**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, DC  20549**

 

**FORM 10-KSB**

 

| **ý**                         |   | **ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE  ACT OF 1934**     |
|------------------------------------|--------|-----------------------------------------------------------------------------------------|
|                               |   |                                                                                    |
|                               |   | **FOR THE FISCAL YEAR ENDED DECEMBER  29, 2002**                                        |
|                               |   |                                                                                    |
| ** ̈**                         |   | **TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|                               |   |                                                                                    |
| **Commission File Number 0-20845** |

 

**BIG BUCK BREWERY & STEAKHOUSE,INC.**

(Name of Small Business Issuerin Its Charter)

 

| **Michigan**                                                          | **38-3196031**                        |
|-----------------------------------------------------------------------|---------------------------------------|
| (State or Other  Jurisdiction of  Incorporation or Organization)      | (I.R.S. Employer  Identification No.) |
|                                                                  |                                  |
| **550 South Wisconsin Street, Gaylord, Michigan  49734**         |
| (Address of Principal  Executive Offices, including Zip Code)         |
|                                                                  |                                  |
| **(989)  731-0401**                                                   |
| (Issuer’s Telephone  Number, including Area Code)                |
|                                                                  |
| Securities registered  pursuant to Section 12(b) of the Exchange Act: |
|                                                                  |
| **None**                                                              |
|                                                                  |
| Securities registered  pursuant to Section 12(g) of the Exchange Act: |

 

**Common Stock ($0.01 par value)**

(Title of Class)

 

Check whetherthe issuer:  (1) filed all reportsrequired to be filed by Section 13 or 15(d) of the Exchange Act during the past12 months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements for thepast 90 days.  Yes ý No o

 

Check if thereis no disclosure of delinquent filers in response to Item 405 of Regulation S-Bcontained in this form, and no disclosure will be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-KSB or any amendment tothis Form 10-KSB.  o

 

The issuer’srevenues for its most recent fiscal year were $16,391,465.

 

The aggregatemarket value of the common equity held by non-affiliates of the issuer as ofMarch 12, 2003, was approximately $154,731.

 

As of March12, 2003, the issuer had outstanding 861,997 shares of common stock.

 

**DOCUMENTS INCORPORATED BY REFERENCE**

None.

 

 

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**TABLE OF CONTENTS**

 
| PART I             |                                                                                                              | 1      |
|--------------------|-------------------------------------------------------------------------------------------------------------------|--------|
|               |                                                                                                              |   |
| ITEM 1             | DESCRIPTION OF BUSINESS                                                                                           | 1      |
|               |                                                                                                              |   |
| ITEM 2             | DESCRIPTION OF PROPERTY                                                                                           | 5      |
|               |                                                                                                              |   |
| ITEM 3             | LEGAL PROCEEDINGS                                                                                                 | 8      |
|               |                                                                                                              |   |
| ITEM  4            | SUBMISSION  OF MATTERS TO A VOTE OF SECURITY HOLDERS                                                              | 8      |
|               |                                                                                                              |   |
| PART II            |                                                                                                              | 9      |
|               |                                                                                                              |   |
| ITEM  5            | MARKET  FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                                                         | 9      |
|               |                                                                                                              |   |
| ITEM  6            | MANAGEMENT’S  DISCUSSION AND ANALYSIS OR PLAN OF OPERATION                                                   | 10     |
|               |                                                                                                              |   |
| ITEM 7             | FINANCIAL STATEMENTS                                                                                              | 26     |
|               |                                                                                                              |   |
| ITEM 8             | CHANGES IN AND DISAGREEMENTS  WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE                             | 43     |
|               |                                                                                                              |   |
| PART III           |                                                                                                              | 44     |
|               |                                                                                                              |   |
| ITEM 9             | DIRECTORS,  EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(a)  OF THE EXCHANGE ACT | 44     |
|               |                                                                                                              |   |
| ITEM  10           | EXECUTIVE  COMPENSATION                                                                                           | 47     |
|               |                                                                                                              |   |
| ITEM  11           | SECURITY  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER  MATTERS                  | 49     |
|               |                                                                                                              |   |
| ITEM  12           | CERTAIN  RELATIONSHIPS AND RELATED TRANSACTIONS                                                                   | 51     |
|               |                                                                                                              |   |
| ITEM  13           | EXHIBITS  AND REPORTS ON FORM 8-K                                                                                 | 53     |
|               |                                                                                                              |   |
| ITEM  14           | CONTROLS  AND PROCEDURES                                                                                          | 54     |
|               |                                                                                                              |
| SIGNATURES         | 55                                                                                                                |
|               |                                                                                                              |
| CERTIFICATIONS     | 57                                                                                                                |
|               |                                                                                                              |
| INDEX  TO EXHIBITS | 60                                                                                                                |

 

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*The following discussion containsvarious forward-looking statements within the meaning of Section 21E of theExchange Act.  Although we believe that,in making any such statement, our expectations are based on reasonableassumptions, any such statement may be influenced by factors that could causeactual outcomes and results to be materially different from thoseprojected.  When used in the followingdiscussion, the words “anticipates,” “believes,” “expects,” “intends,” “plans,”“estimates” and similar expressions, as they relate to us or our management,are intended to identify such forward-looking statements.  These forward-looking statements are subjectto numerous risks and uncertainties that could cause actual results to differmaterially from those anticipated. Factors that could cause actual results to differ materially from thoseanticipated, certain of which are beyond our control, are set forth under thecaption “Management’s Discussion and Analysis or Plan of Operation — CautionaryStatement.”*

* *

*Our actual results, performance orachievements could differ materially from those expressed in, or implied by,forward-looking statements. Accordingly, we cannot be certain that any of the events anticipated byforward-looking statements will occur or, if any of them do occur, what impactthey will have on us.  We caution you tokeep in mind the cautions and risks described in our Cautionary Statement andto refrain from attributing undue certainty to any forward-looking statements,which speak only as of the date of the document in which they appear.*

** **

**PART I**

** **

**ITEM 1                   DESCRIPTION OFBUSINESS**

** **

**Overview**

 

We develop and operate restaurant-brewpubs under thename “Big Buck Brewery & SteakhouseSM.”  We currently operate one unit in each of thefollowing cities in Michigan: Gaylord, Grand Rapids and Auburn Hills.  In addition, we opened a fourth unit inGrapevine, Texas, a suburb of Dallas, in August 2000.  This unit is owned and operated by Buck & Bass, L.P. pursuantto our joint venture agreement with Bass Pro Outdoor World, L.L.C., a premier retailerof outdoor sports equipment.

 

We had planned, subject to obtaining adequatefinancing, to open our next unit in Nashville, Tennessee.  In March 2002, following the recommendationof the landlord and after careful consideration of the marketplace and ourlimited capital resources, we determined to discontinue our plans to open thisunit.  For the foreseeable future, weplan to focus on the following objectives:

 

•              refinancing existing indebtedness,

 

•              continued implementation of costcontrols, and

 

•              exploration of licensing andfranchising opportunities.

 

On September 13, 2002, we effected a stock combination(reverse stock split) pursuant to which our outstanding shares of common stockwere exchanged for new shares of common stock in an exchange ratio of one newlyissued share for every seven outstanding shares, while maintaining 15 millionauthorized shares, consisting of 10 million shares of common stock and 5million shares of preferred stock. Share and per share data, except for par, for all periods presented havebeen restated to reflect the reverse stock split.

 

We were incorporated under the Michigan BusinessCorporation Act in November 1993, as Michigan Brewery, Inc.  All references to us herein include oursubsidiaries, unless otherwise noted. Our executive office is located at 550 South Wisconsin Street, Gaylord,Michigan 49734.  Our telephone number is(989) 731-0401.

** **

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**RestaurantOperations**

* *

*General*.  Big Buck Brewery & Steakhouses offercraft brewed beer brewed on site along with a menu featuring steaks, ribs,chicken, fish, pasta and other food in a unique, architecturally spacioussetting.  Our units offer over tendifferent types of beers ranging from a light golden ale to a full-bodiedstout.  We also offer customers a fullselection of hard liquors.  We attemptto create an exciting yet casual restaurant where patrons can have fun and feelcomfortable.

* *

*Designand Layout*.  Big BuckBrewery & Steakhouses feature large, open and visually stimulating diningareas, highlighted by gleaming stainless steel and copper brewingequipment.  Each unit’s interior followsthe same motif with a warm, cozy atmosphere utilizing soft lighting and Amishfurniture.  The menu and beer styles arethe same at each existing unit.

 

•                                          The Gaylordunit features a 4,000 square foot dining area and a 1,600 square foot bar area,with combined seating capacity of approximately 420.  It is decorated with a rustic wood-finished interior, mounteddeer racks, 36-foot high vaulted ceilings and warm lighting.  The specially commissioned Amish hand-carvedwooden furniture and overhead genuine Tennessee whisky barrel lighting fixturesadd character to the building’s decor. The layout is flexible, permitting tables to be rearranged toaccommodate customer demand.  A wall oftelevision sets, including a ten-foot screen television set, adjacent to thebar area provides customers the opportunity to watch sporting and other specialevents.  The friendly and attentivestaff, on-site brewing, summertime outdoor seating and live music are designedto create an appealing atmosphere for lunch, dinner and bar customers.

 

•                                            TheGrand Rapids unit’s seating capacity is approximately 250 in the restaurant andbar combined.  The brewing andfermenting tanks of this unit front directly on 28th Street, awell-traveled street.

 

•                                          The AuburnHills unit, which houses a 15-barrel brewing system, encompasses approximately26,700 square feet including brewery, bar and restaurant, with a total seatingcapacity of approximately 650.  Thisunit is accessible to Detroit metro area residents.

 

•                                          The Grapevineunit, which is located between Bass Pro Outdoor World, a premier retailer ofoutdoor sports equipment, and Embassy Suites Outdoor World Hotel and ConventionCenter on Bass Pro Drive, encompasses approximately 20,500 square feetincluding brewery, bar and restaurant. This unit has a total seating capacity of approximately 500 and isaccessible to Dallas/Fort Worth metro area residents.

* *

*Menuand Pricing*.  The menuat each unit consists of appetizers, soups, meal-sized salads, and entrees,including steaks, ribs, chicken, fish, pastas as well as a variety ofdesserts.  Management analyzes menuitems for popularity, profitability and ease of preparation.  The menu items are selected to complementour craft brewed beers.  The menu isdesigned to offer a broad range of prices that convey value to the customer.  Entrees range in price from $9.99 to $28.00with an average entree price of $15.00. During 2002, sales of alcohol, including beer and wine, accounted for17.7%, 18.9%, 22.1% and 22.7% of the Gaylord, Grand Rapids, Auburn Hills andGrapevine unit sales, respectively.

* *

*Customers*.  We believe our restaurants appeal to a widerange of customers and draw clientele from throughout the region in which theyare located.  Increased customer loyaltyto our beers results in repeat business.

** **

**2**

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**Brewing Operations**

* *

*General*.  The brewery at the Gaylord unit presentlyhas the capacity to brew 10,000 barrels of beer per year, and is designed toproduce 20,000 barrels per year with the installation of additionalfermentation tanks.  The Grand Rapidsunit features a 7.5-barrel brewing system that can produce 7,000 barrels peryear with the installation of additional fermentation tanks.  The Auburn Hills unit features a 15-barrelbrewing system that can produce 15,000 barrels per year with the installationof additional fermentation tanks.  TheGrapevine unit features a 15-barrel brewing system that can produce 15,000barrels per year with the installation of additional fermentation tanks.  Each existing brewery has beencustom-designed to be integrated into the restaurant layout in an efficient andaesthetically pleasing manner.

* *

*QualityControl*.  Qualitycontrol of each brewery is under the supervision of our brewmaster.  Each unit contains a laboratory to monitorand maintain quality assurance in the brewing and packaging processes.

* *

*Ingredients. *Beer is made primarilyfrom four natural ingredients: malted barley, hops, yeast and water.  We use only the finest barley, primarily tworow, in our production.  The universalspice of beer is hops.  Hops, like thegrapes used in wine, are varietal. Brewers select hops based on specific varieties grown in select areasaround the world.  Some hop varietiesare selected for their bittering qualities, while others are chosen for theirability to impart distinctive aromas to the beer.  Yeast is a uni-cellular organism whose metabolism converts sugarinto alcohol and carbon dioxide.  We useonly specially selected yeast.  Theentire brewing process from mashing through filtration typically is completed in14 to 21 days, depending on the formulation and style of the beer being brewed.  We purchase the required raw materials frommarket sources on a competitive bid basis.

** **

**Sales andMarketing**

 

We advertise primary through four-walls marketing,including the use of table tents, in-house promotions and other events to buildcustomer loyalty.  We strive to provideour customers with a dining experience that will encourage repeat business andpromote “word-of-mouth” advertising.  Tosupplement our service-oriented marketing efforts, we sell merchandise,including hats, t-shirts, sweatshirts and other items bearing the Big BuckBrewery & Steakhouse name and logo. During 2002, we incurred approximately $156,029 in marketing expenses.

** **

**Competition**

* *

*Restaurantcompetitors. *Therestaurant industry is highly competitive with respect to price, service,location and food quality, including taste, freshness and nutritionalvalue.  New restaurants have a highfailure rate.  New restaurants generallyexperience a decline in revenue growth, or in actual revenues, following aperiod of excitement that accompanies their opening.  The restaurant industry is also generally affected by changes inconsumer preferences, national, regional and local economic conditions, anddemographic trends.  The performance ofindividual restaurants may also be affected by factors such as trafficpatterns, demographic considerations, and the type, number and location ofcompeting restaurants.  In addition,factors such as inflation, increased food, labor and employee benefit costs,and unavailability of experienced management and hourly employees may alsoadversely affect the restaurant industry in general and our units inparticular.  Restaurant operating costsare further affected by increases in the minimum hourly wage, unemployment taxrates and similar matters over which we have no control.  We face numerous well-establishedcompetitors, including national, regional and local restaurant chains,possessing substantially greater financial, marketing, personnel and otherresources than we do.  We also competewith a large variety of locally owned restaurants, diners, and otherestablishments that offer moderately priced food to the public and with otherbrewpubs.  Competitors

 

3

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could utilize the Big BuckBrewery & Steakhouse format or a related format.  We cannot assure you that we will be able to respond to variouscompetitive factors affecting the restaurant industry.

* *

*Brewingindustry competitors. *Thedomestic beer market is highly competitive due to:

 

•                                          the enormousadvertising and marketing expenditures by national and major regional brewers,

 

•                                          theproliferation of craft breweries and brewpubs,

 

•                                          theintroduction of fuller-flavored products by certain major national brewers, and

 

•                                          a generalsurplus of domestic brewing capacity, which facilitates existing contractbrewer expansion and the entry of new contract brewers.

 

We cannot assure you that demand for craft brewedbeers will continue.  Most of ourbrewing competitors possess greater financial, marketing, personnel and otherresources than we do.  We cannot assureyou that we will be able to succeed against such competition.

** **

**GovernmentRegulation**

*** ***

***Beer Regulation***.  A significant percentage of our revenue isderived from beer sales.  Total sales ofalcohol, including beer, wine and hard liquor, accounted for 21.1% of ourrevenues during 2002.  We must complywith federal licensing requirements imposed by the United States Department ofTreasury, Alcohol and Tobacco Tax and Trade Bureau, as well as the licensingrequirements of states and municipalities where our units are located.  Our failure to comply with federal, state orlocal regulations could cause our licenses to be revoked and force us to ceasebrewing and selling beer.  Typically,licenses must be renewed annually and may be revoked or suspended for cause atany time.  We believe we are operatingin substantial compliance with applicable laws and regulations governing ouroperations.

*** ***

***RestaurantRegulation***.  Therestaurant industry is subject to numerous federal, state and local governmentregulations, including those relating to the preparation and sale of food andthose relating to building and zoning requirements.  We are subject to regulation by air and water pollution controldivisions of the Environmental Protection Agency of the United States and bycertain states and municipalities in which our units are located.  We are also subject to laws governing ourrelationship with our employees, including minimum wage requirements, overtime,working and safety conditions and citizenship requirements.  Restaurant operating costs are affected byincreases in the minimum hourly wage, unemployment tax rates, sales taxes andsimilar matters, such as any government-mandated health insurance, over whichwe have no control.  We believe we areoperating in substantial compliance with applicable laws and regulationsgoverning our operations.

*** ***

***Dram-Shop Laws***.  We are subject to “dram-shop” laws inMichigan and Texas.  These lawsgenerally provide someone injured by an intoxicated person the right to recoverdamages from the establishment that wrongfully served alcoholic beverages tosuch person.  We carry liquor liabilitycoverage as part of our existing comprehensive general liability insurance.  However, a judgment against us under adram-shop statute in excess of our liability coverage could have a materialadverse effect on our business, operating results, cash flows and financialcondition.

*** ***

***State Liquor Laws***.  We are licensed under Michigan law as a“brewpub.”  A brewpub in Michigan is (1)limited to a combined annual production of not more than 5,000 barrels, (2)limited to no more than three units in Michigan, and (3) prohibited fromselling beer on a wholesale basis.  Buck& Bass is licensed under Texas law as a “brewpub.”  A brewpub in Texas is limited to theproduction of not more than 5,000 barrels of malt liquor, ale, and beer foreach licensed brewpub established, operated, or

 

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maintained in Texas by theholder of the brewpub license.  Brewpubsin Michigan and Texas are also licensed to sell hard liquor with appropriatelicensing.  Applicable legislation,regulations or administrative interpretations of liquor laws may hinder ouroperations or increase our operating costs.

*** ***

***Excise Taxes***.** **The federal government currentlyimposes an excise tax of $18.00 on each barrel of beer produced for domesticconsumption in the United States. However, each brewer with production of not more than 2,000,000 barrelsper year is taxed only $7.00 per barrel on the first 60,000 barrels producedannually.  We cannot assure you that thefederal government will not reduce or eliminate this small brewer ratereduction.  Michigan imposes an excisetax of $6.30 per barrel on each barrel of beer manufactured or sold inMichigan.  However, each brewer thatmanufactures less than 50,000 barrels per year is granted a brewer’s excise taxcredit in the amount of $2.00 per barrel for the first 30,000 barrels.  Buck & Bass is subject to excise taxes underTexas law.  Excise taxes in Texas are$6.138 per barrel for ale and malt liquor, and $6.00 per barrel for beer.  However, Texas grants a 25% tax exemptionfor manufacturers of beer whose annual production in Texas does not exceed75,000 barrels of beer per year.  As aresult, Buck & Bass faces an effective excise tax of $4.50 per barrel forbeer.  If our beer production exceedsthe foregoing credit thresholds, our average excise tax rate would increase.

 

It is possible that the rate of excise taxation couldbe increased by either federal or state governments, or both.  Increased excise taxes on alcoholicbeverages have been considered by the federal government as an additionalsource of tax revenue in connection with various proposals and could be includedin future legislation.  Future increasesin excise taxes on alcoholic beverages, if enacted, could adversely affect ourbusiness, operating results, cash flows and financial condition.

** **

**Employees**

 

At December 29, 2002, we employed 376 persons at ourunits, including approximately 111 full-time employees.  Of our total number of employees, 28 servedas restaurant management personnel, 7 served in executive and corporateadministrative capacities, and the remainder were hourly personnel.  No employee is covered by a collectivebargaining agreement and we have never experienced an organized work stoppage,strike or labor dispute.  We considerrelations with our employees to be satisfactory.

** **

**Trademarks andService Marks**

 

We own several trademarks,including BIG BUCK BREWERY & STEAKHOUSE® and BIG BUCK BEER®. Trademark rights generally continue indefinitely, so long as themarks remain in use and periodic filings are madeand fees paid.  We regard our marks as having substantial valueand as being an important factor in the marketing of our restaurants andbeer.  Our policy is to pursue registration of our marks and to opposevigorously any infringement of our marks.

** **

**ITEM 2                   DESCRIPTION OF PROPERTY**

** **

**Gaylord**

 

We own the Gaylord unit, including the real propertyon which it is located.  See“Description of Business — Restaurant Operations” for a description of theGaylord unit.

** **

**GrandRapids and Auburn Hills**

* *

*Grand Rapids*

 

We purchased the Grand Rapids site in December1996.  The site included an existingstructure of approximately 8,200 square feet and is located on 28th Street inGrand Rapids.  Seating capacity isapproximately 250 for restaurant and bar combined.  The Grand Rapids unit opened in March 1997.

 

5

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In April 1997, we sold the Grand Rapids site,including all improvements thereto, to an entity owned by one of ourshareholders, Eyde Brothers Development Co., pursuant to a real estate purchaseand leaseback agreement for $1.4 million. Pursuant to a separate lease agreement, we lease the Grand Rapids siteat a minimum annual base rent of $140,000 and a maximum annual base rent of$192,500 over a ten-year term.  Thelease may be extended at our option for up to two additional five-yearterms.  In addition to the annual baserent, the lease, as amended in March 2000, provides that we are obligated topay annual percentage rent in the amount of 5% on gross sales at the site inexcess of $1.5 million per year.

 

If annual gross sales do not exceed $1.5 million forany lease year, the lessor will obtain the right to require us to repurchasethe Grand Rapids site for $1.4 million, plus $70,000 for each lease year on apro rata basis.  In March 2002, thelessor waived its right to require repurchase based upon insufficient annualgross sales for the lease years ended April 2001 and April 2002.  We do not expect annual gross sales toexceed $1.5 million for the lease year ended April 2003.  Independent of annual gross sales, thelessor has the option to require us to repurchase such site after the seventhfull lease year for the same price.  Wealso have the option to purchase the Grand Rapids site from the lessor afterthe seventh full lease year for the same price.  If the lessor requires us to repurchase the site, we would beforced to repurchase it at a premium over its sale price.  We cannot assure you that we will havesufficient funds to repurchase the site. If we are required to repurchase the site and cannot do so, it wouldhave a material adverse impact on our business, operating results, cash flowsand financial condition.

 

During 2002, we paid annual rent of $17 per squarefoot at the Grand Rapids unit.

 

*Auburn Hills*

 

We purchased the Auburn Hills site in August1996.  The site is just off ofInterstate 75 at exit 79.  The unitconstructed on this site encompasses approximately 26,700 square feet includingbrewery, bar and restaurant.  Seatingcapacity is approximately 650 for the restaurant and bar combined.  The Auburn Hills unit opened in October1997.

 

In August 1997, we entered into a real estate purchaseand leaseback agreement providing for the sale of the Auburn Hills site to oneof our shareholders, Michael G. Eyde, for $4.0 million.  We lease the Auburn Hills site pursuant to aseparate lease agreement which provides for a minimum annual base rent of$400,000, and a maximum annual base rent of $550,000, over a 25-year term.  The lease may be extended at our option forup to two additional ten-year terms.  Inaddition to the annual base rent, we are obligated to pay an annual percentagerent of 5.25% of gross sales at the site in excess of $8.0 million per year.

 

Because annual gross sales did not exceed $8.0 millionfor the fourth and fifth years of the lease term, the lessor obtained the rightto require us to repurchase the Auburn Hills site for $4.0 million, plus$200,000 for each lease year on a pro rata basis.  We also have the option to purchase the Auburn Hills site fromthe lessor after the seventh full lease year for the same price.  If the lessor requires us to repurchase thesite, we would be forced to repurchase it at a premium over its saleprice.  We cannot assure you that wewill have sufficient funds to repurchase the site.  If we are required to repurchase the site and cannot do so, it wouldhave a material adverse impact on our business, operating results, cash flowsand financial condition.

 

During 2002, we paid annual rent of $15.40 per squarefoot at the Auburn Hills unit.

 

*Termination Provisions*

 

The Grand Rapids and Auburn Hills lessors mayterminate in the event of a default which is not cured within the applicablegrace period.  A default is defined as:

 

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•                                          our failureto make a rental payment within 30 days after receipt of written notice that apayment is past due, or

 

•                                          our failureto perform our obligations under the lease, other than rent payments, within 30days after written notice of a curable violation;

 

provided, however, that if such default cannot becured within the 30-day period, a default will be deemed to have occurred onlyif we have failed to commence a cure within such 30-day period.  In the event of a default and termination ofeither lease, we would be unable to continue operating the related unit, whichwould have a material adverse effect on our business, operating results, cashflows and financial condition.

** **

**Grapevine**

 

The Grapevine unit is owned and operated by Buck &Bass pursuant to our joint venture agreement with Bass Pro.  The Grapevine unit is off Highway 121, themajor artery between downtown Dallas and the Dallas/Fort Worth airport.  The Grapevine site houses a 15-barrelbrewing system and encompasses approximately 20,500 square feet includingbrewery, bar and restaurant, with a total seating capacity of approximately500.

 

Pursuant to a commercial sublease agreement, Buck& Bass leases the Grapevine site from Bass Pro over a 15-year term.  Buck & Bass may extend the sublease forup to seven additional five-year terms. Buck & Bass is obligated to pay an annual percentage rent in theamount of 5.5% on gross sales less than $11.0 million per year and 6.5% ongross sales in excess of $11.0 million per year; provided, however, that theminimum annual base rent is $385,000. The minimum annual base rent is required whether the Grapevine unit isprofitable or not.  If Buck & Bassis required to pay in excess of the minimum annual base rent, the fundsavailable to us for other purposes will be reduced.  During 2002, Buck & Bass paid annual rent of $19.25 per squarefoot at the Grapevine unit (when the second story bar area of such unit isincluded in the total square footage).

 

Bass Pro may terminate the sublease in the event of adefault which is not cured within the applicable grace period.  The sublease provides that a defaultincludes, but is not limited to:

 

•                                          the failureof Buck & Bass to remain open during all business days,

 

•                                          the failureof Buck & Bass to maintain on duty a fully trained service staff,

 

•                                          the failureof Buck & Bass to provide high quality food of the type provided at ourGaylord unit,

 

•                                          the failureof Buck & Bass to achieve gross sales in the first full calendar yearimmediately following the opening and for each calendar year thereafter of $7.0million,

 

•                                          Buck &Bass encumbering in any manner any interest in the subleased premises, or

 

•                                          the failureof Buck & Bass to conduct full and complete customer surveys no lessfrequently than each calendar quarter.

 

The failure of Buck & Bass to achieve the requiredgross sales, the existence in the past of encumbrances upon the subleasedpremises and the failure of Buck & Bass to perform quarterly customersatisfaction surveys give Bass Pro the ability to declare an event of defaultunder the sublease, terminate the sublease and demand all unpaid and reasonablycalculable future rent over the balance of the sublease term.  Pursuant to the limited partnershipagreement, a material default under the sublease would also

 

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entitle Bass Pro to purchaseour interest in the joint venture at 40% of book value, thereby eliminating ourinterest in the Grapevine unit.  Thetermination of the sublease or the elimination of our interest in the Grapevineunit would have a material adverse effect on our business, operating results,cash flows and financial condition.

** **

**Liensand Insurance on Properties**

 

As of March 21, 2003, we owed Wayne County Employees’Retirement System (“WCERS”) approximately $10.2 million.  A first priority lien in favor of WCERS onall of our assets, including the Gaylord unit, our leasehold interest in theAuburn Hills unit, our leasehold interest in the Grand Rapids unit, our limitedpartnership interest in Buck & Bass, L.P. and all of our other assets, nowor hereafter acquired, secures this indebtedness.

 

In the opinion of management, our properties areadequately covered by insurance.

** **

**ITEM 3                   LEGAL PROCEEDINGS**

 

We were not a party to any material litigation as ofMarch 21, 2003.

** **

**ITEM 4                   SUBMISSION OF MATTERS TO A VOTE OFSECURITY HOLDERS**

 

Not applicable.

** **

**Executive Officersof the Registrant**

 

The following table provides information with respectto our executive officers as of March 21, 2003.  Each executive officer has been appointed to serve until hissuccessor is duly appointed by the board or his earlier removal or resignationfrom office.

 
| **Name**              |   | **Age** |   | **Position  with Big Buck**           |
|-----------------------|--------|---------|--------|---------------------------------------|
| Anthony P. Dombrowski |   | 42      |   | President, Chief Executive Officer,   |
|                  |   |    |   | Chief Financial Officer and Treasurer |
| Timothy J. Pugh       |   | 43      |   | Chief Operating Officer               |

 

*Anthony P. Dombrowski* became the President and Chief ExecutiveOfficer of our company in March 2003. Mr. Dombrowski has also served as the Chief Financial Officer andTreasurer of our company since May 1996. He acted as a consultant to our company, in the capacity of ChiefFinancial Officer, from January 1996 to May 1996.  From February 1995 to May 1996, Mr. Dombrowski operated his ownfinancial and consulting business.  FromMay 1989 to January 1995, Mr. Dombrowski was the Chief Financial Officer ofWard Lake Energy, Inc., an independent producer of natural gas inMichigan.  Mr. Dombrowski began hiscareer with Price Waterhouse LLP in 1982.

* *

*Timothy J. Pugh* became our Executive Vice President of Operations in December2000.  He was promoted to ChiefOperating Officer in May 2002.  FromNovember 1998 to November 2000, he was a franchisee partner of Damon’sInternational, a full-service chain of over 100 casual dining restaurants, inKalamazoo, Michigan.  From April 1996 toOctober 1998, he was a regional manager at Damon’s International.  From October 1993 to April 1996, he was ageneral manager at Damon’s International. From April 1991 to October 1993, he managed the Houston’s restaurant inDallas, Texas, and the Houston’s restaurant in Memphis, Tennessee.

 

8

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**PART II**

** **

**ITEM 5****                                                       ****MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDERMATTERS**

 

Our common stock was listed on The Nasdaq SmallCapMarket from the completion of our initial public offering in June 1996 throughthe open of business on October 7, 2002, when it was delisted from The NasdaqSmallCap Market.  Since that time, ourcommon stock has traded on the OTC Bulletin Board under the symbol “BBUC.”  The following table sets forth theapproximate high and low bid prices for our common stock for the periodsindicated as reported by The Nasdaq SmallCap Market and the OTC BulletinBoard.  Such quotations reflectinter-dealer prices, without retail mark-up, markdown or commission, and maynot represent actual transactions.

 
| **Period**      |   | **High** |   | **Low** |   |
|-----------------|--------|----------|--------|---------|--------|
| 2001            |   |     |   |    |   |
| First  Quarter  |   | $        | 10.50  |    | $      | 5.03 |   |
| Second  Quarter |   | $        | 7.91   |    | $      | 4.97 |   |
| Third  Quarter  |   | $        | 9.80   |    | $      | 5.25 |   |
| Fourth  Quarter |   | $        | 6.93   |    | $      | 2.66 |   |
|            |   |     |   |    |   |
| 2002            |   |     |   |    |   |
| First  Quarter  |   | $        | 3.50   |    | $      | 1.05 |   |
| Second  Quarter |   | $        | 2.94   |    | $      | 1.05 |   |
| Third  Quarter  |   | $        | 2.37   |    | $      | 0.75 |   |
| Fourth  Quarter |   | $        | 0.90   |    | $      | 0.21 |   |

 

As of March 7, 2003, we had 134 shareholders ofrecord.  As of July 31, 2002, the dateof our last broker search, we had 1,982 beneficial owners.

 

We have never declared or paid cash dividends.  We currently intend to retain futureearnings for the operation of our business and do not anticipate paying cashdividends on our securities in the foreseeable future.  Any payment of cash dividends in the futurewill be at the discretion of our board of directors and will depend upon ourresults of operations, earnings, capital requirements, contractual restrictionsand other factors deemed relevant by our board.  The payment by us of dividends is subject to the terms of thesubscription and investment representation agreement governing the 10%convertible secured promissory note due February 2003 we issued to WCERS inFebruary 2000.

** **

**Sales ofUnregistered Securities during the Fourth Quarter of 2002**

 

Not applicable.

 

9

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**ITEM 6                   MANAGEMENT’S DISCUSSION AND ANALYSIS ORPLAN OF OPERATION**

** **

**Overview**

 

We develop and operate restaurant-brewpubs under thename “Big Buck Brewery & Steakhouse.” Until May 1995 when we opened our first unit in Gaylord, Michigan, wehad no operations or revenues and our activities were devoted solely todevelopment.  In March 1997, we openedour second unit in Grand Rapids, Michigan, and in October 1997, we opened ourthird unit in Auburn Hills, Michigan, a suburb of Detroit.  In August 2000, we opened our fourth unit inGrapevine, Texas, a suburb of Dallas. This unit is owned and operated by Buck & Bass pursuant to our jointventure agreement with Bass Pro.

 

We had planned, subject to obtaining adequatefinancing, to open our next unit in Nashville, Tennessee.  In March 2002, following the recommendationof the landlord and after careful consideration of the marketplace and ourlimited capital resources, we determined to discontinue our plans to open thisunit.  For the foreseeable future, weplan to focus on the following objectives:

 

•              refinancing existing indebtedness,

 

•              continued implementation of costcontrols, and

 

•              exploration of licensing andfranchising opportunities.

 

Our future revenues and profits will depend uponvarious factors, including market acceptance of the Big Buck Brewery &Steakhouse concept and general economic conditions.

 

We use a 52-/53-week fiscal year ending on the Sundaynearest December 31.  All referencesherein to “2002” and “2001” represent the 52-week fiscal years ended December29, 2002 and December 30, 2001, respectively.

 

10

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**Results ofOperations**

 

Our operating results, expressed as a percentage oftotal revenue, were as follows:

 
|                                             |   | **For the years ended** |   |
|--------------------------------------------------|--------|-------------------------|--------|
|                                             |   | **December 29,  2002**  |   | **December 30,  2001** |   |
|                                             |   |                    |   |   |   |
| REVENUE                                          |   |                    |   |   |   |
| Restaurant  sales                                |   | 99.1                    | %      | 98.4 | % |
| Wholesale  and retail sales                      |   | 0.9                     |   | 1.6 |   |
| Total  revenue                                   |   | 100.0                   |   | 100.0 |   |
|                                             |   |                    |   |   |   |
| COSTS AND  EXPENSES:                             |   |                    |   |   |   |
| Cost of  sales                                   |   | 33.1                    |   | 33.0 |   |
| Restaurant  salaries and benefits                |   | 25.9                    |   | 26.3 |   |
| Operating  expenses                              |   | 23.2                    |   | 21.1 |   |
| Depreciation                                     |   | 8.2                     |   | 7.6 |   |
| Preopening  expenses and store development costs |   | —                  |   | 2.0 |   |
| General and  administrative expenses             |   | 11.8                    |   | 10.2 |   |
| Impairment  loss                                 |   | 4.9                     |   | — |   |
| Total costs  and expenses                        |   | 107.1                   |   | 100.2 |   |
|                                             |   |                    |   |   |   |
| LOSS FROM  OPERATIONS                            |   | (7.1                    | )      | (0.2 | ) |
|                                             |   |                    |   |   |   |
| OTHER INCOME  (EXPENSE):                         |   |                    |   |   |   |
| Interest  expense                                |   | (12.2                   | )      | (9.5 | ) |
| Interest  income                                 |   | —                  |   | — |   |
| Other                                            |   | (2.8                    | )      | (2.9 | ) |
| Minority  interest share of joint venture        |   | 0.1                     |   | — |   |
| Other income  (expense), net                     |   | (14.9                   | )      | (12.4 | ) |
|                                             |   |                    |   |   |   |
| NET LOSS                                         |   | (22.0)                  | %      | (12.6) | % |

 

**Results ofOperations for the Fiscal Years Ended December 29, 2002 and December 30, 2001**

** **

**Revenues**

 

Revenues decreased 6.3% to $16,391,465 in 2002 from$17,487,957 in 2001.  The decrease wasmainly due to a weak economy and the lack of a sustained marketingprogram.  We believe that increasedspending on marketing, including the use of a sustained, professionally managedmarketing program, will increase revenues at our existing units.

** **

**Costs of Sales**

 

Cost of sales, which consists of food, merchandise andbrewery supplies, decreased 5.7% to $5,436,563 in 2002 compared to $5,763,345in 2001.  The decrease was primarily dueto lower sales volume.  As a percentageof revenues, costs of sales increased to 33.1% in 2002 from 33.0% in 2001.  The percentage increase was due to anincrease in produce and meat cost.

** **

11

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**RestaurantSalaries and Benefits**

 

Restaurant salaries and benefits, which consist ofrestaurant management and hourly employee wages and benefits, payroll taxes andworkers’ compensation insurance, decreased 7.6% to $4,242,593 in 2002 comparedto $4,591,917 in 2001.  As a percentageof revenues, restaurant salaries and benefits decreased to 25.9% in 2002compared to 26.3% in 2001.  Thedecreases were due to improved labor controls and budgeting.

** **

**Operating Expenses**

 

Operating expenses, which include supplies, utilities,repairs and maintenance, advertising and occupancy costs, increased 2.9% to$3,801,965 in 2002 compared to $3,694,304 in 2001.  As a percentage of revenues, operating expenses increased to23.2% in 2002 compared to 21.1% in 2001. The increases were due to increases in employee food expense, repair andmaintenance cost and promotion and marketing expense.

** **

**PreopeningExpenses and Store Development Costs**

 

Preopening expenses and store development costsconsist of expenses incurred prior to an opening of a new unit, including butnot limited to wages and benefits, relocation costs, supplies, advertisingexpenses and training costs.  We had nopreopening expenses and store development costs in 2002.  The preopening expenses and store developmentcosts of $354,923 for 2001 related to the development costs incurred inconnection with the abandoned plans to open a unit in Nashville.

** **

**General andAdministrative Expenses**

 

General and administrative expenses increased 8% to$1,928,306 in 2002 compared to $1,785,886 in 2001.  The increase reflected an increase in professional fees relatedto the legal proceedings involving the Nashville site and the Grapevine unitand the delisting of our securities from The Nasdaq SmallCap Market.  As a percentage of revenue, these expensesincreased to 11.8% in 2002 compared to 10.2% in 2001.

** **

**Depreciation**

 

Depreciation expenses increased 0.1% to $1,340,430 in2002 compared to $1,338,650 in 2001.  Asa percentage of revenues, these expenses increased to 8.2% in 2002 from 7.6% in2001.  The increase was the result oflower sales volume.

** **

**ImpairmentLoss**

** **

Impairmentloss increased to $800,000 in 2002 compared to $0 in 2001.  The increase reflected the recording ofasset impairment charges of $800,000 to write-down the building andimprovements of the Grand Rapids unit.

 

**Interest Expense**

 

Interest expense increased $350,116 to $2,008,525 in2002 compared to $1,658,409 in 2001. The increase reflected the purchase price premium on the Grand Rapidsunit due to the possible need to repurchase such unit based upon annual grosssales for the lease year ended April 2003. As a percentage of revenues, interest expense increased to 12.2% in 2002from 9.5% in 2001.

** **

** **

12

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**Other Income andExpense**

 

Other income and expense includes miscellaneous incomeand amortization expense.  Otherexpenses were $461,298 in 2002 compared to $501,086 in 2001.

 

 

**Liquidity andCapital Resources**

* *

*Overview*

 

We have not made any required debt service payments toWayne County Employees’ Retirement System (“WCERS”) since September 2001.  On February 1, 2003, the entire $8,912,786principal amount of the secured debt held by WCERS became due and payable.  As of March 21, 2003, we had defaulted on$10,235,392 of principal and interest payments to WCERS and $650,000 ofprincipal payments to holders of our convertible subordinated promissorynotes.  We cannot assure you that wewill have sufficient financial resources to repay existing indebtedness or tocontinue operations.

 

We used $1,169,458 and $431,899 in cash for operatingactivities during 2002 and 2001, respectively. We had working capital deficits of approximately $16.4 million atDecember 29, 2002 and approximately $3.0 million at December 30, 2001.  The reclassification of our indebtedness toWCERS from a long-term obligation to a short-term obligation was primarilyresponsible for the increase in our working capital deficit, partially offsetby the loan we obtained for $5.0 million from United Bank and Trust Companyduring the first quarter of 2002. During 2002, we spent $479,983 in new equipment for existing units andproject management fees.  At thedirection of WCERS, we have been making interest and principal payments toUnited Bank and Trust Company.  We havebeen making interest only payments to most of the holders of our convertiblesubordinated promissory notes.

 

In general, we have experienced operating losses ineach quarterly and annual period since inception.  We incurred net losses of approximately $3.6 million for thefiscal year ended December 29, 2002, and approximately $2.2 million for thefiscal year ended December 30, 2001.  Asof December 29, 2002, we had an accumulated deficit of $13.4 million.  We currently depend upon our existing unitsfor all of our revenues.  We expect toincur significant losses for the foreseeable future.  We will need to generate significant increases in our revenues toachieve and maintain profitability.  Ifour revenues fail to grow or grow more slowly than we anticipate, or ouroperating expenses exceed our expectations, our losses could significantlyincrease, which would harm our business, operating results, cash flows andfinancial condition.  In addition, ourfailure to become and remain profitable may adversely affect the market price ofour securities and our ability to raise capital and continue operations.  The reports of our independent publicaccountants for the years ended December 29, 2002 and December 30, 2001 includeexplanatory paragraphs expressing doubt about our ability to continue as agoing concern.  In addition, oursecurities were delisted from The Nasdaq SmallCap Market on October 7, 2002,which may adversely affect our ability to raise capital.

 

Since inception, our principal capital requirementshave been the funding of (a) our operations and promotion of the Big BuckBrewery & Steakhouse format and (b) the construction of units and theacquisition of furniture, fixtures and equipment for such units.  Total capital expenditures for the Gaylord,Grand Rapids and Auburn Hills units were approximately $6.2 million, $3.2million and $10.2 million, respectively. Total capital expenditures of Buck & Bass for the Grapevine unitwere approximately $7.6 million. Pursuant to our joint venture agreement with Bass Pro, we fundedapproximately $6.4 million of that cost, including our $1.5 million loan toBuck & Bass.

* *

 

 

13

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*Financing activities in 2002*

 

In February 2002, wereceived a $500,000 advance from WCERS to cover unpaid real estate taxes inMichigan.  In March 2002, we obtained aloan from United Bank and Trust Company for $5,000,000 which matures in March2004.  The collateral of this loan is a$5,000,000 letter of credit from WCERS. Of the proceeds of such loan, we had used approximately $3,940,000through March 21, 2003 for the following purposes:

 

**•**                                          $200,000 to terminate our lease of theNashville site,

** **

**•**                                          $500,000 to repay the advance from WCERS,

 

**•**                                          $1,000,000 to repay our indebtedness toCrestmark Bank,

 

**•**                                          $825,000 to settle the dispute between Buck& Bass and the general contractor of the Grapevine unit,

 

**•**                                          $380,000 to make principal and interestpayments to United Bank and Trust Company,

 

**•**                                          $108,000****to pay Columbia Construction Services, anentity controlled by one of our directors, Mark S. Provenzano, for servicesrendered in connection with the Nashville site,

 

**•**                                          $163,000 to pay certain accounts payable,

 

**•**                                          $273,000 to pay property taxes, and

 

**•**                                          $491,000 for other working capital purposes.

 

*Financing activities during 2001*

* *

In February 2001,we agreed with WCERS to extend the maturity dates of certain promissory notesheld by WCERS, with an aggregate principal amount of approximately $7,400,000,to February 2003.  As a consequence,each of our outstanding promissory notes held by WCERS has a maturity date of February1, 2003.  On the same day, we alsoissued 46,200 shares of our common stock to WCERS in lieu of $327,610 inprincipal and/or interest otherwise payable to WCERS in February, March, Apriland May 2001.  In March 2001, we enteredinto a first amendment and acknowledgment of partial payment with the holder ofone of our convertible subordinated promissory notes with a principal amount of$250,000.  Pursuant to such agreement,we repaid $75,000 of principal, agreed to a repayment schedule involving monthlypayments of principal and interest commencing May 1, 2001, and adjusted theconversion price on such note from $10.3264 to $5.11 per share.  We repaid such note in full in March 2002.  Also in March 2001, we entered into twoamendments with Michael G. Eyde, one of our shareholders and the holder of twoof our subordinated promissory notes. Pursuant to such agreements, we made his $100,000 non-convertible noteconvertible into shares of our common stock at a conversion price of $7.00,adjusted the conversion price of his $100,000 convertible note from $13.4316 to$7.00 and extended the maturity date of both notes until October 2001.  In April 2001, we entered into a firstamendment with the holder of one of our convertible subordinated promissorynotes with a principal amount of $50,000. Pursuant to such agreement, the maturity date of such note was extendeduntil January 2002 and the conversion price was adjusted from $13.3875 to $5.11per share.  In April 2001, we enteredinto a first amendment with the holder of one of our convertible subordinatedpromissory notes with a principal amount of $250,000.  Pursuant to such agreement, the maturity date of such note wasextended until October 2001 and the conversion price was adjusted from $10.3264to $5.11 per share.  We subsequentlyagreed to a repayment schedule involving monthly payments of principal andinterest on 

*14*

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this note commencing November 1, 2001. In July 2001, we generated $100,000 in net proceeds from the privateplacement of a $100,000 principal amount convertible subordinated promissorynote to Thomas E. Zuhl, who became one of our directors in January 2002.  The note, which is convertible into 16,496 sharesof common stock at a conversion price of $6.062 per share, matured in July2002.  In December 2001, we generated$100,000 in net proceeds from the private placement of a $100,000 principalamount convertible promissory note to Pac Rim Associates, Inc.  Such entity is owned by Thomas E. Zuhl, whobecame one of our directors in January 2002. The note, which is convertible into 27,793 shares of common stock at aconversion price of $3.598 per share, matured in December 2002.  We used the funds provided by thissubordinated debt financing for working capital purposes.

 

*Additional financing isrequired for debt repayment*

 

Without additional financing, our leveraged position,requirements for payments to the holders of our secured and subordinated debtand requirements for payments on our loan agreement****may require us to liquidateall or a portion of our assets.  We hadworking capital deficits of approximately $16.4 million at December 29, 2002and approximately $3.0 million at December 30, 2001.  As of March 21, 2003, we had outstanding (1) convertible secureddebt aggregating $7,412,786, (2) non-convertible secured debt aggregating$5,674,940, and (3) convertible subordinated debt aggregating $650,000.  The outstanding convertible secured debt and$1.5 million of the outstanding non-convertible secured debt matured onFebruary 1, 2003.  Of the outstandingconvertible subordinated debt, $100,000 matured in November 2000, $300,000matured in October 2001, $50,000 matured in January 2002, $100,000 matured in July2002 and $100,000 matured in December 2002. Our outstanding debt must be repaid in full as follows:

 
| **Type of Debt**               |   | **Principal  Amount** |      | **Repayment  Required** |       |
|--------------------------------|--------|-----------------------|-----------|-------------------------|------------|
| Convertible  Secured Debt      |   | $                     | 7,412,786 |                    | Immediate  |   |
| Non-Convertible  Secured Debt  |   | $                     | 1,500,000 |                    | Immediate  |   |
| Non-Convertible  Secured Debt  |   | $                     | 4,174,940 |                    | March 2004 |   |
| Convertible  Subordinated Debt |   | $                     | 650,000   |                    | Immediate  |   |

 

To fund thematurity of our outstanding debt, we must obtain additional financing orrefinance the debt.  However, we cannotassure you that we will be able to obtain the required funds or refinance thedebt, which could materially adversely affect our business, operating results,cash flows and financial condition.

* *

*WCERS payment defaultsand covenant violations*

 

We have not made any required debt service payments toWCERS since September 2001.  On February1, 2003, the entire $8,912,786 principal amount of the secured debt held byWCERS became due and payable.  As ofMarch 21, 2003, we had defaulted on $10,235,392 of principal and interestpayments to WCERS.  We cannot assure youthat we will have sufficient financial resources to repay existing indebtednessor to continue operations.

 

Among other things, we also agreed with WCERS that (1)we would not create, incur or suffer to be created or incurred or to exist, anylien of any kind upon any of our property or assets of any character whetherthen owned or thereafter acquired, or upon the income or profits therefromexcept for certain permitted liens, (2) we would keep and maintain tangible networth plus subordinated debt in an amount not less than $8.5 million, (3) wewould keep and maintain a minimum debt coverage ratio of 1.25 to 1.0 (excludingGrapevine pre-opening and financing costs), (4) we would maintain our thencurrent cash flow position, and (5) we would not permit the difference betweenour current assets and our current liabilities (other than subordinated debt)to be less than $500,000.  We havenotified WCERS that we have violated each of the foregoing covenants.  On April3, 2001, we entered into a letter agreement with WCERS pursuant to whichthe foregoing covenants were modified to provide that (1) we must maintaintangible net worth plus subordinated debt in an amount not less than $6.25million and (2) we had until January 

 

15

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1, 2002 to meet all other covenants set forth in theloan documents (unless modified by the parties in writing).  We notified WCERS that we violated theamended covenants.  On April 1, 2002, we entered into aletter agreement with WCERS pursuant to which the foregoing covenants weremodified to provide that (1) we must maintain tangible net worth plussubordinated debt in an amount not less than $4.5 million and (2) we had untilJanuary 1, 2003 to meet all other covenants set forth in the loan documents(unless modified by the parties in writing). We have notified WCERS that we have violated each of the foregoingcovenants.

 

Because we have not made timely payments of principaland interest on our indebtedness to WCERS and are in violation of variouscovenants, we are in default under our agreements with WCERS.  As a result, WCERS may, by notice in writingto us, declare all amounts owing with respect to the agreements to beimmediately due and payable without presentment, demand, protest or othernotice of any kind, all of which we previously waived.  Our assets are, as a consequence, subject toforeclosure by WCERS.  Foreclosure byWCERS would force us to cease all operations. We cannot assure you that we will be able to repay or refinance ourindebtedness to WCERS or regain compliance with the amended covenants.

* *

*Grapevine covenantviolations*

 

The failure of Buck & Bass to achieve the requiredgross sales, the existence in the past of encumbrances upon the subleasedpremises and the failure of Buck & Bass to perform quarterly customersatisfaction surveys give Bass Pro the ability to declare an event of defaultunder the sublease, terminate the sublease and demand all unpaid and reasonablycalculable future rent over the balance of the sublease term.  Pursuant to the limited partnershipagreement, a material default under the sublease would also entitle Bass Pro topurchase our interest in the joint venture at 40% of book value, thereby eliminatingour interest in the Grapevine unit.  Thetermination of the sublease or the elimination of our interest in the Grapevineunit would have a material adverse effect on our business, operating results,cash flows and financial condition.

* *

*Siterepurchase obligations*

 

If annual gross sales do not exceed $1.5 million forany lease year, the lessor of the Grand Rapids unit will obtain the right torequire us to repurchase such site for $1.4 million, plus $70,000 for eachlease year on a pro rata basis.  In March2002, the lessor waived its right to require repurchase based upon insufficientannual gross sales for the lease years ended April 2001 and April 2002.  We do not expect annual gross sales toexceed $1.5 million for the lease year ended April 2003.

 

Because annual gross sales did not exceed $8.0 millionfor the fourth and fifth years of the lease term, the lessor of the AuburnHills unit obtained the right to require us to repurchase such site for $4.0million, plus $200,000 for each lease year on a pro rata basis.

 

If either lessor elects toexercise his option to require us to repurchase a site, we would be forced torepurchase such site at a premium over its sale price.  We cannot assure you that we will havesufficient funds to repurchase either site. If we are required to repurchase a site and cannot do so, it would havea material adverse impact on our business, operating results, cash flows andfinancial condition.

* *

*Limitations on ability toincur additional indebtedness*

 

We granted the following security interests to WCERSin connection with their provision of certain debt financing:

 

•                                          a pledge ofour limited partnership interest in Buck & Bass,

 

 

16

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•                                          a pledge ofour shares of the issued and outstanding common stock of BBBP ManagementCompany, and

 

•                                          a securityinterest, assignment or mortgage, as applicable, in our interest in all assetsnow or hereafter owned, ownership interests, licenses, and permits, including,without limitation, a mortgage encumbering the Gaylord, Auburn Hills and GrandRapids sites.

 

We also granted to WCERS a right of first refusalpursuant to which WCERS may, for so long as the approximately $5.8 millionpromissory note is outstanding or WCERS owns more than 15% of our common stock,elect to purchase securities offered by us, within 45 days of the receipt ofnotice by WCERS, at the same price and on the same terms and conditions as areoffered to a third party.

 

Our agreement with WCERS imposes limitations on ourability to incur additional indebtedness. We agreed that we would not create, incur, assume, guarantee or be orremain liable, contingently or otherwise, with respect to any indebtedness,except for indebtedness incurred in the ordinary course of business not toexceed at any time $1.5 million in the aggregate.  Any indebtedness not in the ordinary course of business or inexcess of $1.5 million requires the approval of WCERS.  These restrictions may impede our ability tosecure financing for continued operations. Our failure to raise capital when needed would have a material adverseeffect on our business, operating results, cash flows and financial condition.

* *

*Liquidity plans*

 

We seek to refinance our indebtedness to WCERS.  We hope to refinance such indebtedness atlower interest rates.  We also plan tocontinue searching for ways of reducing our operating costs, including reducedgeneral and administrative expenses.  Atthe beginning of 2001, we set goals to equal or exceed the operating benchmarksof several of our competitors.  Webelieve that we have attained those goals and we seek continuedimprovement.  We also intend to explorelicensing and franchising arrangements. We are in discussions with several parties regarding the possiblelicensing of the Big Buck Brewery & Steakhouse concept in and outside thestate of Michigan.  We have entered intoa license agreement with Up North Adventures, an entity owned by one of ourdirectors, Thomas E. Zuhl, pursuant to which we hope to introduce our conceptto various Asian markets.

** **

**Seasonality**

** **

**Our operating results are expectedto fluctuate based on seasonal patterns. Based on our existing units, we anticipate that our highest revenueswill occur in the second and third calendar quarters due to the milder climateduring those quarters in Michigan.  Becauseof the effect of seasonality on our business, results for any quarter are notnecessarily indicative of the results that may be achieved for a full fiscalyear and cannot be used to indicate financial performance for a full fiscalyear.**

 

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**CautionaryStatement**

* *

*Big Buck Brewery & Steakhouse,Inc., or persons acting on our behalf, or outside reviewers retained by usmaking statements on our behalf, or underwriters of our securities, from timeto time, may make, in writing or orally, “forward-looking statements” asdefined under the Private Securities Litigation Reform Act of 1995.  This Cautionary Statement, when used inconjunction with an identified forward-looking statement, is for the purpose ofqualifying for the “safe harbor” provisions of the Litigation Reform Act and isintended to be a readily available written document that contains factors whichcould cause results to differ materially from such forward-looking statements.  These factors are in addition to any othercautionary statements, written or oral, which may be made, or referred to, inconnection with any such forward-looking statement.*

* *

*The following matters, among others,may have a material adverse effect on our business, financial condition,liquidity, results of operations or prospects, financial or otherwise.  Reference to this Cautionary Statement inthe context of a forward-looking statement or statements shall be deemed to bea statement that any one or more of the following factors may cause actualresults to differ materially from those in such forward-looking statement orstatements.*

** **

**We may be unableto repay current**maturitiesof existing indebtedness, forcing us to liquidate all or a portion of ourassets.

* *

*Overview*

 

Without additional financing, our leveraged position, requirements forpayments to the holders of our secured and subordinated debt and requirementsfor payments on our loan agreement may require us to liquidate all or a portionof our assets.  We had workingcapital deficits of approximately $16.4 million at December 29, 2002 andapproximately $3.0 million at December 30, 2001.  As of March 21,2003, we had outstanding (1) convertible secured debt aggregating $7,412,786,(2) non-convertible secured debt aggregating $5,674,940, and (3) convertiblesubordinated debt aggregating $650,000. The outstanding convertible secured debt and $1.5 million of theoutstanding non-convertible secured debt matured on February 1, 2003.  Of the outstanding convertible subordinateddebt, $100,000 matured in November 2000, $300,000 matured in October 2001,$50,000 matured in January 2002, $100,000 matured in July 2002 and $100,000matured in December 2002.

 

To fund the maturity of the outstanding debt, we mustobtain additional financing or refinance the debt.  However, we cannot assure you that we will be able to obtain therequired funds or refinance the debt, which could materially adversely affectour business, operating results, cash flows and financial condition.

* *

*Convertible Secured andNon-Convertible Secured Debt*

 

We have not made any required debt service payments toWCERS since September 2001.  On February1, 2003, the entire $8,912,786 principal amount of the secured debt held byWCERS became due and payable.  As ofMarch 21, 2003, we had defaulted on $10,235,392 of principal and interestpayments to WCERS.  We cannot assure youthat we will have sufficient financial resources to repay existing indebtednessor to continue operations.  As of March21, 2003, we were also in violation of various covenants under our agreementswith WCERS.

 

Because we have not made timely payments of principaland interest on our indebtedness to WCERS and are in violation of variouscovenants, we are in default under our agreements with WCERS.  As a result, WCERS may, by notice in writingto us, declare all amounts owing with respect to the agreements to beimmediately due and payable without presentment, demand, protest or othernotice of any kind, all of which we previously waived.  Our assets are, as a consequence, subject toforeclosure by

 

18

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WCERS.  Foreclosure by WCERS would force us to ceaseall operations.  We cannot assure youthat we will be able to repay or refinance our indebtedness to WCERS or regaincompliance with the amended covenants.

 

In March 2002, we obtained aloan from United Bank and Trust Company for $5.0 million which matures in March2004.  The collateral of this loan is a$5.0 million letter of credit from WCERS. We cannot assure you that we will be able to repay our indebtedness toUnited Bank.

* *

*Convertible SubordinatedPromissory Notes*

 

To fund the maturity of the outstanding convertiblesubordinated promissory notes, we must obtain additional financing or refinancethe debt.  However, we cannot assure youthat we will be able to obtain the required funds or refinance the debt, whichcould materially adversely affect our business, operating results, cash flowsand financial condition.  As of March21, 2003, our outstanding convertible subordinated promissory notes had thefollowing terms and conditions:

** **
| **Principal********Amount** |    | **Date of********Issuance** |          | **Maturity********Date** |     | **Shares Issuable********Upon  Conversion** |   | **Conversion********Price** |   |
|-----------------------------|---------|-----------------------------|---------------|--------------------------|----------|---------------------------------------------|--------|-----------------------------|--------|
|                        |    |                        |          |                     |     |                                        |   |                        |   |
| $                           | 100,000 |                        | 10–08-99 |                     | 10-07-01 |                                        | 9,523  |                        | $      | 10.5000 |   |
| $                           | 100,000 |                        | 11-17-99      |                     | 11-01-00 |                                        | 5,890  |                        | $      | 16.9764 |   |
| $                           | 100,000 |                        | 01-19-00      |                     | 10-01-01 |                                        | 14,285 |                        | $      | 7.0000 |   |
| $                           | 100,000 |                        | 12-04-00      |                     | 10-01-01 |                                        | 14,285 |                        | $      | 7.0000 |   |
| $                           | 50,000  |                        | 01-27-00      |                     | 01-01-02 |                                        | 9,784  |                        | $      | 5.1100 |   |
| $                           | 100,000 |                        | 07-20-01      |                     | 07-20-02 |                                        | 16,496 |                        | $      | 6.0620 |   |
| $                           | 100,000 |                        | 12-11-01      |                     | 12-11-02 |                                        | 27,793 |                        | $      | 3.5980 |   |

 

Because we have not made timely payments of principalon this indebtedness, the note holders may declare all amounts owing to beimmediately due and payable without presentment, demand, protest or othernotice of any kind, all of which we previously waived.  We cannot assure you that we will be able torepay or refinance this indebtedness.

** **

**We have incurredlosses and we expect to incur substantial future losses.  This may prevent us from raising capital andcontinuing operations.**

 

In general, we haveexperienced operating losses in each quarterly and annual period sinceinception.  We incurred net losses ofapproximately $3.6 million for the fiscal year ended December 29, 2002 andapproximately $2.2 million for the fiscal year ended December 30, 2001.  As of December 29, 2002, we had anaccumulated deficit of $13.4 million. We currently depend upon our existing units for all of ourrevenues.  We expect to incursignificant losses for the foreseeable future. We will need to generate significant increases in our revenues toachieve and maintain profitability.  Ifour revenues fail to grow or grow more slowly than we anticipate, or ouroperating expenses exceed our expectations, our losses could significantlyincrease, which would harm our business, operating results, cash flows andfinancial condition.  In addition, ourfailure to become and remain profitable may adversely affect the market priceof our securities and our ability to raise capital and continueoperations.  The reports of ourindependent public accountants for the years ended December 29, 2002 andDecember 30, 2001 include explanatory paragraphs expressing doubt about ourability to continue as a going concern.

** **

**If we are unableto obtain additional capital or secure refinancing, we may be required to scaleback our operations or cease our operations.**

 

If additional capital doesnot become available to us, we may be required to scale back our operations orcease our operations.  We cannot assureyou that we will be able to secure additional

 

19

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financing or refinancing.  If we are able to obtain financing orrefinancing, we cannot assure you that it will be on favorable or acceptable terms.  To obtain additional financing, weanticipate that we will be required to sell additional debt or equitysecurities.  New investors may seek andobtain substantially better terms than those available in connection with openmarket purchases and our issuance of securities in the future may result insubstantial dilution.  To obtainrefinancing, we may be required to agree to certain negative covenants withwhich we may be unable to comply.  Inaddition, our securities were delisted from The Nasdaq SmallCap Market onOctober 7, 2002, which may adversely affect our ability to raise capital.

 

Our agreement with WCERSimposes limitations on our ability to incur additional indebtedness.  We agreed that we would not create, incur,assume, guarantee or be or remain liable, contingently or otherwise, withrespect to any indebtedness, except for indebtedness incurred in the ordinarycourse of business not to exceed at any time $1.5 million in theaggregate.  Any indebtedness not in theordinary course of business or in excess of $1.5 million requires the approvalof WCERS.  We also granted toWCERS a right of first refusal pursuant to which WCERS may, for so long as theapproximately $5.8 million promissory note is outstanding or WCERS owns morethan 15% of our common stock, elect to purchase securities offered by us,within 45 days of the receipt of notice by WCERS, at the same price and on thesame terms and conditions as are offered to a third party.  Theserestrictions may impede our ability to secure financing for continuedoperations.  Our failure to raisecapital when needed would have a material adverse effect on our business,operating results, cash flows and financial condition.

** **

**We cannot assureyou that future operations of any unit will be profitable.**

 

Future revenues and profits,if any, will depend upon various factors, including:

 

•                                          the quality of restaurant and breweryoperations,

 

•                                          the acceptance of our food and beer, and

 

•                                          general economic conditions.

 

We cannot assure you that wewill ever operate profitably.

 

**Youmay have difficulty reselling your securities.**

 

Our securitiesare subject to certain rules of the SEC relating to “penny stocks.”  Such rules require broker-dealers to make asuitability determination for purchasers and to receive the purchaser’s priorwritten consent for a purchase transaction, thus restricting the ability topurchase or sell the securities in the open market.  In addition, trading in our securities is conducted in theover-the-counter market on the OTC Bulletin Board, which was established forsecurities that do not meet Nasdaq listing requirements.  Selling our securities may be difficultbecause of the quantity of securities that may be bought and sold, thepossibility that transactions may be delayed, and the low level of securityanalyst and news media coverage given to over-the-counter stocks.  These factors could contribute to lowerprices and larger spreads in the bid and ask prices for our securities.

** **

**Our interest inthe Grapevine unit may be reduced or eliminated by Bass Pro.**

 

The failure of Buck & Bass to achieve the requiredgross sales, the existence in the past of encumbrances upon the subleasedpremises and the failure of Buck & Bass to perform quarterly customersatisfaction surveys give Bass Pro the ability to declare an event of defaultunder the sublease, terminate the sublease and demand all unpaid and reasonablycalculable future rent over the balance of the sublease term.  Pursuant to the limited partnership agreement, a material default underthe sublease would also entitle Bass Pro to purchase our interest in the jointventure at 40% of book value, thereby eliminating our

 

20

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interest in the Grapevineunit.  The termination of the subleaseor the elimination of our interest in the Grapevine unit would have a materialadverse effect on our business, operating results, cash flows and financialcondition.

** **

**IfBuck & Bass is required to pay more than the minimum annual base rent forthe Grapevine site, funds available to us for other purposes will be reduced.**

 

Pursuant to acommercial sublease agreement, Buck & Bass leases the Grapevine site fromBass Pro over a 15-year term.  Buck& Bass is obligated to pay annual percentage rent in the amount of 5.5% on grosssales less than $11.0 million per year and 6.5% on gross sales in excess of$11.0 million per year; provided, however, that the minimum annual base rent is$385,000.  Bass Pro may terminate thesublease in the event of a default which is not cured within the applicablegrace period.  In March 2000, we agreedwith Bass Pro in writing to revise the definition of default under thesublease.  As amended, the subleaseprovides that a default includes, but is not limited to:

 

•                                          thefailure of Buck & Bass to remain open during all business days,

 

•                                          thefailure of Buck & Bass to maintain on duty a fully trained service staff,

 

•                                          thefailure of Buck & Bass to provide high quality food of the type provided atour Gaylord unit,

 

•                                          thefailure of Buck & Bass to achieve gross sales in the first full calendaryear immediately following the opening and for each calendar year thereafter of$7.0 million,

 

•                                          Buck& Bass encumbering in any manner any interest in the subleased premises, or

 

•                                          thefailure of Buck & Bass to conduct full and complete customer surveys noless frequently than each calendar quarter.

 

The minimumannual base rent is required whether the Grapevine unit is profitable ornot.  If Buck & Bass is required topay in excess of the minimum annual base rent, the funds available to us forother purposes will be reduced.  In theevent of a default and termination of the joint venture agreement, our interestin the Grapevine unit would be eliminated. This would have a material adverse effect on our business, operatingresults, cash flows and financial condition.

** **

**Ifwe are required to pay more than the minimum annual base rent for the GrandRapids or Auburn Hills sites, funds available to us for other purposes will bereduced.**

 

In April 1997,we sold the Grand Rapids site, including all improvements thereto, to an entityowned by one of our shareholders, Eyde Brothers Development Co., pursuant to areal estate purchase and leaseback agreement for $1.4 million.  Pursuant to a separate lease agreement, welease the Grand Rapids site at a minimum annual base rent of $140,000 and amaximum annual base rent of $192,500 over a ten-year term.  The lease may be extended at our option forup to two additional five-year terms. In addition to the annual base rent, the lease, as amended in March2000, provides that we are obligated to pay annual percentage rent in theamount of 5% on gross sales at the site in excess of $1.5 million per year.

 

In August1997, we entered into a real estate purchase and leaseback agreement providingfor the sale of the Auburn Hills site to one of our shareholders, Michael G.Eyde, for $4.0 million.  In connectionwith this transaction, we granted a five-year stock option, exercisable at$35.00 per share, for 7,142 shares of our common stock to Mr. Eyde.  We lease the Auburn Hills site pursuant to aseparate lease agreement which provides for a minimum annual base rent of$400,000, and a maximum annual base rent of 

 

21

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$550,000, over a 25-year term.  The lease may be extended at our option forup to two additional ten-year terms.  Inaddition to the annual base rent, we are obligated to pay annual percentagerent of 5.25% of gross sales at the site in excess of $8.0 million per year.

 

Annual percentagerent is required whether or not such units are profitable.  If we are required to pay annual percentagerent, the funds available to us for other purposes will be reduced.

** **

**Ifwe default and the lessor of the Grand Rapids site or the lessor of the AuburnHills site terminates the related lease, we would be unable to continueoperating such unit.**

 

The GrandRapids and Auburn Hills lessors may terminate in the event of a default whichis not cured within the applicable grace period.  A default is defined as:

 

•                                          ourfailure to make a rental payment within 30 days after receipt of written noticethat a payment is past due, or

 

•                                          ourfailure to perform our obligations under the lease, other than rent payments,within 30 days after written notice of a curable violation;

 

provided, however, that if suchdefault cannot be cured within the 30-day period, a default will be deemed tohave occurred only if we have failed to commence a cure within such 30-dayperiod.  In the event of a default andtermination of either lease, we would be unable to continue operating therelated unit, which would have a material adverse effect on our business,operating results, cash flows and financial condition.

** **

**Ifwe are required to repurchase the Grand Rapids site or the Auburn Hills siteand cannot do so, we would be unable to continue operating such unit.**

 

If annualgross sales do not exceed $1.5 million for any lease year, the lessor of theGrand Rapids unit will obtain the right to require us to repurchase such sitefor $1.4 million, plus $70,000 for each lease year on a pro rata basis.  In March 2002, the lessor waived its rightto require repurchase based upon insufficient annual gross sales for the leaseyears ended April 2001 and April 2002. We do not expect annual gross sales to exceed $1.5 million for the leaseyear ended April 2003.

 

Because annualgross sales did not exceed $8.0 million for the fourth and fifth years of thelease term, the lessor of the Auburn Hills unit obtained the right to requireus to repurchase such site for $4.0 million, plus $200,000 for each lease yearon a pro rata basis.

 

If eitherlessor elects to exercise his option to require us to repurchase a site, wewould be forced to repurchase such site at a premium over its sale price.  We cannot assure you that we will havesufficient funds to repurchase either site. If we are required to repurchase a site and cannot do so, it would havea material adverse impact on our business, operating results, cash flows andfinancial condition.

** **

**Wemay be unable to compete with larger, better-established restaurantcompetitors.**

 

The restaurantindustry is highly competitive with respect to price, service, location andfood quality, including taste, freshness and nutritional value.  New restaurants have a high failurerate.  New restaurants generallyexperience a decline in revenue growth, or in actual revenues, following aperiod of excitement that accompanies their opening.  The restaurant industry is also generally affected by changes inconsumer preferences, national, regional and local economic conditions, anddemographic trends.  The performance ofindividual restaurants may also be affected by factors such as trafficpatterns, demographic considerations, and the type, number and location ofcompeting restaurants.  In addition,

 

22

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factors such as inflation,increased food, labor and employee benefit costs, and the unavailability ofexperienced management and hourly employees may also adversely affect the restaurantindustry in general and our units in particular.  Restaurant operating costs are further affected by increases inthe minimum hourly wage, unemployment tax rates and similar matters over whichwe have no control.  We face numerouswell-established competitors, including national, regional and local restaurantchains, possessing substantially greater financial, marketing, personnel andother resources than we do.  We alsocompete with a large variety of locally owned restaurants, diners and other establishmentsthat offer moderately priced food to the public and with other brewpubs.  Competitors could utilize the Big BuckBrewery & Steakhouse format or a related format.  We cannot assure you that we will be able to respond to variouscompetitive factors affecting the restaurant industry.

** **

**Ifwe are unable to comply with applicable restaurant regulations, we will beunable to operate; compliance with such regulations may increase our operatingexpenses.**

 

The restaurantindustry is subject to numerous federal, state and local governmentregulations, including those relating to the preparation and sale of food andthose relating to building and zoning requirements.  We are subject to regulation by air and water pollution controldivisions of the Environmental Protection Agency of the United States and bycertain states and municipalities in which our units are located.  We are also subject to laws governing ourrelationship with our employees, including minimum wage requirements, overtime,working and safety conditions and citizenship requirements.  Restaurant operating costs are affected byincreases in the minimum hourly wage, unemployment tax rates,sales taxes and similar matters, such as any government-mandatedhealth insurance, over which we have no control.

** **

**Ouroperations depend upon obtaining and maintaining governmental licenses andpermits required for brewing and selling beer.**

 

A significantpercentage of our revenue is derived from beer sales.  Total sales of alcohol, including beer, wine and hard liquor,accounted for 21.1% of our revenues during 2002.  We must comply with federal licensing requirements imposed by theUnited States Department of Treasury, Alcohol and Tobacco Tax and Trade Bureau,as well as the licensing requirements of states and municipalities where ourunits are located.  Our failure tocomply with federal, state or local regulations could cause our licenses to berevoked and force us to cease brewing and selling our beer.  Typically, licenses must be renewed annuallyand may be revoked or suspended for cause at any time.

 

**Wemay face liability under dram-shop laws.**

 

We are subjectto “dram-shop” laws in Michigan and Texas. These laws generally provide someone injured by an intoxicated personthe right to recover damages from the establishment that wrongfully servedalcoholic beverages to such person.  Wecarry liquor liability coverage as part of our existing comprehensive generalliability insurance.  However, ajudgment against us under a dram-shop statute in excess of our liabilitycoverage could have a material adverse effect on our business, operatingresults, cash flows and financial condition.

** **

**Wemust pay federal and state excise taxes on our beer; we may be unable to retainthe credits that help us to offset part of such taxes.**

 

The federalgovernment currently imposes an excise tax of $18.00 on each barrel of beerproduced for domestic consumption in the United States.  However, each brewer with production of notmore than 2,000,000 barrels per year is taxed only $7.00 per barrel on thefirst 60,000 barrels produced annually. We cannot assure you that the federal government will not reduce oreliminate this small brewer rate reduction. Michigan imposes an excise tax of $6.30 per barrel on each barrel ofbeer manufactured or sold in Michigan. However, each brewer that manufactures less than 50,000 barrels per

 

23

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year is granted a brewer’sexcise tax credit in the amount of $2.00 per barrel for the first 30,000barrels.  Buck & Bass is subject toexcise taxes under Texas law.  Excisetaxes in Texas are $6.138 per barrel for ale and malt liquor, and $6.00 perbarrel for beer.  However, Texas grantsa 25% tax exemption for manufacturers of beer whose annual production in Texasdoes not exceed 75,000 barrels of beer per year.  As a result, Buck & Bass faces an effective excise tax of$4.50 per barrel for beer.  If our beerproduction exceeds the foregoing credit thresholds, our average excise tax ratewould increase.

 

It is possiblethat the rate of excise taxation could be increased by either federal or stategovernments, or both.  Increased excisetaxes on alcoholic beverages have been considered by the federal government asan additional source of tax revenue in connection with various proposals andcould be included in future legislation. Future increases in excise taxes on alcoholic beverages, if enacted,could adversely affect our business, operating results, cash flows and financialcondition.

** **

**Ourmanagement possesses significant control which could reduce your ability toreceive a premium for your securities through a change in control.**

 

As of February28, 2003, our officers and directors beneficially owned approximately 45.5% ofour outstanding common stock.  Accordingly,such persons can:

** **

**•**              exert substantial influence overthe composition of our board of directors,

 

**•**              generally direct our affairs, and

 

**•**                                          mayhave the power to control the outcome of shareholder approvals of businessacquisitions, mergers and combinations and other actions.

 

We are alsosubject to Michigan statutes regulating business combinations and restrictingvoting rights of certain persons acquiring shares of common stock which mayhinder or delay a change in control.

 

**Fluctuationsin our operating results may result in decreases in the market price of oursecurities.**

 

Our sales and earnings areexpected to fluctuate based on seasonal patterns.  Based on our existing units, we anticipate that our highestearnings will occur in the second and third calendar quarters due to the milderclimate during those quarters in Michigan. Because of the effect of seasonality on our business, results for anyquarter are not necessarily indicative of the results for a full fiscal year.

 

**Youmay not be able to sell our securities at the same price at which you purchaseour securities due to significant volatility in the market price of oursecurities.**

 

The market price of ourcommon stock has been subject to significant fluctuations in response tonumerous factors, including:

 

**•**              variationsin our annual or quarterly financial results or those of our competitors,

 

**•**              changesby financial research analysts in their estimates of our earnings or those ofour competitors,

 

**•**              conditionsin the economy in general or in the brewing industry in particular,

 

**•**              unfavorablepublicity, and

 

**•**                                          changes in applicable laws and regulations,or judicial or administrative interpretations thereof, affecting us or thebrewing industry.

 

24

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We cannot assure purchasersof our securities that they will be able to sell such securities at or abovethe prices at which they were purchased. In addition, our securities were delisted from The NasdaqSmallCap Market on October 7, 2002, which may adversely affect the liquidity ofour securities.

** **

**Thesale of additional securities may be dilutive to existing security holders.**

 

We had 861,997 shares ofcommon stock outstanding as of March 21, 2003. On that date, we also had warrants, stock options, convertible debt andother rights outstanding to purchase an additional 840,685 shares of commonstock, exercisable at prices ranging from $0.28 to $36.75 per share.  We have also registered certain shares ofour common stock for resale on the public market.  The sale of such shares, and the sale of additional shares whichmay become eligible for sale in the public market from time to time upon theexercise of warrants, stock options, convertible debt and other rights, may bedilutive to existing security holders and could have the effect of depressingthe market price of our securities.

 

25

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** **

**ITEM 7                   FINANCIAL STATEMENTS**

 

**INDEX TO CONSOLIDATED FINANCIAL STATEMENTS**

 
| **Big Buck Brewery & Steakhouse, Inc.**           |   |
|-------------------------------------------------------|--------|
| Report of Independent Public Accountants              | 27     |
| Consolidated  Financial Statements                    | 28     |
| Consolidated Balance Sheets                           | 28     |
| Consolidated Statements of Operations                 | 29     |
| Consolidated Statements of Shareholders’  Equity | 30     |
| Consolidated Statements of Cash Flows                 | 31     |
| Notes to Consolidated Financial Statements            | 32     |

 

26

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**REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS**

 

To Big Buck Brewery &Steakhouse, Inc.:

 

We haveaudited the accompanying consolidated balance sheet of Big Buck Brewery &Steakhouse, Inc. (a Michigan corporation) as of December 29, 2002 and December30, 2001, and the related consolidated statements of operations, shareholders’equity and cash flows for the years then ended.  These financial statements are the responsibility of theCompany’s management.  Ourresponsibility is to express an opinion on these financial statements based onour audits.

 

We conductedour audits in accordance with auditing standards generally accepted in theUnited States of America.  Thosestandards require that we plan and perform the audits to obtain reasonableassurance about whether the financial statements are free of materialmisstatement.  An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements.  An audit alsoincludes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statementpresentation.  We believe that ouraudits provide a reasonable basis for our opinion.

 

In ouropinion, the financial statements referred to above present fairly, in allmaterial respects, the financial position of Big Buck Brewery & Steakhouse,Inc. as of December 29, 2002 and December 30, 2001, and the results of itsoperations and its cash flows for the years then ended in conformity withaccounting principles generally accepted in the United States of America.

 

Theaccompanying financial statements have been prepared assuming that the Companywill continue as a going concern.  Asdiscussed in Note 9 to the financial statements, the Company has sufferedrecurring losses from operations and has a net working capital deficiency,which raise substantial doubt about its ability to continue as a goingconcern.  Management’s plans in regardto these matters are also described in Note 9. The financial statements do not include any adjustments that mightresult from the outcome of this uncertainty.

 
|                     | /s/ PLANTE  & MORAN, PLLC |
|--------------------------|-------------------------------|
| Grand  Rapids, Michigan, |                          |
| March 28,  2003          |                          |

 

27

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**BIG BUCK BREWERY & STEAKHOUSE, INC.**

 

Consolidated Balance Sheets

 
|                                                                                                                              |   | **December 29,  2002** | ** ** | **December 30,  2001** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|------------|------------------------|------------|
| **ASSETS**                                                                                                                        |   |                   |       |                   |       |
| **CURRENT ASSETS:**                                                                                                               |   |                   | ** ** |                   | ** ** |
| Cash                                                                                                                              |   | $                      | 1,516,821  |                   | $          | 96,453 |   |
| Accounts receivable                                                                                                               |   | 145,811                |       | 237,187                |       |
| Inventories (Note 1)                                                                                                              |   | 216,428                |       | 223,891                |       |
| Prepaids and other                                                                                                                |   | 478,182                |       | 592,927                |       |
|                                                                                                                              |   |                   |       |                   |       |
| Total current assets                                                                                                              |   | 2,357,242              |       | 1,150,458              |       |
|                                                                                                                              |   |                   |       |                   |       |
| PROPERTY AND EQUIPMENT (Note 1)                                                                                                   |   | 21,237,757             |       | 22,926,270             |       |
|                                                                                                                              |   |                   |       |                   |       |
| OTHER ASSETS, net                                                                                                                 |   | 534,982                |       | 803,881                |       |
|                                                                                                                              |   |                   |       |                   |       |
|                                                                                                                              |   | $                      | 24,129,981 |                   | $          | 24,880,609 |   |
|                                                                                                                              |   |                   |       |                   |       |   |   |
| **LIABILITIES AND SHAREHOLDERS' EQUITY**                                                                                          |   |                   | ** ** |                   | ** ** |
|                                                                                                                              |   |                   |       |                   |       |
| **CURRENT LIABILITIES:**                                                                                                          |   |                   | ** ** |                   | ** ** |
| Accounts payable                                                                                                                  |   | $                      | 1,016,370  |                   | $          | 1,925,998 |   |
| Accrued expenses                                                                                                                  |   | 1,448,647              |       | 899,016                |       |
| Current maturities of long-term obligations                                                                                       |   | 16,311,999             |       | 1,351,728              |       |
| Total current liabilities                                                                                                         |   | 18,777,016             |       | 4,176,742              |       |
|                                                                                                                              |   |                   |       |                   |       |
| LONG-TERM OBLIGATIONS, less current  maturities (Note 2)                                                                          |   | 3,378,737              |       | 15,084,690             |       |
| Total liabilities                                                                                                                 |   | 22,155,753             |       | 19,261,432             |       |
|                                                                                                                              |   |                   |       |                   |       |
| MINORITY INTEREST (Note 8)                                                                                                        |   | 449,452                |       | 466,143                |       |
|                                                                                                                              |   |                   |       |                   |       |
| SHAREHOLDERS'  EQUITY (Notes 5 and 6):                                                                                            |   |                   |       |                   |       |
|                                                                                                                              |   |                   |       |                   |       |
| Common stock, $0.01 par value, 15,000,000  and 20,000,000 shares authorized; 861,997 and 6,083,358 shares issued and  outstanding |   | 8,620                  |       | 60,834                 |       |
| Additional paid-in capital                                                                                                        |   | 14,905,621             |       | 14,870,141             |       |
| Accumulated deficit                                                                                                               |   | (13,389,465            | )          | (9,777,941             | )          |
|                                                                                                                              |   |                   |       |                   |       |
| Total shareholders' equity                                                                                                        |   | 1,524,776              |       | 5,153,034              |       |
|                                                                                                                              |   |                   |       |                   |       |
|                                                                                                                              |   | $                      | 24,129,981 |                   | $          | 24,880,609 |   |

 

The accompanying notes are an integral part of these financialstatements.

 

28

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**BIG BUCK BREWERY & STEAKHOUSE, INC.**

 

Consolidated Statements of Operations

 
|                                                      |   | **For the  Years Ended** |       |
|-----------------------------------------------------------|--------|--------------------------|------------|
|                                                      |   | **December  29,  2002**  |       | **December  30,  2001** |   |
|                                                      |   |                     |       |   |   |
| REVENUE:                                                  |   |                     |       |   |   |
| Restaurant sales                                          |   | $                        | 16,244,594 |   | $ | 17,207,829 |   |
| Wholesale and retail sales                                |   | 146,871                  |       | 280,128 |   |
| Total revenue                                             |   | 16,391,465               |       | 17,487,957 |   |
|                                                      |   |                     |       |   |   |
| COSTS AND EXPENSES:                                       |   |                     |       |   |   |
| Cost of sales                                             |   | 5,436,563                |       | 5,763,345 |   |
| Restaurant salaries and benefits (Notes 6  and 7)         |   | 4,242,593                |       | 4,591,917 |   |
| Operating expenses                                        |   | 3,801,965                |       | 3,694,304 |   |
| Depreciation                                              |   | 1,340,430                |       | 1,338,650 |   |
| Preopening expenses and store development  costs (Note 3) |   | —                   |       | 354,923 |   |
| General and administrative expenses                       |   | 1,928,306                |       | 1,785,886 |   |
| Impairment loss (Note 1)                                  |   | 800,000                  |       | — |   |
| Total costs and expenses                                  |   | 17,549,857               |       | 17,529,025 |   |
|                                                      |   |                     |       |   |   |
| LOSS FROM OPERATIONS                                      |   | (1,158,392               | )          | (41,068 | ) |
|                                                      |   |                     |       |   |   |
| OTHER EXPENSE:                                            |   |                     |       |   |   |
| Interest expense                                          |   | (2,008,525               | )          | (1,658,409 | ) |
| Other expense/amortization of financing  cost             |   | (461,298                 | )          | (501,086 | ) |
| Other expense, net                                        |   | (2,469,823               | )          | (2,159,495 | ) |
|                                                      |   |                     |       |   |   |
| LOSS BEFORE INCOME TAXES AND MINORITY INTEREST            |   | (3,628,215               | )          | (2,200,563 | ) |
|                                                      |   |                     |       |   |   |
| INCOME TAX EXPENSE                                        |   | —                   |       | — |   |
| LOSS BEFORE  MINORITY INTEREST                            |   | (3,628,215               | )          | (2,200,563 | ) |
|                                                      |   |                     |       |   |   |
| MINORITY INTEREST SHARE OF JOINT VENTURE                  |   | 16,691                   |       | (2,332 | ) |
|                                                      |   |                     |       |   |   |
| NET LOSS                                                  |   | $                        | (3,611,524 | ) | $ | (2,202,895 | ) |
|                                                      |   |                     |       |   |   |
| BASIC AND DILUTED LOSS PER COMMON SHARE                   |   | $                        | (4.19      | ) | $ | (2.53 | ) |
|                                                      |   |                     |       |   |   |
| OUTSTANDING WEIGHTED AVERAGE SHARES                       |   | 866,000                  |       | 840,488 |   |
|                                                           |        |                          |            |  |  |  |  |  |

 

The accompanying notes are an integral part of these financialstatements.

 

29

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**BIG BUCK BREWERY & STEAKHOUSE, INC.**

** **

Consolidated Statements of Shareholders’ Equity

For the Years Ended

 
|                                                                    |   | **Common  Stock** |   |       |   | **Additional  Paid-In  Capital** |   | **Accumulated  Deficit** |   |        |   |
|-------------------------------------------------------------------------|--------|-------------------|--------|------------|--------|----------------------------------|--------|--------------------------|--------|-------------|--------|
|                                                                    |   | **Shares**        |   | **Amount** |   | **Warrants**                     |   |                     |   | **Total**   |   |
| BALANCE, January 1, 2001                                                |   | 5,474,562         |   | 54,746     |   | 153,650                          |   | 14,153,174               |   | (7,575,046  | )      | 6,786,524 |   |
| Issuance of common stock for debt and and  interest to WCERS            |   | 323,406           |   | 3,234      |   | 3⁄4                           |   | 324,376                  |   | 3⁄4      |   | 327,610 |   |
| Issuance of common stock for services to to  Morgan James               |   | 125,000           |   | 1,250      |   | 3⁄4                           |   | 112,500                  |   | 3⁄4      |   | 113,750 |   |
| Issuance of common stock for employee stock  purchase plan at $0.478125 |   | 20,914            |   | 209        |   | 3⁄4                           |   | 9,791                    |   | 3⁄4      |   | 10,000 |   |
| Issuance of common stock for services to  Columbia Construction         |   | 50,000            |   | 500        |   | 3⁄4                           |   | 45,000                   |   | 3⁄4      |   | 45,500 |   |
| Issuance of common stock for services to to  Morgan James               |   | 75,000            |   | 750        |   | 3⁄4                           |   | 66,750                   |   | 3⁄4      |   | 67,500 |   |
| Issuance of common stock for employee stock  purchase plan at $0.3485   |   | 14,476            |   | 145        |   | 3⁄4                           |   | 4,900                    |   | 3⁄4      |   | 5,045 |   |
| Expiration of warrants                                                  |   | 3⁄4            |   | 3⁄4     |   | (153,650                         | )      | 153,650                  |   | 3⁄4      |   | 3⁄4 |   |
| Net loss                                                                |   | 3⁄4            |   | 3⁄4     |   | 3⁄4                           |   | 3⁄4                   |   | (2,202,895  | )      | (2,202,895 | ) |
| BALANCE, December 30, 2001                                              |   | 6,083,358         |   | 60,834     |   | 3⁄4                           |   | 14,870,141               |   | (9,777,941  | )      | 5,153,034 |   |
|                                                                    |   |              |   |       |   |                             |   |                     |   |        |   |   |   |
| Issuance of common stock for employee stock purchase plan               |   | 11,422            |   | 114        |   |                             |   | 2,507                    |   |        |   | 2,621 |   |
| Stock repurchased by Company                                            |   | (37,600           | )      | (376       | )      |                             |   | (9,624                   | )      |        |   | (10,000 | ) |
| Stock repurchased by Company                                            |   | (23,100           | )      | (231       | )      |                             |   | (9,124                   | )      |        |   | (9,355 | ) |
| Reverse Stock Split 1 for 7                                             |   | (5,172,083        | )      | (51,721    | )      |                             |   | 51,721                   |   |        |   | 3⁄4 |   |
| Net loss                                                                |   |              |   |       |   |                             |   |                     |   | (3,611,524  | )      | (3,611,524 | ) |
|                                                                    |   |              |   |       |   |                             |   |                     |   |        |   |   |   |
| BALANCE,  December 29, 2002                                             |   | 861,997           |   | 8,620      |   | 3⁄4                           |   | 14,905,621               |   | (13,389,465 | )      | 1,524,776 |   |

 

The accompanying notes are an integral partof these financial statements.

 

30

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**BIG BUCKBREWERY & STEAKHOUSE, INC.**

 

Consolidated Statements ofCash Flows

 
|                                                                                                  |   | **For the Years Ended** |       |
|-------------------------------------------------------------------------------------------------------|--------|-------------------------|------------|
|                                                                                                  |   | **December  29,  2002** |       | **December 30,  2001** |   |
| OPERATING ACTIVITIES:                                                                                 |   |                    |       |   |   |
| Net loss                                                                                              |   | $                       | (3,611,524 | ) | $ | (2,202,895 | ) |
| Adjustments to reconcile  net loss to cash flows used in operating activities—                   |   |                    |       |   |   |
| Depreciation and  amortization                                                                        |   | 1,655,170               |       | 1,720,112 |   |
| Loss on sale of property                                                                              |   | —                  |       | 6,868 |   |
| Loss on forfeiture of  property                                                                       |   | —                  |       | 354,923 |   |
| Loss on impairment of  assets                                                                         |   | 800,000                 |       | — |   |
| Minority interest share of  joint venture                                                             |   | (16,691                 | )          | 2,332 |   |
| Interest expense paid for  with common stock                                                          |   | —                  |       | 303,170 |   |
| Consulting services paid  for with common stock                                                       |   | —                  |       | 94,519 |   |
| Change in operating assets and liabilities:                                                           |   |                    |       |   |   |
| Accounts receivable                                                                                   |   | 91,376                  |       | 148,349 |   |
| Inventories                                                                                           |   | 7,463                   |       | 86,015 |   |
| Prepaids and other                                                                                    |   | 114,745                 |       | (121,527 | ) |
| Accounts payable                                                                                      |   | (909,628                | )          | (1,046,227 | ) |
| Accrued expenses                                                                                      |   | 699,631                 |       | 222,462 |   |
|                                                                                                  |   |                    |       |   |   |
| Net cash used in operating  activities                                                                |   | (1,169,458              | )          | (431,899 | ) |
|                                                                                                  |   |                    |       |   |   |
| INVESTING ACTIVITIES:                                                                                 |   |                    |       |   |   |
| Purchases of property and equipment                                                                   |   | (406,603                | )          | (736,490 | ) |
| Increase in other assets                                                                              |   | (73,380                 | )          | (34,710 | ) |
| Proceeds from sale of asset                                                                           |   | —                  |       | 7,750 |   |
|                                                                                                  |   |                    |       |   |   |
| Net cash used in investing  activities                                                                |   | (479,983                | )          | (763,450 | ) |
|                                                                                                  |   |                    |       |   |   |
| FINANCING ACTIVITIES:                                                                                 |   |                    |       |   |   |
| Borrowings under long-term debt                                                                       |   | 5,500,000               |       | 1,199,729 |   |
| Payments on long-term debt  and capital lease obligations                                             |   | (2,395,682              | )          | (268,123 | ) |
| Payment of deferred  financing costs                                                                  |   | (17,775                 | )          | (17,750 | ) |
| Tenant allowance                                                                                      |   | —                  |       | 340,000 |   |
| Repurchase of common stock                                                                            |   | (19,355                 | )          | — |   |
| Proceeds from sale of  common stock                                                                   |   | 2,621                   |       | 15,045 |   |
|                                                                                                  |   |                    |       |   |   |
| Net cash provided by  financing activities                                                            |   | 3,069,809               |       | 1,268,901 |   |
|                                                                                                  |   |                    |       |   |   |
| INCREASE IN CASH                                                                                      |   | 1,420,368               |       | 73,552 |   |
|                                                                                                  |   |                    |       |   |   |
| CASH, beginning of year                                                                               |   | 96,453                  |       | 22,901 |   |
|                                                                                                  |   |                    |       |   |   |
| CASH, end of year                                                                                     |   | $                       | 1,516,821  |   | $ | 96,453 |   |
|                                                                                                  |   |                    |       |   |   |
| SUPPLEMENTAL CASH FLOW INFORMATION:                                                                   |   |                    |       |   |   |
| Interest paid                                                                                         |   | $                       | 867,478    |   | $ | 1,099,428 |   |
| Income taxes paid                                                                                     |   | —                  |       | 3⁄4 |   |
| NONCASH TRANSACTIONS:                                                                                 |   |                    |       |   |   |
| Issuance of common stock,  stock options and warrants for property and services and interest and debt |   | —                  |       | 554,360 |   |

 

The accompanying notes are an integral part ofthese financial statements.

 

31

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**BIG BUCK BREWERY & STEAKHOUSE, INC.**

 

Notes toConsolidated Financial Statements

December 29, 2002 and December30, 2001

 

**1.             Nature of Business and SignificantAccounting Policies:**

* *

*Nature of Business*

 

Big Buck Brewery &Steakhouse, Inc. (f/k/a Michigan Brewery, Inc.) develops and operatesrestaurant-brewpubs under the name “Big Buck Brewery & Steakhouse.”  As of December 29, 2002, the Company ownedand operated three units in the state of Michigan.  The first unit opened in Gaylord, Michigan, on May 26, 1995.  Subsequent Michigan units opened on March17, 1997 in Grand Rapids and on October 1, 1997 in Auburn Hills, a suburb ofDetroit.  On August 31, 2000, theCompany opened a fourth unit in Grapevine, Texas, a suburb of Dallas.  This unit is operated by Buck & Bass,L.P. pursuant to a joint venture agreement between the Company and Bass ProOutdoor World, L.P.

 

The Company incurred net lossesof $3,611,524 in 2002 and $2,202,895 in 2001. The Company has a limited operating history, and future revenues andattaining profitability from operations will depend upon various factors,including market acceptance of the Big Buck Brewery & Steakhouse conceptand general economic conditions.  TheCompany’s ability to achieve profitability depends on its ability to refinanceits indebtedness, increase revenues, reduce costs and attain sufficient workingcapital.

* *

***Fiscal Year***

 

The Company has adopted a52-/53-week fiscal year ending on the Sunday nearest December 31 of eachyear.  All references herein to “2002”and “2001” represent the fiscal years ended December 29, 2002 (a 52 week year)and December 30, 2001 (a 52 week year), respectively.

* *

***Consolidation***

 

The consolidated financialstatements include the accounts of the Company and its majority-ownedsubsidiary, Buck & Bass, L.P.  Allsignificant intercompany accounts and transactions are eliminated.

* *

***Inventories***

 

Inventories consist primarilyof restaurant food and beverage items, raw materials used in the brewingprocess, finished goods, including beer in kegs and beer held in fermentationprior to the filtration and packaging process, and retail goods for resale.  Inventories are stated at the lower of costor market as determined by the first-in, first out inventory method andconsisted of the following at:

 
|                                |   | **December  29,  2002** |    | **December  30,  2001** |   |
|-------------------------------------|--------|-------------------------|---------|-------------------------|--------|
|                                |   |                    |    |                    |   |
| Food                                |   | $                       | 87,041  |                    | $      | 95,757 |   |
| Brewery (including wine and liquor) |   | 103,528                 |    | 103,452                 |   |
| Retail goods                        |   | 25,859                  |    | 24,682                  |   |
|                                |   | $                       | 216,428 |                    | $      | 223,891 |   |

 

32

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* *

***Property andEquipmen****t*

 

Property and equipment arerecorded at cost.  Improvements arecapitalized, while repair and maintenance costs are charged to operations whenincurred.  Property and equipment aredepreciated using the straight-line method for financial reporting purposes andaccelerated methods for income tax reporting purposes over their estimateduseful lives of 5 to 40 years.  In theevent that facts and circumstances indicate that the carrying amount ofproperty may not be recoverable, an evaluation would be performed using suchfactors as recent operating results, projected cash flows and management’splans for future operations.

 

Property and equipmentconsisted of the following at:

 
|                              |   | **December 29,  2002** |       | **December 30,  2001** |   | **Estimated  Useful Lives** |   |
|-----------------------------------|--------|------------------------|------------|------------------------|--------|-----------------------------|--------|
| Land and improvements             |   | $                      | 5,052,914  |                   | $      | 5,052,914                   |   | 20 years for  improvements |   |
| Leasehold improvements            |   | 6,444,646              |       | 5,978,865              |   | 15 years                    |   |
| Building and improvements         |   | 8,461,213              |       | 9,328,391              |   | 40 years                    |   |
| Brewery equipment                 |   | 2,659,269              |       | 2,656,518              |   | 12-30 years                 |   |
| Restaurant equipment              |   | 1,882,261              |       | 1,880,255              |   | 10 years                    |   |
| Furniture, fixtures and equipment |   | 2,661,854              |       | 2,665,956              |   | 5-7 years                   |   |
| Total property and equipment      |   | 27,162,157             |       | 27,562,899             |   |                        |   |
| Accumulated depreciation          |   | (5,924,400             | )          | (4,636,629             | )      |                        |   |
| Net carrying amount               |   | $                      | 21,237,757 |                   | $      | 22,926,270                  |   |   |   |

 

During2002 and 2001, the Company received construction and advisory services from acompany owned by a board member, totaling $22,000 and $292,000, respectively.

* *

***Impairment ofLong-Lived Assets***

*** ***

TheCompany follows the provisions of SFAS No. 144, "Accounting for theImpairment or Disposal of Long-Lived Assets."  This statement supersedes FASB Statement No. 121,"Accounting for the Impairment of Long-Lived Assets and for Long-LivedAssets to Be Disposed Of" (SFAS 121), and provides a single accountingmodel for long-lived assets to be disposed of. For purposes of recognizing and measuring impairment of long-livedassets, the Company evaluates assets at the store level because this is thelowest level of independent cash flows ascertainable to evaluateimpairment.  The Company reviewslong-lived assets to be held and used for impairment whenever events or changesin circumstances indicate that the carrying amount of the assets may not berecoverable.  If the sum of theundiscounted expected future cash flows is less than the carrying amount of theassets, the assets are considered to be impaired.  Impairment losses are measured as the amount by which thecarrying amount of the assets exceeds the fair value of the assets.  When fair values are not available, theCompany estimates fair value.  Inassessing recoverability, the Company must make assumptions regarding estimatedfuture cash flows and other factors to determine the fair value of therespective assets.  

 

During2002, the Company recorded non-cash asset impairment charges of $800,000 towrite-down the building and improvements of the Grand Rapids unit.

* *

***Income Taxes***

 

Deferred tax assets andliabilities are computed based on the difference between the financialreporting and tax bases of the Company’s assets and liabilities using currentlyenacted tax rates.

* *

 

 

33

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* *

***Reverse Stock Split***

 

OnSeptember 13, 2002, the Company effected a one-for-seven reversestock split.  Share and per share data,except for par, for all periods presented have been restated to reflect thereverse stock split.  For outstandingwarrants, stock options and convertible debt, all share amounts, exerciseprices and conversion rates have been restated to reflect the impact of thereverse stock split.

 

***Basic Loss Per Share***

 

Basic net loss per share iscomputed by dividing net income by the weighted average number of common sharesoutstanding during the year, without regard to stock options outstanding.  In the computation of fully diluted earningsper share, the weighted average shares outstanding is increased to reflect thepotential dilution if stock warrants, stock options and convertible securitieswere to be exercised or converted to common stock, if such exercise orconversion has a dilutive effect.  Theoptions, warrants, and convertible securities have been excluded from theearnings per share calculation because each would have an antidilutiveeffect.  Basic loss per share for 2001has been restated to reflect a one-for-seven reverse stock split effective onSeptember 13, 2002.

* *

***Use of Estimates***

 

The preparation of financialstatements in conformity with generally accepted accounting principles requiresmanagement to make estimates and assumptions that affect the reported amountsof assets and liabilities and disclosure of contingent assets and liabilitiesat the date of the financial statements and the reported amounts of revenuesand expenses during the reporting period. Ultimate results could differ from those estimates.

 

34

----

 

2.             **Long-Term Obligations:**

 

Long-term obligations consistedof the following as of:

 
|                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | **December 29,  2002** |      | **December 30,  2001** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|-----------|------------------------|--------|
| Convertible note payable to the Wayne  County Employees’ Retirement System (WCERS), with monthly payments beginning  April 1, 2000, in an amount which would fully amortize the principal and  interest over a period of 300 months, which approximates $53,400, including  interest at 10%.  The unpaid balance  was due in February 2003 and is convertible into common stock at $16.94 per  share at any time during the agreement. |   | 5,809,599              |      | 5,806,084              |   |
| Convertible notes payable to WCERS, with  monthly payments of $14,756 including interest at 10%, due February  2003.  The note is convertible into  common stock at $16.94 per share.                                                                                                                                                                                                                                                       |   | 1,603,187              |      | 1,603,187              |   |
| Equipment note payable to WCERS, with  monthly interest payments at 11%, due February 2003.                                                                                                                                                                                                                                                                                                                                                      |   | 1,500,000              |      | 1,500,000              |   |
| Promissory note payable to United Bank and  Trust Company, collateralized by a WCERS $5.0 million letter of credit, with  monthly payments beginning March 15, 2002, in an amount which would fully  amortize the principal and interest over a period of 60 months, which  approximates $94,000, including interest at 4.86%.  The unpaid balance is due on March 25, 2004.                                                                |   | 4,327,950              |      | —                 |   |
| Capital lease obligations (see below).                                                                                                                                                                                                                                                                                                                                                                                                           |   | 5,750,000              |      | 5,400,000              |   |
| Line of  Credit for $1,000,000 from Crestmark Bank, monthly interest only payments at  prime plus one percent (effective rate of 5.75 percent at December 31,  2001).  Principal due March 2002,  collateralized by letter of credit from WCERS.  This line of credit was refinanced during 2002.                                                                                                                                      |   | 3⁄4                 |      | 999,729                |   |
| Convertible  subordinated promissory notes payable to various investors, bearing interest  at 10%, due October 2000 through March 2002.                                                                                                                                                                                                                                                                                                          |   | 300,000                |      | 527,418                |   |
| Convertible  subordinated promissory notes payable to director and company owned by a  director, bearing interest at 10%, due July 2002 through December 2002.                                                                                                                                                                                                                                                                                   |   | 200,000                |      | 200,000                |   |
| Leasehold  tenant allowance to be repaid as the result of a settlement reached with Opry  Mills to terminate lease, due March 2002.                                                                                                                                                                                                                                                                                                              |   | 3⁄4                 |      | 200,000                |   |
| Convertible  subordinated promissory notes payable to shareholder, with monthly interest  payments ranging from 10.00% to 12.75%, remaining balance due January 2001  through April 2001.  The notes are unsecured.                                                                                                                                                                                                                         |   | 200,000                |      | 200,000                |   |
| Total                                                                                                                                                                                                                                                                                                                                                                                                                                            |   | 19,690,736             |      | 16,436,418             |   |
| Less-Current  maturities                                                                                                                                                                                                                                                                                                                                                                                                                         |   | 16,311,999             |      | 1,351,728              |   |
| Long-term  obligations                                                                                                                                                                                                                                                                                                                                                                                                                           |   | $                      | 3,378,737 |                   | $      | 15,084,690 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                  |        |                        |           |                        |        |  |  |

 

35

----

 

**The Notes payable to WCERS are collateralized by all assetsof the Company, the Company’s limited partnership interest in Buck & Bass,L.P., and a pledge of the Company’s shares of the issued and outstanding commonstock of BBBP Management Company. Effective December 2001 and February 2002, two officers of WCERS becamedirectors of the Company.**

** **

**The debt agreements with WCERS contain certain financialcovenants, including minimum tangible net worth, debt coverage, working capitaland liabilities to tangible net worth ratios. At December 31, 2000, the Company was not in compliance with the debtcoverage and working capital ratios.  On April 3, 2001, the Company entered into aletter agreement with WCERS pursuant to which the foregoing covenants weremodified to provide that (1) the Company must maintain tangible net worth plussubordinated debt in an amount not less than $6.25 million and (2) the Companyhad until January 1, 2002 to meet all other covenants set forth in the loandocuments (unless modified by the parties in writing).  At December 30, 2001, the Company was not incompliance with various covenants.  OnApril 1, 2002, the Company entered into a letter agreement with WCERS pursuantto which the foregoing covenants were modified to provide that (1) the Companymust maintain tangible net worth plus subordinated debt in an amount not lessthan $4.5 million and (2) the Company had until January 1, 2003 to meetall other covenants set forth in the loan documents (unless modified by theparties in writing).  AtDecember 29, 2002, the Company was not in compliance with debtcoverage and working capital ratios. Additionally, the Company has not made any required debt servicepayments since September 2001.  As aresult, the debt is callable and is classified as current in the accompanying balancesheet.**

 

In April 1997, the Company entered into a real estatesale and leaseback agreement with a shareholder of the Company, for the landand property of its Grand Rapids unit. The Company received proceeds of $1,400,000 and in return, entered intoa ten-year lease with a minimum annual base rent of $140,000 and a maximumannual base rent of $192,500 and percentage rent provisions.  In March 2000, the lease was amended toadjust the gross sales level over which annual percentage rent is payable to $1,500,000per year.  Because annual gross salesdid not exceed $1.5 million for the lease year ended April 2001, thelessor obtained the right to require the Company to repurchase the Grand Rapidssite for $1.4 million, plus $70,000 for each lease year on a pro ratabasis.  At December 29, 2002,the Company has accrued the annual buy out price of $70,000 for five years,totaling $350,000.  In March 2002, thelessor waived its right to require repurchase based upon annual gross sales forthe lease years ended April 2001 and April 2002.  The lessor has the option to require the Company to repurchasethe Grand Rapids site after the seventh full lease year for the sameprice.  Annual gross sales are notanticipated to exceed $1.5 million for the lease year ended April 2003.  As a result, the obligation is classified ascurrent in the accompanying balance sheet.

 

In August 1997, the Company entered into a second realestate sale and leaseback agreement with the same shareholder, for the land ofits Auburn Hills unit.  The Companyreceived proceeds of $4,000,000 and in return, entered into a 25-year leasewith a minimum annual base rent of $400,000 and percentage rentprovisions.  In the event gross sales,as defined, do not exceed $8,000,000 for any two consecutive lease years, theCompany is obligated to repurchase the land for $4.0 million, plus$200,000 for each lease year on a pro rata basis.  Annual gross sales for the lease years ended October 2001 and2002 did not exceed $8.0 million.  As aresult, the obligation is classified as current in the accompanying balancesheet.  The Company has the option topurchase the Auburn Hills site from the lessor after the seventh full leaseyear for the same price.

 

No gain or loss was recognized on the sale andleaseback transactions and the leases were accounted for as financingtransactions.  Management expects thatif the Company was required to purchase the land at these units that theseleases could be renewed or replaced by mortgage or other financingarrangements; however, there can be no assurance that such financing would beavailable on acceptable terms or at all.

 

The convertible subordinated promissory notes may beconverted at any time, at the option of the holders, into a total of 152,349shares of common stock.  Interest ispaid monthly in arrears.  All of theconvertible 

 

 

36

----

 

subordinated notes had matured as of December 29,2002 and were not paid.  Therefore, thenotes are in default.

 

In March 2001, the Company entered into a firstamendment and acknowledgment of partial payment with the holder of one of theconvertible subordinated promissory notes with a principal amount of$250,000.  Pursuant to such agreement,the Company repaid $75,000 of principal, agreed to a repayment scheduleinvolving monthly payments of principal and interest of $18,161, commencing May1, 2001, and adjusted the conversion price on such note from $10.3264 to$5.11.  Also in March 2001, the Companyentered into a first amendment with the holder of the non-convertiblesubordinated promissory note to shareholder with a principal amount of$100,000.  Pursuant to such agreement,the Company made such note convertible into shares of the Company’s commonstock at a conversion price of $1.00 and extended the maturity date of suchnote until October 2001.  In addition,the Company entered into a first amendment with the holder of one of theconvertible subordinated promissory notes with a principal amount of$100,000.  Pursuant to such agreement,the maturity date of such note was extended until October 2001 and theconversion price was adjusted from $1.9188 to $1.00.

 

In April 2001, the Company entered into a firstamendment with the holder of one of the convertible subordinated promissorynotes with a principal amount of $50,000. Pursuant to such agreement, the maturity date of such note was extendeduntil January 2002 and the conversion price was adjusted from $1.9125 to $0.73.

 

Maturities of long-term obligations as of December 29,2002, based on the amended payment terms discussed above, are as follows:

 

| 2003       |   | 16,311,999 |       |
|------------|--------|------------|------------|
| 2004       |   | 3,378,737  |       |
| 2005       |   | —     |       |
| 2006       |   | —     |       |
| 2007       |   | —     |       |
| Thereafter |   | —     |       |
|       |   | $          | 19,690,736 |   |
|            |        |            |            |  |

 

**Interest expense to related parties was approximately$1,800,000 and $1,200,000 during 2002 and 2001, respectively.  Accrued interest to related parties wasapproximately $1,040,000 and $250,000 at December 29, 2002 and December 30,2001, respectively.**

** **

**3.             Operating Lease**

 

In November 2000, the Company executed a lease with Opry Mills LimitedPartnership, a division of the Mills Corporation, for approximately 20,000square feet of space in the Opry Mills mall over a 10-year term.  Beginning August 2001, the Company wasobligated to pay monthly rental payments of $43,211, regardless of whether thestore was open for business. Additionally, the lease required the Company to pay an annual percentagerent in the amount of 6% on gross sales in excess of $8.5 million.  The Company did not pay the rental payments.

 

In March 2002, the Company terminated the lease agreement for$200,000.  Under the terms of thepossession agreement and the settlement and termination agreement, the Companyforfeited all improvements made to the site, including assets purchased throughuse of the tenant allowance of $340,000 provided by the landlord.  As a result of the terminated leasetransaction, the Company incurred a loss of approximately $355,000, includingthe termination fee paid in 2002.  Theloss was recorded in preopening expenses and store development costs in thestatement of operations in 2001.

 

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** **

**4.             Income Taxes:**

 

The deferred tax assets and liabilities consisted ofthe following at:

 
|                      |   | **December  29,  2002** |   | **December 30,  2001** |   |
|---------------------------|--------|-------------------------|--------|------------------------|--------|
|                      |   |                    |   |                   |   |
| Deferred tax  liabilities |   | (800,000                | )      | (831,000               | )      |
| Deferred tax  assets      |   | 5,000,000               |   | 3,991,000              |   |
| Net deferred tax asset    |   | 4,200,000               |   | 3,160,000              |   |
| Valuation  allowance      |   | (4,200,000              | )      | (3,160,000             | )      |
| Net deferred  tax         |   | 3⁄4                  |   | 3⁄4                 |   |

 

Effective January 1, 1996, the Company converted fromS Corporation status to a C Corporation. As of December 29, 2002 and December 30, 2001, the Company’s deferredtax assets consist primarily of net operating loss carryforwards, and deferredtax liabilities result from the use of accelerated methods of depreciation fortax purposes.  The Company has recordeda full valuation allowance against the net deferred tax asset due to theuncertainty of realizing the related benefit. As of December 29, 2002, the Company had net operating losscarryforwards of approximately $14.6 million which expire through the year2023.

** **

**5.             Warrants:**

 

Each of the 364,286 units issued in connection withthe Company’s IPO consisted of one share of common stock and one RedeemableClass A Warrant, exercisable at $56.00 per share.  In 2001, the expiration date of these warrants was extendedthrough December 2002.  All of thesewarrants expired unexercised on December 13, 2002.

 

In connection with the joint venture agreement (Notes1 and 7), the Company issued a warrant, exercisable at $18.375 per share, for7,143 shares of its common stock to Bass Pro expiring in August 2003.  The Company also issued a warrant to itsprivate placement agent, exercisable at $19.3375 per share, for 2,083 shares ofits common stock, expiring in November 2003.

 

In exchange for services, the Company issued warrants,exercisable at $11.375 per share, for 14,286 shares of its common stock.  In connection with the same serviceagreements, the Company also issued warrants for 28,571 shares of commonstock.  Of these warrants, 14,286 wereexercisable at $17.50 per share and vested in October 2000.  The remaining 14,286 warrants wereexercisable at $24.50 per share and vested in October 2001.  All of the warrants issued as part of theseservice agreements expired in October 2002.

 

In connection with a consulting agreement, the Companyissued a warrant, exercisable at $11.375 per share, for 7,143 shares of itscommon stock, expiring in October 2002. The Company also issued warrants, exercisable at $14.00 per share, for21,429 shares of its common stock, vesting in 7,143 increments as the Company’sstock price reaches $28.00, $35.00, and $42.00 per share, expiring in October2002.

 

In connection with the refinancing of debt, theCompany issued a warrant to WCERS, exercisable at $14.00 per share, for 28,571shares of its common stock, expiring in February 2004.  The conversion to stock of these warrantsand the convertible notes disclosed in Note 2, when added to common owned byWCERS, would result in WCERS owning 512,155 shares of common stock, or a 38.6%ownership of the Company.

 

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In connection with amending theAuburn Hills lease, the Company issued a warrant, exercisable at $12.6875 pershare, for 3,571 shares of its common stock, expiring in January 2003.  The Company has also issued a warrant tothis lessor, which is exercisable at $35.00 per share, for 3,571 shares,expiring August 2002.

 

Of the warrants describedabove, warrants for 41,368 shares, with exercise prices ranging from $14.00 to$19.34 per share, remain outstanding at December 29, 2002.

 

**6.             Stock Option and Stock PurchasePlans:**

 

During January 1996, theCompany adopted the 1996 Stock Option Plan (the Plan), pursuant to whichoptions to acquire an aggregate of 85,714 shares, as amended in June 1997, ofthe Company’s common stock may be granted. Under the Plan, the board of directors may grant options to purchaseshares of the Company’s stock to eligible employees, nonemployees andcontractors at a price not less than 100% of the fair market value at the timeof the grant for both incentive and nonstatutory stock options.  Options granted under the Plan vest annuallyover four years from date of grant and are exercisable for ten years, exceptthat the term may not exceed five years for incentive stock options granted topersons who own more than 10% of the Company’s outstanding voting stock.

 

Also, during January 1996, theCompany adopted the 1996 Director Stock Option Plan (the Director’s Plan) pursuantto which options to acquire an aggregate of 14,286 shares of the Company’scommon stock were available for grant to outside directors.  Under the Director’s Plan, 714 options withan exercise price of $31.50 were automatically granted to each outside directorupon the completion of the Company’s IPO, and thereafter 714 options weregranted annually for each year of continued service by the outsidedirector.  Each option was granted atfair market value on the date of grant, vested one year after the date of grantand was exercisable for ten years. During 2000, this plan was canceled with options for 10,714 sharesoutstanding.  These options will remainexercisable as originally issued, and additional options will not beissued.  At December 29, 2002, optionsfor 3,570 shares remain outstanding, with exercise prices ranging from $12.25to $36.75 per share.

 

During October 2000, theCompany adopted the 2000 Stock Option Plan (the 2000 Plan), pursuant to whichoptions to acquire an aggregate of up to 142,857 shares of common stock may begranted to qualified employees, directors, and outside consultants.  Under the 2000 Plan, 2,857 options areautomatically granted annually to each outside director and an additional 1,429options to each outside director serving on the executive committee.  Each option is granted at fair market valueon the date of grant, vests one year after the date of grant and is exercisablefor ten years.

 

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A summary of the status of theCompany’s stock option plans at December 29, 2002 and December 30, 2001, andchanges during the fiscal years then ended, is presented in the table andnarrative below:

 
|                                            |   | **Year Ended   December 29, 2002** |   | **Year Ended   December 30, 2001**      |   |
|-------------------------------------------------|--------|------------------------------------|--------|-----------------------------------------|--------|
|                                            |   | **Shares**                         |   | **Weighted   Average   Exercise Price** |   | **Shares** |   | **Weighted   Average   Exercise Price** |   |
|                                            |   |                               |   |                                    |   |   |   |   |   |
| Outstanding,  beginning of Period               |   | 140,490                            |   | $                                       | 16.17  |   | 106,548 |   | $ | 23.10 |   |
| Granted                                         |   | 25,947                             |   | .86                                     |   | 58,762 |   | 5.25 |   |
| Exercised                                       |   | 3⁄4                             |   | 3⁄4                                  |   | 3⁄4 |   | 3⁄4 |   |
| Forfeited                                       |   | (38,974                            | )      | 14.04                                   |   | (21,249 | ) | 17.64 |   |
| Expired                                         |   | (7,142                             | )      | 35.00                                   |   | (3,571 | ) | 35.00 |   |
| Outstanding,  end of                            |   |                               |   |                                    |   |   |   |   |   |
| Period                                          |   | 120,321                            |   | 12.25                                   |   | 140,490 |   | $ | 16.17 |   |
| Exercisable,  end of                            |   |                               |   |                                    |   |   |   |   |   |
| Period                                          |   | 112,973                            |   |                                    |   | 131,822 |   |   |   |
|                                            |   |                               |   |                                    |   |   |   |   |   |
| Weighted  average fair value of options granted |   |                               |   | $                                       | .19    |   |   |   | $ | 4.83 |   |

 

The following table providescertain information with respect to stock options outstanding at December 29,2002:

 
| **Range of  exercise   prices** |   | **Stock options   Outstanding** |   | **Weighted   average exercise   price** |   | **Weighted average   remaining contractual  life** |   |
|---------------------------------|--------|---------------------------------|--------|-----------------------------------------|--------|----------------------------------------------------|--------|
|                            |   |                            |   |                                    |   |                                               |   |
| .28 – 10.00                |   | 70,085                          |   | 3.48                                    |   | 7.31                                               |   |
| 10.01 – 20.00              |   | 15,530                          |   | 12.68                                   |   | 7.41                                               |   |
| 20.01 – 36.75              |   | 34,706                          |   | 29.77                                   |   | 5.58                                               |   |

 

The following table providescertain information with respect to stock options exercisable at December 29,2002:

 
| **Range of  exercise   prices** |   | **Stock options  exercisable** |   | **Weighted  average exercise  price** |   |
|---------------------------------|--------|--------------------------------|--------|---------------------------------------|--------|
|                            |   |                           |   |                                  |   |
| .28 – 10.00                |   | 63,587                         |   | 3.39                                  |   |
| 10.01 – 20.00              |   | 14,681                         |   | 12.71                                 |   |
| 20.01 – 36.75              |   | 34,706                         |   | 29.77                                 |   |

 

 

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The Company accounts foroptions issued to employees and directors under these plans using APB OpinionNo. 25, under which no compensation cost has been recognized.  Had compensation cost for these plans beendetermined consistent with SFAS No. 123, “Accounting for Stock-BasedCompensation,” the Company’s net loss and loss per share would have beenincreased to the following pro forma amounts:

 
|                   |   |                          |   | **2002**   |       | **2001**   |   |
|------------------------|--------|-------------------------------|--------|------------|------------|------------|--------|
| Net Loss               |   | As Reported                   |   | $          | (3,611,524 | )          | $      | (2,202,895 | ) |
|                   |   | SFAS 123 compensation expense |   | (93,731    | )          | (346,739   | )      |
|                   |   | Pro Forma                     |   | (3,705,255 | )          | (2,549,634 | )      |
| Basic and  Diluted EPS |   | As Reported                   |   | (4.19      | )          | (2.53      | )      |
|                   |   | Pro Forma                     |   | (4.30      | )          | (2.93      | )      |
|                        |        |                               |        |            |            |            |        |  |  |

 

The fair value of each employeeoption grant is estimated on the date of grant using the Black-Scholes optionpricing model with the following weighted-average assumptions used for grantsin 2002 and 2001, respectively: risk-free interest rate of 1.68%; no expected dividend yields; expectedlives of 7 years; and expected volatility of 89.62% and 131.09%.

 

Non-employee option grants arerecorded at fair value.  There have beenno non-employee options granted under the plan.

 

On October 18, 1999, theCompany established a qualified Employee Stock Purchase Plan, effective as ofJanuary 1, 2000.  The Company is authorizedto issue up to 28,571 shares of its common stock for qualified employees, asdefined.  Under the terms of the plan,employees can choose each year to have up to 15 percent of their annual baseearnings withheld to purchase the Company’s common stock.  The purchase price of the stock is 85percent of the lower of the closing price at the beginning of the 18-monthoffering period or end of the 6-month accumulation period.  Under the plan, the Company soldapproximately 1,600 and 5,000 shares in 2002 and 2001, respectively.  In January 2003, the board approved thetemporary suspension of the plan.

 

**7.             Retirement Plan:**

 

On February 1, 1999, theCompany began sponsoring a 401(k) plan for employees with a minimum of sixmonths of service with the Company. Contributions to the plan totaled $7,619 and $8,731 for 2002 and 2001,respectively.

 

**8.             Commitments and Contingencies:**

 

***Legal Proceedings***

 

The Company is involved invarious legal actions rising in the ordinary course of business.  Although the outcomes of any such legalactions cannot be predicted, in the opinion of management there is no legalproceeding pending against or involving the Company for which the outcome islikely to have a material adverse effect upon the financial position or resultsof operations of the Company.

 

***Joint Venture***

 

The Company owns 89.1 percentas a limited partner and 0.8 percent as a general partner, for an aggregate89.9 percent ownership of Buck & Bass, L.P., which owns and operates theGrapevine unit.

 

Pursuant to the commercialsublease agreement, the limited partnership created by the joint venture leasesthe Grapevine site from Bass Pro over a 15-year term.  The lease may be extended for seven additional five-year termssubject to Bass Pro renewing its lease of the location.  The sublessee is obligated to pay an

 

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annual percentage rent in theamount of 5.5% on gross sales less than $11.0 million per year and 6.5% ongross sales in excess of $11.0 million per year (with a minimum annual baserent of $385,000).  Bass Pro mayterminate in the event of a default which is not cured within the applicablegrace period.  In March 2000, theCompany and Bass Pro L.P. agreed in writing to revise the definition of defaultunder the sublease.  As amended, thesublease provides that a default includes, but is not limited to, (a) thesublessee’s failure to remain open during all business days, (b) thesublessee’s failure to maintain on duty a fully trained service staff, (c) thesublessee’s failure to provide high quality food of the type provided at theGaylord unit, (d) the sublessee’s failure to achieve gross sales in the firstfull calendar year immediately following the opening and for each calendar yearthereafter of $7.0 million, (e) the sublessee encumbering in any manner anyinterest in the subleased premises, or (f) the sublessee’s failure to conductfull and complete customer surveys no less frequently than each calendarquarter.  The rent expense for the yearsended December 29, 2002 and December 30, 2001 was $385,000.  The following is a schedule of futureminimum rental payments under the operating lease for the next five years:

 

| 2003 |   | $ | 385,000 |   |
|------|--------|---|---------|--------|
| 2004 |   | $ | 385,000 |   |
| 2005 |   | $ | 385,000 |   |
| 2006 |   | $ | 385,000 |   |
| 2007 |   | $ | 385,000 |   |

 

The failure of Buck & Bassto achieve the required gross sales, the existence in the past of encumbrancesupon the subleased premises and the failure of Buck & Bass to performquarterly customer satisfaction surveys give Bass Pro the ability to declare anevent of default under the sublease at December 29, 2002, terminate thesublease and demand all unpaid and reasonably calculable future rent over thebalance of the sublease term.  Pursuantto the limited partnership agreement, a material default under the subleasewould also entitle Bass Pro to purchase the Company’s interest in the jointventure at 40% of book value, thereby eliminating the Company’s interest in theGrapevine unit.  The termination of thesublease or the elimination of the Company’s interest in the Grapevine unitwould have a material adverse effect on the Company’s business, operatingresults, cash flows and financial condition.

 

**9.             Management’s Plan**

 

The accompanying financial statements have been prepared on a goingconcern basis, which contemplates the realization of assets and thesatisfaction of liabilities in the normal course of business.  As shown in the financial statements theCompany has experienced net losses since inception, resulting in an accumulateddeficit of $13.4 million and a working capital deficit of $16.4 million as ofDecember 29, 2002.  These factors, amongothers, raise doubt about the Company’s ability to continue as a going concernfor a reasonable period of time.

 

The financial statements do not include any adjustments relating to therecoverability and classification of recorded asset amounts or the amounts andclassification of liabilities that might be necessary should the Company beunable to continue as a going concern. The Company’s continuation as a going concern depends upon its abilityto generate sufficient cash flow to meet its obligations on a timely basis, tocomply with the terms and covenants of its financing and joint ventureagreements, to obtain additional financing or refinancing as may be required,and to attain profitable operations. The Company is continuing its efforts to obtain additional funds so thatthe Company can meet its obligations and sustain operations.  There can be no assurance that additionalfinancing will be available on terms acceptable or favorable to the Company, orat all.

 

In February 2002, the Companyreceived a $500,000 advance from WCERS to cover unpaid real estate taxes inMichigan.  In March 2002, the Companyobtained a loan from United Bank and Trust Company for $5,000,000 which maturesin March 2004.  The collateral of thisloan is a $5,000,000 letter of credit from WCERS.  Of the proceeds from such loan, the Company used $200,000 to terminateits lease of the

 

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Nashville site, $500,000 torepay the advance from WCERS, and $1,000,000 to retire indebtedness toCrestmark bank.  The balance wasintended to pay certain accounts payable and for various working capitalpurposes.  Although the Company’sshort-term liquidity issues were improved as a result of this financing, therecan be no assurance that the Company will have sufficient financial resourcesto repay existing indebtedness or to continue operations.

 

The Company intends to explorelicensing and franchising arrangements. The Company is in discussions with several parties regarding thepossible licensing of the Big Buck Brewery & Steakhouse concept in andoutside the state of Michigan.  TheCompany has entered into a license agreement with Up North Adventures, anentity owned by one of the Company’s directors, Thomas E. Zuhl, pursuant towhich the Company hopes to introduce its concept to various Asian markets.

 

The Company also seeks to refinance its indebtedness to WCERS.  The Company hopes to refinance such indebtednessat lower interest rates.  The Companyalso plans to continue searching for ways of reducing its operating costs.  At the beginning of 2001, the Company setgoals to equal or exceed the operating benchmarks of several of itscompetitors.  The Company believes thatit has attained those goals and it seeks continued improvement.  During 2003, the Company also plans to fullyimplement new short-term and long-term marketing campaigns pursuant to whichthe Company hopes to increase revenues.

 

**ITEM 8****                                                        CHANGES IN AND DISAGREEMENTS WITHACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE**

** **

Notapplicable.

 

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**PARTIII**

 

**ITEM 9****                                                        DIRECTORS,EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION16(a) OF THE EXCHANGE ACT**

 

The followingtable provides information with respect to our directors and executive officersas of March 21, 2003.  Each directorserves for a one-year term and until his successor has been duly elected andqualified.  Each executive officer hasbeen appointed to serve until his successor is duly appointed by the board orhis earlier removal or resignation from office.  There are no family relationships between any director orexecutive officer.

 
| **Name**               |   | **Age** |   | **Principal Occupation**                                                               |   | **Position with Big Buck**                                                 |   | **Director   Since** |   |
|------------------------|--------|---------|--------|----------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------|--------|----------------------|--------|
|                   |   |    |   |                                                                                   |   |                                                                       |   |                 |   |
| Anthony P.  Dombrowski |   | 42      |   | President, Chief Executive Officer, Chief  Financial Officer and Treasurer of Big Buck |   | President, Chief Executive Officer, Chief  Financial Officer and Treasurer |   | N/A                  |   |
| Timothy J.  Pugh       |   | 43      |   | Chief Operating Officer of Big Buck                                                    |   | Chief Operating Officer                                                    |   | N/A                  |   |
| Jonathon D.  Ahlbrand  |   | 41      |   | President and Chief Executive Officer of  The Center of American Jobs                  |   | Director                                                                   |   | 2001                 |   |
| Matthew P.  Cullen     |   | 47      |   | General Manager of General Motors  Enterprise Activity Group                           |   | Director                                                                   |   | 2000                 |   |
| Richard A.  Noelke     |   | 51      |   | Deputy Director of Wayne County Employees’  Retirement System                     |   | Director                                                                   |   | 2001                 |   |
| Mark S.  Provenzano    |   | 45      |   | President of Columbia Construction Services                                            |   | Chairman of the Board                                                      |   | 2002                 |   |
| Henry T.  Siwecki      |   | 58      |   | Sole Owner and President of Siwecki  Construction                                      |   | Director                                                                   |   | 1995                 |   |
| Ronald Yee             |   | 50      |   | Director of Wayne County Employees’  Retirement System                            |   | Director                                                                   |   | 2002                 |   |
| Thomas E.  Zuhl        |   | 42      |   | Owner of Pac Rim Associates, Inc.                                                      |   | Director                                                                   |   | 2002                 |   |

 

*Anthony P. Dombrowski*became the President and Chief Executive Officer of our company in March2003.  Mr. Dombrowski has also served asthe Chief Financial Officer and Treasurer of our company since May 1996.  He acted as a consultant to our company, inthe capacity of Chief Financial Officer, from January 1996 to May 1996.  From February 1995 to May 1996, Mr.Dombrowski operated his own financial and consulting business.  From May 1989 to January 1995, Mr.Dombrowski was the Chief Financial Officer of Ward Lake Energy, Inc., anindependent producer of natural gas in Michigan.  Mr. Dombrowski began his career with Price Waterhouse LLP in1982.

 

*Timothy J. Pugh*became our Executive Vice President of Operations in December 2000.  He was promoted to Chief Operating Officerin May 2002.  From November 1998 toNovember 2000, he was a

 

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franchisee partner of Damon’sInternational, a full-service chain of over 100 casual dining restaurants, inKalamazoo, Michigan.  From April 1996 toOctober 1998, he was a regional manager at Damon’s International.  From October 1993 to April 1996, he was ageneral manager at Damon’s International. From April 1991 to October 1993, he managed the Houston’s restaurant inDallas, Texas, and the Houston’s restaurant in Memphis, Tennessee.

 

*Jonathon D. Ahlbrand*became a director in January 2001. Since June 1999, Mr. Ahlbrand has been President and Chief ExecutiveOfficer of The Center of American Jobs, a nation-wide recruiting service.  Since April 1998, he has been a managingmember of Private Equity, LLC, an entity that concentrates on the privateplacement of debt and equity securities. From April 1998 to July 1998, Private Equity performed certainconsulting and advisory services for Seger Financial, Inc.  Private Equity has provided certainfinancial advisory services to us.  Inaddition, both Private Equity and Seger Financial have served as our privateplacement agents.  From August 1997 toMarch 1998, Mr. Ahlbrand was Senior Vice President of IntelliQuest, an Austin,Texas based global research services firm. From December 1994 to August 1997, he was Chief Executive Officer ofNational TechTeam Europe, a global information services company.  For more information regarding ourtransactions with Private Equity, Seger Financial and Mr. Ahlbrand, pleasereview “Certain Relationships and Related Transactions.”

 

*Matthew P. Cullen*has been a director since July 2000. Mr. Cullen is General Manager of General Motors Enterprise ActivityGroup, which includes the company’s worldwide real estate division.  He joined General Motors in 1979 as a realestate administrator and subsequently assumed a variety of senior assignments.  Prior to his current position, he wasresponsible for the disposal and redevelopment of surplus property as well assite selection and strategic site acquisition. Mr. Cullen is Vice Chairman of Detroit Downtown, Inc., past Chairman ofDetroit News Center Area Council, and the Chair-Elect of the InternationalAssociation of Corporation Real Estate Executives.

 

*Richard A. Noelke*became a director in December 2001.  Mr.Noelke has served as the Deputy Director of WCERS since February 1997.  Mr. Noelke was an elected Trustee of WCERSfor ten years prior to becoming Deputy Director.  He has been employed with Wayne County, Michigan, for the past 25years, including ten years as an Accountant and Supervisor of Accounting, andten years as the Assistant Finance Director, at Detroit Metropolitan WayneCounty Airport.  Mr. Noelke is also adirector of Everest Energy Fund.  WCERSbeneficially owns approximately 38.6% of our common stock.  For more information regarding ourtransactions with WCERS, please review “Certain Relationships and RelatedTransactions.”

 

*Mark S. Provenzano*became a director in February 2002 and Chairman of the Board in March2003.  He is the President and ashareholder of Columbia Construction Services, a general contracting andconstruction management firm he founded in 1981.  Columbia specializes in hospitality, restaurant and retailconstruction in the Eastern United States. Mr. Provenzano is also the President and a shareholder of SupremeHeating and Supply Co, Inc., a family-operated firm started in 1950 by hisfather.  Supreme provides HVAC servicesthroughout Southeastern Michigan. Columbia, which beneficially owns less than one percent of our commonstock, has provided certain services to our company pursuant to a MasterAgreement for Program Management Services. Supreme has also provided certain services to our company.  For more information regarding ourtransactions with Columbia and Supreme, please review “Certain Relationshipsand Related Transactions.”

 

*Henry T. Siwecki* hasbeen a director since August 1995.  Formore than the last five years, Mr. Siwecki has been the sole owner andPresident of Siwecki Construction, Inc., a commercial and residentialcontractor.

 

*Ronald Yee* became adirector in February 2002.  He hasserved as a Director of WCERS since February 1997.  Prior to that, he was WCERS’ Deputy Director for six years.  Mr. Yee also served as Wayne County’s RiskManager, Chief Labor Relations Analyst, Director of Administration forPersonnel

 

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as well as other professionallevel positions during his 28-year career. WCERS beneficially owns approximately 38.6% of our common stock.  For more information regarding ourtransactions with WCERS, please review “Certain Relationships and RelatedTransactions.”

 

*Thomas E. Zuhl* becamea director in January 2002.  Mr. Zuhlhas owned Pac Rim Associates, Inc., an automotive parts manufacturer’srepresentative company, since October 1991. He also owns Up North Adventures, Inc. and Tried and True Builders,LLC.  Mr. Zuhl beneficially owns 5.5% ofour common stock.  In July 2001, wegranted a license to Up North Adventures (1) to use our intellectual property,(2) to import, sell and distribute our products, and (3) to open and operateBig Buck restaurants, in Japan, Thailand, Malaysia and Singapore.  For more information regarding ourtransactions with Up North Adventures, Pac Rim Associates and Mr. Zuhl, pleasereview “Certain Relationships and Related Transactions.”

 

**Section16(a) Beneficial Ownership Reporting Compliance**

 

Section 16(a) ofthe Exchange Act requires our officers, directors and persons who own more than10% of a registered class of our equity securities to file reports of ownershipand changes in ownership with the SEC. Such officers, directors and shareholders are required by the SEC tofurnish us with copies of all such reports. To our knowledge, based solely on a review of copies of reports filedwith the SEC during the last fiscal year, all applicable Section 16(a) filingrequirements were met, except that  thefollowing reports were not filed on a timely basis:  (1) one report on Form 3 relating to the appointment of RonaldYee to our board of directors on February 19, 2002, (2) one report on Form 3relating to the appointment of Mark S. Provenzano to our board of directors onFebruary 19, 2002, and (3) one report on Form 4 relating to the grant ofoptions to purchase 2,142 shares received by Mr. Provenzano on February 19,2002.

 

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**ITEM 10****                EXECUTIVECOMPENSATION**

 

The followingtable sets forth information with respect to compensation paid by us to ourChief Executive Officer, our former Chief Executive Officer and the otherhighest paid executive officers (the “Named Executive Officers”) during thethree most recent fiscal years.

 

**SUMMARY COMPENSATION TABLE**

 
|                                   |   |                     |       |                                   |       |   |   | **Long-Term   Compensation** |   |
|----------------------------------------|--------|--------------------------|------------|----------------------------------------|------------|--------|--------|------------------------------|--------|
|                                   |   |                     |       |                                   |       |   |   | **Awards**                   |   |
| **Name and Principal Position**        |   | **Annual  Compensation** | ** ** | **Securities    Underlying   Options** | ** ** |
| **Year**                               |   | **Salary**               |       | **Bonus**                              |
|                                   |   |                     |       |                                   |       |   |   |                         |   |
| William F.  Rolinski(1)                |   | 2002                     |       | $                                      | 182,106    |   | $      | 0                            |   | 0 |   |
| Former  President, Chief Executive     |   | 2001                     |       | $                                      | 188,279    |   | $      | 0                            |   | 0 |   |
| Officer and  Chairman of the Board     |   | 2000                     |       | $                                      | 153,247    |   | $      | 0                            |   | 32,037 |   |
|                                   |   |                     |       |                                   |       |   |   |                         |   |   |   |
| Anthony P.  Dombrowski(2)              |   | 2002                     |       | $                                      | 130,500    |   | $      | 0                            |   | 0 |   |
| President,  Chief Executive Officer,   |   | 2001                     |       | $                                      | 108,953    |   | $      | 0                            |   | 60,000 |   |
| Chief  Financial Officer and Treasurer |   | 2000                     |       | $                                      | 94,742     |   | $      | 0                            |   | 14,962 |   |
|                                   |   |                     |       |                                   |       |   |   |                         |   |
| Timothy J.  Pugh(3)                    |   | 2002                     |       | $                                      | 127,500    |   | $      | 36,250                       |   | 0 |   |
| Chief  Operating Officer               |   | 2001                     |       | $                                      | 119,365    |   | $      | 0                            |   | 75,000 |   |
|                                   |   | 2000                     |       | $                                      | 10,346     |   | $      | 0                            |   | 0 |   |

 

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(1)          Mr. Rolinski resigned asour President, Chief Executive Officer and Chairman of the Board onMarch 1, 2003.

(2)          Mr. Dombrowski was namedPresident and Chief Executive Officer on March 1, 2003.

(3)          Mr. Pugh joined ourcompany as Executive Vice President of Operations in December 2000.  He was promoted to Chief Operating Officerin May 2002.

 

No stockoptions or stock appreciation rights were granted to the Named ExecutiveOfficers during 2002.

 

The followingtable sets forth information concerning the unexercised options held by theNamed Executive Officers as of the end of the last fiscal year.  No stock options were exercised by the NamedExecutive Officers during the last fiscal year.  No stock appreciation rights were exercised by the NamedExecutive Officers during the last fiscal year or were outstanding at the endof that year.

 

47

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**Aggregated OptionExercises in Last Fiscal Year and Fiscal Year End Option Values**

 
|                   |   | **Number of  Securities  Underlying Unexercised  Options at FY-End** |       | **Value of  Unexercised  In-the-Money Options  at FY-End(1)** | ** ** |
|------------------------|--------|----------------------------------------------------------------------|------------|---------------------------------------------------------------|------------|
| **Name**               |   | **Exercisable**                                                      | ** ** | **Unexercisable**                                             | ** ** | **Exercisable** | ** ** | **Unexercisable** | ** ** |
|                   |   |                                                                 |       |                                                          |       |   |   |   |   |
| William F.  Rolinski   |   | 19,575                                                               |       | 0                                                             |       | $ | 0 |   | N/A |   |
|                   |   |                                                                 |       |                                                          |       |   |   |   |   |
| Anthony P.  Dombrowski |   | 26,848                                                               |       | 0                                                             |       | $ | 0 |   | N/A |   |
|                   |   |                                                                 |       |                                                          |       |   |   |   |   |
| Timothy J.  Pugh       |   | 10,713                                                               |       | 0                                                             |       | $ | 0 |   | N/A |   |

 

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(1)                Market value ofunderlying securities at fiscal year end minus the exercise price.

 

**Compensationof Directors**

 

Directors whoare also our employees receive no remuneration for services as members of theboard or any board committee.  Eachnon-employee director receives $500 for each regularly scheduled meeting of theboard he attends.  Effective July 1,2001, our board resolved to pay each non-employee director who serves on ourexecutive committee $3,000 per month for such service.  To date, we have not made suchpayments.  Our directors are reimbursedfor expenses incurred solely in connection with our business purposes.  During 2002, our non-employee directorsreceived the options described below.

 

On December 1,2002, pursuant to the automatic grant provisions of the 2000 Stock Option Plan,we granted (1) an option for the purchase of 20,000 shares of common stock toeach non-employee director and (2) an option for the purchase of 10,000 sharesof common stock to each non-employee member of the Executive Committee of theboard.  We automatically grant suchoptions annually for each year of continued service.  Any person who first becomes eligible to receive a grant pursuantto this provision of the 2000 Stock Option Plan following any December 1, willautomatically receive a pro rata portion of such grant upon their appointmentto such position.  Each option isgranted at fair market value on the date of grant, vests one year after thedate of grant and expires ten years after the date of grant.

 

**EmploymentContracts and Termination of Employment, and Change-in-Control Arrangements**

 

In May 2002,we entered into an employment agreement with our then Executive Vice Presidentof Operations Timothy J. Pugh.  Mr. Pughwas promoted to Chief Operating Officer in May 2002.  The agreement provides for an annual base salary of $127,500,annual bonus potential based upon financial performance measures at theoperating units, and benefits made available to other executives.  The agreement is terminable by either party,at any time, with or without cause. However, if Mr. Pugh is terminated without cause prior to the thirdanniversary of the agreement, we will be obligated to pay him an amount equalto six months’ salary.

 

In February2003, we entered into an employment agreement with our then Chief FinancialOfficer and Treasurer Anthony P. Dombrowski. Mr. Dombrowski assumed the additional positions of President and ChiefExecutive Officer in March 2003.  Theagreement provides for an annual base salary of $133,000, five weeks paidvacation per year, and benefits made available to other executives.  The agreement is terminable by either party,at any time, with or without cause.  However,if Mr. Dombrowski is terminated without cause prior to the third anniversary ofthe agreement, we will be obligated to pay him an amount equal to six months’salary.

 

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**ITEM 11****                                                 SECURITYOWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERS**

 

Thefollowing table sets forth certain information regarding beneficial ownershipof our common stock as of February 28, 2003, by (a) each person who is known tous to own beneficially more than five percent of our common stock, (b) eachdirector, (c) our Named Executive Officers (as defined herein), and (d) allexecutive officers and directors as a group. Unless otherwise noted, each person identified below possesses solevoting and investment power with respect to such shares.  Except as otherwise noted below, we know ofno agreements among our shareholders which relate to voting or investment powerwith respect to our common stock.

 
| **Name and Address of Beneficial Owner (1)**                     |   | **Shares  Beneficially****Owned (1)** |   | **Percent  of****Class (2)** |   |
|------------------------------------------------------------------|--------|---------------------------------------|--------|------------------------------|--------|
|                                                             |   |                                  |   |                         |   |
| Wayne County Employees’ Retirement  System(3)               |   | 512,155                               |   | 38.6                         | %      |
| 28 West Adams, Suite 1900                                        |   |                                  |   |                         |   |
| Detroit, Michigan 48226                                          |   |                                  |   |                         |   |
| William F. Rolinski(4)                                           |   | 139,662                               |   | 15.8                         | %      |
| 5242 Greenview                                                   |   |                                  |   |                         |   |
| Gaylord, Michigan 49735                                          |   |                                  |   |                         |   |
| Estate of Blair A. Murphy                                        |   | 83,572                                |   | 9.7                          | %      |
| Thomas E.  Zuhl(5)                                               |   | 50,112                                |   | 5.5                          | %      |
| Michael G.  Eyde(6)                                              |   | 45,782                                |   | 5.1                          | %      |
| 6250 West Michigan Avenue                                        |   |                                  |   |                         |   |
| Lansing, Michigan 48917                                          |   |                                  |   |                         |   |
| Henry T. Siwecki(7)                                              |   | 27,997                                |   | 3.2                          | %      |
| Anthony P. Dombrowski(8)                                         |   | 27,705                                |   | 3.1                          | %      |
| Timothy J. Pugh(9)                                               |   | 10,713                                |   | 1.2                          | %      |
| Jonathon D. Ahlbrand(10)                                         |   | 9,939                                 |   | 1.1                          | %      |
| Mark S. Provenzano(11)                                           |   | 9,285                                 |   | 1.1                          | %      |
| Matthew P. Cullen(9)                                             |   | 7,142                                 |   | *                            |   |
| Ronald Yee(12)                                                   |   | 512,512                               |   | 38.6                         | %      |
| Richard A. Noelke                                                |   | 71                                    |   | *                            |   |
| All directors and executive officers as a  group (9 persons)(13) |   | 655,476                               |   | 45.5                         | %      |

 

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*  Represents less than one percent.

 

(1)                                  Beneficialownership is determined in accordance with the rules of the Securities andExchange Commission and includes voting or investment power with respect tosecurities.  Securities “beneficiallyowned” by a person may include securities owned by or for, among others, thespouse, children or certain other relatives of such person as well as othersecurities as to which the person has or shares voting or investment power orhas the option or right to acquire within 60 days of February 28, 2003.  Unless otherwise indicated, the address ofeach shareholder is c/o Big Buck Brewery & Steakhouse, Inc., 550 SouthWisconsin Street, Gaylord, Michigan 49734.

 

(2)                                  Percentage of beneficial ownership is basedon 861,997 shares outstanding as of February 28, 2003.  Shares issuable pursuant to derivativesecurities are deemed outstanding for computing the percentage of the personholding such derivative securities but are not deemed outstanding for computingthe percentage of any other person.

 

49

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(3)                                  Includes 28,571 shares purchasable upon theexercise of a warrant and 437,383 shares purchasable upon the conversion ofpromissory notes.

 

(4)                                  Includes 19,575 shares purchasable upon theexercise of options.

 

(5)                                  Includes 2,380 shares purchasable upon theexercise of options, 16,496 shares purchasable upon the conversion of apromissory note and 27,793 shares purchasable upon the conversion of apromissory note held by Pac Rim Associates, Inc.

 

(6)                                  Includes28,570 shares purchasable upon the conversion of promissory notes.

 

(7)                                  Includes9,284 shares purchasable upon the exercise of options.

 

(8)                                  Includes26,848 shares purchasable upon the exercise of options.

 

(9)                                  Representsshares purchasable upon the exercise of options.

 

(10)                            Represents7,856 shares purchasable upon the exercise of options and 2,083 sharespurchasable upon the exercise of a warrant held by Seger Financial, Inc.

 

(11)                            Represents2,142 shares purchasable upon the exercise of options and 7,143 shares held byColumbia Construction Services – Michigan, Inc.

 

(12)                            Mr.Yee disclaims beneficial ownership of the securities owned by Wayne CountyEmployees’ Retirement System.

 

(13)                            Includes66,365 shares purchasable upon the exercise of options, 30,654 sharespurchasable upon the exercise of warrants and 481,672 shares purchasable uponthe conversion of promissory notes.

 

50

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**EquityCompensation Plan Information**

 

The followingtable provides information as of the end of the most recently completed fiscalyear with respect to compensation plans under which our equity securities areauthorized for issuance.

 
| **Plan category**                                              |   | **Number of   securities to be   issued upon   exercise of   outstanding   options, warrants   and rights(a)** |   | **Weighted-average   exercise price of   outstanding options,   warrants and rights(b)** |   | **Number of securities   remaining available for   future issuance under   equity compensation**

**plans (excluding   securities reflected in   column (a))(c)** |    |
|----------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------|
| **Equity compensation plans approved by security holders**     |   | 104,608                                                                                                        |   | $                                                                                        | 12.28  |                                                                                                                                                              | 144,390 | (1) |
| **Equity compensation plans not approved by security holders** |   | 57,080                                                                                                         | (2)    | $                                                                                        | 14.49  |                                                                                                                                                              | 0       |   |
| **Total**                                                      |   | 161,688                                                                                                        |   | $                                                                                        | 13.06  |                                                                                                                                                              | 144,390 | (1) |

 

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(1)                                  Represents(a) 27,051 shares remaining available for issuance under our 1996 Stock OptionPlan, (b) 16,857 shares remaining available for issuance under our 1999Employee Stock Purchase Plan (which we suspended in January 2003), and (c)100,482 shares remaining available for issuance under our 2000 Stock OptionPlan.  We terminated our 1996 DirectorStock Option Plan in September 2000.

 

(2)                                  Represents (a) 7,142 shares underlying awarrant exercisable at $18.38 per share issued on November 5, 1998 to Bass ProOutdoor World, L.L.C. that expires on August 31, 2003, (b) 2,083 sharesunderlying a five-year warrant exercisable at $19.34 per share issued onNovember 20, 1998 to Seger Financial, Inc., (c) 3,571 shares underlying athree-year warrant exercisable at $12.69 per share issued on January 26, 2000to Michael G. Eyde, (d) 28,571 shares underlying a warrant exercisable at$14.00 per share issued on February 4, 2000 to Wayne County Employees’Retirement System that expires on February 27, 2004, (e) an aggregate of 7,142shares underlying options exercisable at $21.00 per share issued outside of ourstock option plans on December 29, 1998 to certain of our executive officers,and (f) an aggregate of 8,571 shares underlying options exercisable at $7.00per share issued outside of our stock option plans on March 30, 2001 to certaindirectors of Buck & Bass, L.P.

 

**ITEM 12****                CERTAINRELATIONSHIPS AND RELATED TRANSACTIONS**

 

*Agreements with Wayne County Employees’ Retirement System andRelationships with Ronald Yee and Richard A. Noelke*

 

We haveobtained certain debt financing from WCERS. As of March 21, 2003, we owed WCERS approximately $10.2 million.  A first priority lien in favor of WCERS onall of our assets, including the Gaylord unit, our leasehold interest in theAuburn Hills unit, our leasehold interest in the Grand Rapids unit, our limitedpartnership interest in Buck & Bass, L.P. and all of our other assets, nowor hereafter acquired, secures this indebtedness.  As of February 28, 2003, WCERS beneficially owned approximately38.6% of our common stock.  For moreinformation regarding our transactions with WCERS, please review “Management’sDiscussion and Analysis or Plan of Operation.” Ronald Yee, who became one of our directors in February 2002, serves asDirector of WCERS.  Richard A. Noelke,who became one of our directors in December 2001, serves as Deputy Director ofWCERS.

 

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*Agreements with Michael G. Eyde*

 

We haveentered into certain sale/leaseback transactions with Michael G. Eyde.  As of February 28, 2003, Mr. Eydebeneficially owned approximately 5.1% of our common stock.  For more information regarding ourtransactions with Mr. Eyde, please review “Description of Property – GrandRapids and Auburn Hills.”

 

*Agreements with Up North Adventures, Transactions with Pac RimAssociates and Thomas E. Zuhl, and Relationship with Thomas E. Zuhl*

* *

In July 2001,we granted an exclusive license to Up North Adventures, Inc. (1) to use ourintellectual property, (2) to import, sell and distribute our products, and (3)to open and operate our restaurants, in Japan, Thailand, Malaysia andSingapore.  In consideration of such rights,the licensee, an entity owned by Thomas E. Zuhl, will pay us one and one halfpercent of its gross receipts for products sold in the territory for the first24 months after the first Big Buck restaurant is opened.  For the remainder of the 25-year term, theroyalty amount will increase to two percent. In July 2001, we issued a convertible subordinated promissory note inthe principal amount of $100,000 to Thomas E. Zuhl.  This note matured in July 2002. It may be converted into 16,496 shares of common stock at a conversionprice of $6.062 per share.  In December2001, we issued a convertible subordinated promissory note in the principalamount of $100,000 to Pac Rim Associates, Inc. Such entity is owned by Mr. Zuhl. This note matured in December 2002. It may be converted into 27,793 shares of common stock at a conversionprice of $3.598 per share.  In January2002, Mr. Zuhl became one of our directors.

 

*Agreements and Transactions with Columbia Construction Services,Transactions with Supreme Heating and Supply Co, Inc. and Relationship withMark S. Provenzano*

 

In January2001, we entered into a Master Agreement for Program Management Services withColumbia Construction Services – Michigan, Inc.  Pursuant to this agreement, Columbia has provided us with certainproject-specific construction management services and advice regardingdevelopment, design and construction issues related to our restaurantbusiness.  Mark S. Provenzano, whobecame one of our directors in February 2002, is President and a shareholder ofColumbia.  Under the agreement, Columbiaconducted certain demolition and construction work in connection with theNashville location.  For such services,we paid Columbia $212,423 during 2001 and $19,930 during 2002.  Columbia also provided us with advisoryservices in connection with our former construction litigation.  For such services, we paid Columbia $79,613during 2001 and $24,000 during 2002. Our agreement also provides that we will reimburse Columbia, at actualcost plus 15%, for all reimbursable costs incurred by it in connection withproject-specific construction management services as well as advisoryservices.  We did not pay Columbia forany project-specific construction management services during 2002 because wehad no pending projects during such fiscal year.  Effective February 9, 2001, we issued 7,142 shares of commonstock to Columbia as compensation for field audit services provided by suchentity to us in connection with the Grapevine unit.  During 2002, we paid Supreme Heating and Supply Co, Inc. $17,456for mechanical repair services on the HVAC system at our Auburn Hillslocation.  Mr. Provenzano is Presidentand a shareholder of Supreme.

 

*Transaction with Seger Financial, Agreements with Private Equity, andRelationship with Jonathon D. Ahlbrand*

* *

On November 20,1998, we issued a five-year warrant, exercisable at $2.7625 per share, for thepurchase of 2,083 shares of our common stock to Seger Financial, Inc.  This issuance was made in connection withthe $1.4 million debt financing which Seger Financial obtained for us fromCrestmark Bank.  In addition, we paidSeger Financial a commission of 5% of the total amount of the debt placed($70,000).  Private Equity, LLC, anentity of which Jonathon D. Ahlbrand, who became one of our directors inJanuary 2001, is a managing member, performed certain consulting and advisoryservices for

 

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Seger Financial from April 1998to July 1998.  In connection with thedissolution of such relationship, Mr. Ahlbrand came to beneficially own thesecurities underlying the foregoing warrant and was paid $17,500 of theabove-referenced commissions.

 

On September17, 1999, we entered into a consulting services agreement with Private Equity,LLC.  Pursuant to this agreement,Private Equity agreed to provide advice, recommendations and introductionsregarding financing options, market conditions, program structure and strategicoptions, including acquisitions and mergers. We agreed to bear all reasonable costs and expenses associated with suchconsulting efforts.  We reimbursedPrivate Equity for $22,400 of costs and expenses during 2000.  In addition, we issued warrants to purchasean aggregate of 28,571 shares of our common stock to Private Equity.  Mr. Ahlbrand, who became one of our directorsin January 2001, has served as a managing member of Private Equity since April1998.  All of such warrants expiredunexercised on October 1, 2002.

 

*Employment Agreements with Anthony P. Dombrowski and Timothy J. Pugh*

 

Two of ourexecutive officers have employment agreements with our company.  For more information regarding suchagreements, please review “Executive Compensation — Employment Contracts andTermination of Employment, and Change-in-Control Arrangements.”

 

*General*

 

All futuretransactions between us and our officers, directors and principal shareholdersand their affiliates will be approved by a majority of the board, including amajority of the independent and disinterested non-employee directors, and willbe on terms no less favorable to us than could be obtained from unaffiliatedthird parties.

 

**ITEM 13****                EXHIBITSAND REPORTS ON FORM 8-K**

 

(a)           Exhibits

 

See “Index toExhibits.”

 

(b)           Reportson Form 8-K

 

On October 8, 2002, we filed a Current Reporton Form 8-K relating to the delisting of our securities from The NasdaqSmallCap Market.  We filed no otherCurrent Reports on Form 8-K during the quarter ended December 29, 2002.

 

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**ITEM 14****                CONTROLSAND PROCEDURES**

 

We maintain asystem of disclosure controls and procedures that is designed to providereasonable assurance that information, which is required to be disclosed, isaccumulated and communicated to management timely.  Within the 90-day period prior to the filing date of thisperiodic report, we carried out an evaluation under the supervision and withthe participation of our management, including our Chief Executive Officer (whoalso serves as our Chief Financial Officer), of the effectiveness of the designand operation of our disclosure controls and procedures pursuant to ExchangeAct Rule 13a-15.  Based upon thatevaluation, our Chief Executive Officer concluded that our disclosure controlsand procedures are effective in timely alerting him to material informationrelating to our company required to be disclosed in our periodic filings withthe SEC.

 

There were nosignificant changes in our internal controls or in other factors that couldsignificantly affect our internal controls subsequent to the date of their mostrecent evaluation.

 

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**SIGNATURES**

 

In accordancewith Section 13 or 15(d) of the Exchange Act, the registrant has duly causedthis report to be signed on its behalf by the undersigned, thereunto dulyauthorized, in the City of Gaylord, State of Michigan, on March 31, 2003.

 
|   | BIG BUCK  BREWERY & STEAKHOUSE, INC. |
|--------|------------------------------------------|
|   |                                     |
|   | By                                       | /s/ Anthony  P. Dombrowski |   |
|   |                                     | Anthony P.  Dombrowski |
|   |                                     | President,  Chief Executive Officer, Chief |
|   |                                     | Financial  Officer and Treasurer (Principal |
|   |                                     | Executive  Officer, Principal Accounting Officer |
|   |                                     | and  Principal Financial Officer) |

 

**POWEROF ATTORNEY**

 

KNOW ALL BYTHESE PRESENT, that each person whose signature appears below constitutes andappoints Anthony P. Dombrowski and Timothy J. Pugh as his or her true and lawfulattorney-in-fact and agent, with full powers of substitution andresubstitution, for him or her and in his or her name, place and stead, in anyand all capacities, to sign any or all amendments to this report, and to filethe same, with all exhibits thereto, and other documents in connectiontherewith, with the SEC, granting unto said attorney-in-fact and agent, fullpower and authority to do and perform each and every act and thing requisite ornecessary to be done in and about the premises, as fully to all intents andpurposes as he or she might or could do in person, hereby ratifying andconfirming all that said attorney-in-fact and agent, or his or her substituteor substitutes, may lawfully do or cause to be done by virtue hereof.

 

In accordancewith the Exchange Act, this report has been signed below by the followingpersons on behalf of the registrant, and in the capacities and on the dateindicated.

 
| **Signature**              |   | **Title**                               |   | **Date**       |
|----------------------------|--------|-----------------------------------------|--------|----------------|
|                       |   |                                    |   |           |
| /s/ Anthony  P. Dombrowski |   | President, Chief Executive Officer,     |   | March 31, 2003 |
| Anthony P.  Dombrowski     |   | Chief Financial Officer and Treasurer   |   |           |
|                       |   | (Principal Executive Officer, Principal |   |           |
|                       |   | Accounting Officer and Principal        |   |           |
|                       |   | Financial Officer)                      |   |           |
|                       |   |                                    |   |           |
|                       |   | Director                                |   |           |
| Jonathon D.  Ahlbrand      |   |                                    |   |           |
|                       |   |                                    |   |           |
|                       |   | Director                                |   |           |
| Matthew P.  Cullen         |   |                                    |   |           |
|                       |   |                                    |   |           |
|                       |   |                                    |   |           |
| /s/ Richard A. Noelke      |   | Director                                |   | March 31, 2003 |
| Richard A.  Noelke         |   |                                    |   |           |

 

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| /s/ Mark S. Provenzano |   | Chairman of the Board |   | March 31, 2003 |
|------------------------|--------|-----------------------|--------|----------------|
| Mark S. Provenzano     |   |                  |   |           |
|                   |   |                  |   |           |
|                   |   | Director              |   |           |
| Henry T.  Siwecki      |   |                  |   |           |
|                   |   |                  |   |           |
| /s/ Ronald  Yee        |   | Director              |   | March 31, 2003 |
| Ronald Yee             |   |                  |   |           |
|                   |   |                  |   |           |
| /s/ Thomas  E. Zuhl    |   | Director              |   | March 31, 2003 |
| Thomas E.  Zuhl        |   |                  |   |           |

 

56

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**CERTIFICATIONS**

 

*CERTIFICATION PURSUANT TO RULE 13a-14*

 

I, Anthony P.Dombrowski, Chief Executive Officer and Chief Financial Officer of Big BuckBrewery & Steakhouse, Inc., certify that:

 

1.                                       Ihave reviewed this annual report on Form 10-KSB of Big Buck Brewery &Steakhouse, Inc.;

 

2.                                       Basedon my knowledge, this annual report does not contain any untrue statement of amaterial fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, notmisleading with respect to the period covered by this annual report;

 

3.                                       Basedon my knowledge, the financial statements, and other financial informationincluded in this annual report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant asof, and for, the periods presented in this annual report;

 

4.                                       Iam responsible for establishing and maintaining disclosure controls andprocedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for theregistrant and have:

 

a)                                      designedsuch disclosure controls and procedures to ensure that material informationrelating to the registrant, including its consolidated subsidiaries, is madeknown to me by others within those entities, particularly during the period inwhich this annual report is being prepared;

 

b)                                     evaluatedthe effectiveness of the registrant’s disclosure controls and procedures as ofa date within 90 days prior to the filing date of this annual report (the“Evaluation Date”); and

 

c)                                      presentedin this annual report my conclusions about the effectiveness of the disclosurecontrols and procedures based on my evaluation as of the Evaluation Date;

 

5.                                       Ihave disclosed, based on my most recent evaluation, to the registrant’sauditors and the audit committee of registrant’s board of directors (or personsperforming the equivalent functions):

 

a)                                      allsignificant deficiencies in the design or operation of internal controls whichcould adversely affect the registrant’s ability to record, process, summarizeand report financial data and have identified for the registrant’s auditors anymaterial weaknesses in internal controls; and

 

b)                                     anyfraud, whether or not material, that involves management or other employees whohave a significant role in the registrant’s internal controls; and

 

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6.                                       Ihave indicated in this annual report whether or not there were significantchanges in internal controls or in other factors that could significantlyaffect internal controls subsequent to the date of my most recent evaluation,including any corrective actions with regard to significant deficiencies andmaterial weaknesses.

 
| Dated: | March 31, 2003 |   | By     | /s/ Anthony P. Dombrowski    |
|--------|----------------|--------|--------|------------------------------|
|   |           |   |   | Anthony P. Dombrowski        |
|   |           |   |   | Chief Executive Officer  and |
|   |           |   |   | Chief Financial Officer      |

 

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CERTIFICATION PURSUANT TO 18U.S.C. SECTION 1350

 

In connectionwith the Annual Report of Big Buck Brewery & Steakhouse, Inc. (the“Company”) on Form 10-KSB for the annual period ended December 29, 2002, asfiled with the Securities and Exchange Commission on the date hereof (the“Report”), I, Anthony P. Dombrowski, Chief Executive Officer and ChiefFinancial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, asadopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

 

1.                                       theReport fully complies with the requirements of Section 13(a) or 15(d) of theSecurities Exchange Act of 1934; and

2.                                       theinformation contained in the Report fairly presents, in all material respects,the financial condition and results of operations of the Company.

 
| Dated: | March 31, 2003 |   | By     | /s/ Anthony P. Dombrowski    |
|--------|----------------|--------|--------|------------------------------|
|   |           |   |   | Anthony P. Dombrowski        |
|   |           |   |   | Chief Executive Officer  and |
|   |           |   |   | Chief Financial Officer      |

 

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**INDEXTO EXHIBITS**

 
| **Exhibit  Number** |   | **Description**                                                                                                                                                                                                                                                                                     |
|---------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                |   |                                                                                                                                                                                                                                                                                                |
| 3.1                 |   | Restated Articles of Incorporation, as  amended (incorporated by reference to our Quarterly Report on Form 10-QSB,  filed on November 13, 2002 (File No. 0-20845)).                                                                                                                                 |
| 3.2                 |   | Amended and Restated Bylaws (incorporated  by reference to our Quarterly Report on Form 10-QSB, filed on November 13,  2002 (File No. 0-20845)).                                                                                                                                                    |
| 4.1                 |   | See Exhibit 3.1.                                                                                                                                                                                                                                                                                    |
| 4.2                 |   | See Exhibit 3.2.                                                                                                                                                                                                                                                                                    |
| 4.3                 |   | Specimen common stock certificate  (incorporated by reference to our Quarterly Report on Form 10-QSB, filed  November 13, 2002 (File No. 0.20845)).                                                                                                                                                 |
| 10.1                |   | 1996 Stock Option Plan (incorporated by  reference to our Annual Report on Form 10-KSB, filed on March 23, 1998 (File  No. 0-20845)).                                                                                                                                                               |
| 10.2                |   | 1996 Director Stock Option Plan  (incorporated by reference to our Registration Statement on Form SB-2, filed  on April 15, 1996 (File No. 333-3548)).                                                                                                                                              |
| 10.3                |   | 1999 Employee Stock Purchase Plan  (incorporated by reference to our Definitive Schedule 14A (Proxy Statement),  filed on October 26, 1999 (File No. 0-20845)).                                                                                                                                     |
| 10.4                |   | Amendment No. 1 to 1999 Employee Stock  Purchase Plan (incorporated by reference to our Annual Report on Form 10-KSB,  filed on April 2, 2001 (File No. 0-20845)).                                                                                                                                  |
| 10.5                |   | 2000 Stock Option Plan (incorporated by  reference to our Definitive Schedule 14A (Proxy Statement), filed on October  18, 2000 (File No. 0-20845)).                                                                                                                                                |
| 10.6                |   | Real Estate Purchase and Leaseback  Agreement by and between Eyde Brothers Development Co., Landlord, and Big  Buck, Tenant, dated April 11, 1997 (incorporated by reference to our  Quarterly Report on Form 10-QSB, filed on May 9, 1997 (File No. 0-20845)).                                     |
| 10.7                |   | Lease Agreement by and between Eyde  Brothers Development Co., Landlord, and Big Buck, Tenant, dated April 11,  1997 (incorporated by reference to our Quarterly Report on Form 10-QSB, filed  on May 9, 1997 (File No. 0-20845)).                                                                  |
| 10.8                |   | Amendment to Lease Agreement by and between  Eyde Brothers Development Co., Landlord, and Big Buck, Tenant, dated March  27, 2000 (incorporated by reference to our Annual Report on Form 10-KSB,  filed on March 31, 2000 (File No. 0-20845)).                                                     |
| 10.9                |   | Amendment No. 2 to Lease Agreement by and  between Eyde Brothers Development Co., Landlord and Big Buck, Tenant, dated  March 29, 2002 (incorporated by reference to our Annual Report on Form  10-KSB, filed on April 1, 2002 (File No. 0-20845)).                                                 |
| 10.10               |   | Real Estate Purchase and Leaseback  Agreement by and between Michael G. Eyde, Landlord, and Big Buck, Tenant,  dated August 1, 1997 (incorporated by reference to our Quarterly Report on Form  10-QSB, filed on August 12, 1997 (File No. 0-20845)).                                               |
| 10.11               |   | Lease Agreement by and between Michael G.  Eyde, Landlord, and Big Buck, Tenant, dated October 1, 1997 (incorporated by  reference to our Annual Report on Form 10-KSB, filed on March 23, 1998 (File  No. 0-20845)).                                                                               |
| 10.12               |   | Amendment to Lease Agreement by and between  Michael G. Eyde, Landlord, and Big Buck, Tenant, dated January 26, 2000  (incorporated by reference to our Annual Report on Form 10-KSB, filed on  March 31, 2000 (File No. 0-20845)).                                                                 |
| 10.13               |   | Limited Partnership Agreement by and among  BBBP Management Company, Bass Pro Outdoor World, L.L.C. (f/k/a Bass Pro  Outdoor World, L.P.) and Big Buck, dated November 5, 1998 (incorporated by  reference to our Quarterly Report on Form 10-QSB, filed on November 12, 1998  (File No. 0-20845)). |
| 10.14               |   | Shareholders’ Agreement by and among BBBP  Management Company, Bass Pro Outdoor World, L.L.C. (f/k/a Bass Pro Outdoor  World, L.P.) and Big Buck, dated November 5, 1998 (incorporated by reference  to our Quarterly Report on Form 10-QSB, filed on November 12, 1998 (File No.  0-20845)).  |

 

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| 10.15 |   | Commercial Sublease Agreement by and  between Bass Pro Outdoor World, L.L.C. (f/k/a Bass Pro Outdoor World, L.P.)  and Buck and Bass, L.P., dated November 5, 1998 (incorporated by reference to  our Quarterly Report on Form 10-QSB, filed on November 12, 1998 (File No.  0-20845)).                                    |
|-------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.16 |   | Common Stock Purchase Warrant issued by Big  Buck to Bass Pro Outdoor World, L.L.C. (f/k/a Bass Pro Outdoor World, L.P.),  dated November 5, 1998 (incorporated by reference to our Quarterly Report on  Form 10-QSB, filed on November 12, 1998 (File No. 0-20845)).                                                      |
| 10.17 |   | Stock Option Agreement between Big Buck and  William F. Rolinski, dated December 29, 1998 (incorporated by reference to  our Annual Report on Form 10-KSB, filed on March 29, 1999 (File No.  0-20845)).                                                                                                                   |
| 10.18 |   | Stock Option Agreement between Big Buck and  Anthony P. Dombrowski, dated December 29, 1998 (incorporated by reference to  our Annual Report on Form 10-KSB, filed on March 29, 1999 (File No.  0-20845)).                                                                                                                 |
| 10.19 |   | Form of Non-Qualified Stock Option  Agreement between Big Buck and certain directors of Buck & Bass, L.P.,  dated March 30, 2001 (incorporated by reference to our Quarterly Report on Form  10-QSB, filed on May 4, 2001 (File No. 0-20845)).                                                                         |
| 10.20 |   | Common Stock Purchase Warrant issued by Big  Buck to Seger Financial, Inc., dated November 20, 1998 (incorporated by  reference to our Annual Report on Form 10-KSB, filed on March 29, 1999 (File  No. 0-20845)).                                                                                                         |
| 10.21 |   | Consulting Agreement by and between Big  Buck and Private Equity, LLC, dated September 17, 1999 (incorporated by  reference to our Annual Report on Form 10-KSB, filed on March 31, 2000 (File  No. 0-20845)).                                                                                                             |
| 10.22 |   | Subscription and Investment Representation  Agreement for 10% Convertible Secured Promissory Note executed by Wayne  County Employees’ Retirement System, dated February 4, 2000 (incorporated by  reference to our Annual Report on Form 10-KSB, filed on March 31, 2000 (File  No. 0-20845)).                       |
| 10.23 |   | 10% Convertible Secured Promissory Note in  the principal amount of $5,876,114.74, issued by Big Buck, Maker, to Wayne  County Employees’ Retirement System, Payee, dated February 4, 2000  (incorporated by reference to our Annual Report on Form 10-KSB, filed on  March 31, 2000 (File No. 0-20845)).             |
| 10.24 |   | Amended, Restated and Consolidated  Convertible Note in the principal amount of $1,623,885.26, issued by Big  Buck, Maker, to Wayne County Employees’ Retirement System, Payee, dated  February 4, 2000 (incorporated by reference to our Annual Report on Form  10-KSB, filed on March 31, 2000 (File No. 0-20845)). |
| 10.25 |   | Common Stock Purchase Warrant issued by Big  Buck to Wayne County Employees’ Retirement System, dated February 4, 2000  (incorporated by reference to our Annual Report on Form 10-KSB, filed on  March 31, 2000 (File No. 0-20845)).                                                                                 |
| 10.26 |   | Promissory Note and Security Agreement by  and between Big Buck and Buck & Bass, L.P., dated August 23, 2000  (incorporated by reference to our Quarterly Report on Form 10-QSB, filed on  November 15, 2000 (File No. 0-20845)).                                                                                      |
| 10.27 |   | Promissory Note in the principal amount of  $1,500,000.00, issued by Big Buck, Maker, to Wayne County Employees’  Retirement System, Payee, dated August 21, 2000 (incorporated by reference to  our Quarterly Report on Form 10-QSB, filed on November 15, 2000 (File No.  0-20845)).                                |
| 10.28 |   | First Loan Modification Agreement by and  between Wayne County Employees’ Retirement System and Big Buck, dated August  21, 2000 (incorporated by reference to our Annual Report on Form 10-KSB,  filed on April 2, 2001 (File No. 0-20845)).                                                                         |
| 10.29 |   | Second Loan Modification Agreement by and  between Wayne County Employees’ Retirement System and Big Buck, dated October  1, 2000 (incorporated by reference to our Annual Report on Form 10-KSB, filed  on April 2, 2001 (File No. 0-20845)).                                                                        |
| 10.30 |   | Third Loan Modification Agreement by and  between Wayne County Employees’ Retirement System and Big Buck, dated  February 20, 2001 (incorporated by reference to our Annual Report on Form  10-KSB, filed on April 2, 2001 (File No. 0-20845)).                                                                       |

 

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| 10.31 |   | Fourth Loan Modification Agreement by and  between Wayne County Employees’ Retirement System and Big Buck, dated March  15, 2001 (incorporated by reference to our Annual Report on Form 10-KSB,  filed on April 1, 2002 (File No. 0-20845)).                |
|-------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.32 |   | Fifth Loan Modification Agreement by and  between Wayne County Employees’ Retirement System and Big Buck, dated March  20, 2002 (incorporated by reference to our Annual Report on Form 10-KSB,  filed on April 1, 2002 (File No. 0-20845)).                 |
| 10.33 |   | Letter Agreement by and between Wayne  County Employees’ Retirement System and Big Buck, dated February 1, 2001  (incorporated by reference to our Annual Report on Form 10-KSB, filed on  April 2, 2001 (File No. 0-20845)).                                |
| 10.34 |   | Letter Agreement between by and between  Wayne County Employees’ Retirement System and Big Buck, dated February 4,  2000 (incorporated by reference to our Annual Report on Form 10-KSB, filed on  April 2, 2001 (File No. 0-20845)).                        |
| 10.35 |   | Letter Agreement by and between Wayne  County Employees’ Retirement System and Big Buck, dated April 3, 2001  (incorporated by reference to our Annual Report on Form 10-KSB/A, filed on  April 13, 2001 (File No. 0-20845)).                                |
| 10.36 |   | Letter Agreement by and between Wayne  County Employees’ Retirement System and Big Buck, dated October 1, 2001  (incorporated by reference to our Quarterly Report on Form 10-QSB, filed  November 14, 2001 (File No. 0-20845)).                             |
| 10.37 |   | Letter Agreement by and between Wayne  County Employees’ Retirement System and Big Buck, dated February 28, 2002  (incorporated by reference to our Annual Report on Form 10-KSB, filed on  April 1, 2002 (File No. 0-20845)).                               |
| 10.38 |   | Letter Agreement by and between Wayne County  Employees’ Retirement System and Big Buck, dated April 1, 2002 (incorporated  by reference to our Annual Report on Form 10-KSB, filed on April 1, 2002  (File No. 0-20845)).                                   |
| 10.39 |   | Form of Subscription and Investment  Representation Agreement for 10% Convertible Subordinated Promissory Note  (including form of note) (incorporated by reference to our Annual Report on  Form 10-KSB, filed on March 31, 2000 (File No. 0-20845)).            |
| 10.40 |   | Form of First Amendment to 10% Convertible  Subordinated Promissory Note (incorporated by reference to our Annual Report  on Form 10-KSB, filed on April 2, 2001 (File No. 0-20845)).                                                                             |
| 10.41 |   | Promissory Note in the principal amount of  $12,000.00, issued by Anthony P. Dombrowski, Maker, to Big Buck, Payee, dated  April 18, 2000 (incorporated by reference to our Annual Report on Form  10-KSB, filed on April 2, 2001 (File No. 0-20845)).            |
| 10.42 |   | Promissory Note in the principal amount of  $100,000.00, issued by Big Buck, Maker, to Michael G. Eyde, Payee, dated  December 4, 2000 (incorporated by reference to our Annual Report on Form  10-KSB, filed on April 2, 2001 (File No. 0-20845)).               |
| 10.43 |   | First Amendment to Non-Convertible  Subordinated Promissory Note issued by Big Buck to Michael G. Eyde, dated  March 29, 2001 (incorporated by reference to our Quarterly Report on Form  10-QSB, filed on May 4, 2001 (File No. 0-20845)).                       |
| 10.44 |   | Consulting Agreement between Big Buck and  Morgan James & Associates, effective July 12, 2001 (incorporated by  reference to our Quarterly Report on Form 10-QSB, filed November 14, 2001  (File No. 0-20845)).                                               |
| 10.45 |   | Promissory Note in the principal amount of  $100,000.00, issued by Big Buck, Maker, to Thomas E. Zuhl, Payee, dated July  20, 2001 (incorporated by reference to our Annual Report on Form 10-KSB,  filed on April 1, 2002 (File No. 0-20845)).                   |
| 10.46 |   | Promissory Note in the principal amount of  $100,000.00, issued by Big Buck, Maker, to Pac Rim Associates, Inc., Payee,  dated December 11, 2001 (incorporated by reference to our Annual Report on  Form 10-KSB, filed on April 1, 2002 (File No. 0-20845)).     |
| 10.47 |   | License Agreement between Up North  Adventures, Inc. and Big Buck, dated July 20, 2001 (incorporated by reference  to our Annual Report on Form 10-KSB, filed on April 1, 2002 (File No.  0-20845)).                                                              |
| 10.48 |   | Promissory Note in the principal amount of  $5,000,000.00, issued by Big Buck, Maker, to United Bank and Trust Company,  Payee, dated March 15, 2002 (incorporated by reference to our Annual Report  on Form 10-KSB, filed on April 1, 2002 (File No. 0-20845)). |

 

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| 10.49 |   | Master Agreement for Program Management  Services between Big Buck and Columbia Construction Services – Michigan,  Inc., dated January 1, 2001 (incorporated by reference to our Annual Report  on Form 10-KSB, filed on April 1, 2002 (File No. 0-20845)). |
|-------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.50 |   | Possession Agreement between Big Buck and  Opry Mills Limited Partnership, dated March 14, 2002 (incorporated by  reference to our Annual Report on Form 10-KSB, filed on April 1, 2002 (File  No. 0-20845)).                                                    |
| 10.51 |   | Settlement and Termination Agreement  between Big Buck and Opry Mills Limited Partnership, dated March 28, 2002  (incorporated by reference to our Annual Report on Form 10-KSB, filed on  April 1, 2002 (File No. 0-20845)).                                    |
| 10.52 |   | Agreement for Specialized Financial and  Organizational Consulting between Big Buck and Iridium Consulting, LLC, dated  June 11, 2002.                                                                                                                           |
| 10.53 |   | Employment Agreement between Big Buck and  Anthony P. Dombrowski, dated February 28, 2003.                                                                                                                                                                       |
| 10.54 |   | Employment Agreement between Big Buck and  Timothy J. Pugh, dated May 16, 2002.                                                                                                                                                                                  |
| 21    |   | Subsidiaries of Big Buck (incorporated by  reference to our Annual Report on Form 10-KSB, filed on March 29, 1999 (File  No. 0-20845)).                                                                                                                          |
| 23    |   | Consent of Independent Public Accountants.                                                                                                                                                                                                                       |
| 24    |   | Power of  Attorney (included on signature page to Form 10-KSB).                                                                                                                                                                                                  |

 

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