005 Plan). The 2005 Plan authorizes the granting
of stock based awards to purchase up to 450,000 shares of the Companys common stock. Under the
2005 Plan, the Companys board of directors or a committee of two or more non-employee directors
designated by our board will administer the 2005 Plan and will have the power to grant awards, to
determine when and to whom awards will be granted, the form of each award, the amount of each
award, and any other terms or conditions of each award consistent with the terms of the 2005 Plan.
Awards may be made to our employees, directors and consultants. The types of awards that may be
granted under the 2005 Plan will include performance shares, incentive and non-qualified stock
options, restricted and unrestricted stock appreciation rights and other stock-based awards. Each
award agreement will specify the number and type of award, together with any other terms and
conditions as determined by the board of directors or committee in their sole discretion. 
 Item 6. EXHIBITS (a)
    
    Exhibits10.1
    
    
    Form of Amended and Restated 2004-2006 Performance Share Agreement.10.2
    
    
    Schedule of grants made under the Form of Amended and Restated 2004-2006
Performance Share Agreement.10.3
    
    
    Form of Amended and Restated 2005-2007 Performance Share Agreement.10.4
    
    
    Schedule of grants made under the Form of Amended and Restated 2005-2007
Performance Share Agreement.31.1
    
    
    Certification of Chief Executive Officer pursuant to Securities Exchange Act
Rule 13a-15(e)/15d-15(e) as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.31.2
    
    
    Certification of Chief Financial Officer pursuant to Securities Exchange Act
Rule 13a-15(e)/15d-15(e) as adopted pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.32.1
    
    
    Certification of Chief Executive Officer and Chief Financial Officer pursuant
to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
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SIGNATURES In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FAMOUS DAVES OF AMERICA, INC.
(Registrant) Dated: May 13, 2005
    By:
    /s/ David GoronkinDavid GoronkinChief Executive Officer and President
(Principal Executive Officer) Dated:  May 13, 2005
    
    
    /s/ Diana Garvis PurcelDiana Garvis PurcelVice President, Chief Financial Officer and Secretary
(Principal Financial and Accounting Officer) -24-