**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, DC 20549**

 

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**FORM 10-QSB/A**

 
| **ý** | ** ** | **QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 28,  2003** |
|------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------|
|       |       |                                                                                                                                       |
| **o**      | ** ** | **TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT OF 1934**                                                   |

 

**Commission File Number 000-29643**

 

**GRANITE CITY FOOD & BREWERY LTD.**

(Exact Name of Small BusinessIssuer as Specified in Its Charter)

 

| **Minnesota**                                                                                      | ** ** | **41-1883639**                        |
|----------------------------------------------------------------------------------------------------|------------|---------------------------------------|
| (State or Other Jurisdiction  of Incorporation or Organization)                                    | ** ** | (I.R.S. Employer  Identification No.) |
| ** **                                                                                         | ** ** | ** **                            |
| **5831 Cedar Lake Road  St. Louis Park, MN 55416****(952) 525-2070**                               |
| (Address of Principal Executive Offices and  Issuer’s  Telephone Number, including Area Code) |

 

Check whether the issuer:  (1) filedall reports required to be filed by Section 13 or 15(d) of the Exchange Actduring the past 12 months (or such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.

 

Yes ý  No o.

 

As of October 28, 2003, the issuer had outstanding 4,027,298 shares ofcommon stock and 1,000,000 Class A Warrants. The number of outstanding shares of common stock includes the sharesissuable upon separation of the units, each consisting of one share of commonstock and one redeemable Class A Warrant, sold in the issuer’s initial publicoffering.

 

Transitional Small Business Disclosure Format:

Yes o  No ý.

 

 

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**PART I  FINANCIAL INFORMATION**

** **

**ITEM1  Financial Statements**

 

**GRANITE CITY FOOD & BREWERY LTD.**

 

# **CONDENSEDBALANCE SHEET**

**(Unaudited)**

** **
| ** **                                                                                                                     | ** ** | **September 28,  2003  (Restated)** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------|------------|
| **ASSETS:**                                                                                                                    |       |                                |       |
| Current assets:                                                                                                                |       |                                |       |
| Cash                                                                                                                           |       | $                                   | 2,625,559  |   |
| Inventory                                                                                                                      |       | 201,739                             |       |
| Prepaids and other                                                                                                             |       | 273,816                             |       |
| Total current assets                                                                                                           |       | 3,101,114                           |       |
|                                                                                                                           |       |                                |       |
| Property and equipment, net                                                                                                    |       | 12,437,067                          |       |
| Intangible assets and other                                                                                                    |       | 373,756                             |       |
| Total assets                                                                                                                   |       | $                                   | 15,911,937 |   |
|                                                                                                                           |       |                                |       |
| **LIABILITIES AND  SHAREHOLDERS’ EQUITY:**                                                                                |       |                                |       |
| Current liabilities:                                                                                                           |       |                                |       |
| Accounts payable                                                                                                               |       | $                                   | 874,472    |   |
| Accrued expenses                                                                                                               |       | 792,681                             |       |
| Long-term debt, current portion                                                                                                |       | 65,235                              |       |
| Capital lease obligations, current portion                                                                                     |       | 315,396                             |       |
| Total current liabilities                                                                                                      |       | 2,047,784                           |       |
|                                                                                                                           |       |                                |       |
| Long-term debt, net of current portion                                                                                         |       | 1,814,480                           |       |
| Capital lease obligations, net of current  portion                                                                             |       | 5,093,502                           |       |
| Total liabilities                                                                                                              |       | 8,955,766                           |       |
|                                                                                                                           |       |                                |       |
| Shareholders’ equity:                                                                                                     |       |                                |       |
| Common stock, $0.01 par value, 90,000,000  shares authorized;  3,950,392 shares issued and outstanding                         |       | 39,504                              |       |
| Preferred stock, $0.01 par value,  10,000,000 authorized;  55,600 Series A Convertible Preferred shares issued and outstanding |       | 556                                 |       |
| Additional paid-in capital                                                                                                     |       | 11,724,125                          |       |
| Stock dividends distributable                                                                                                  |       | 704                                 |       |
| Accumulated deficit                                                                                                            |       | (4,808,718                          | )          |
| Total shareholders’ equity                                                                                                |       | 6,956,171                           |       |
|                                                                                                                           |       |                                |       |
| Total liabilities and shareholders’ equity                                                                                |       | $                                   | 15,911,937 |   |

 

See notes to condensed financial statements.

 

1

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**GRANITE CITY FOOD & BREWERY LTD.**

 

**CONDENSED STATEMENTS OF OPERATIONS**

**(Unaudited)**

** **
| ** **                                              | ** ** | **Thirteen Weeks Ended** | ** ** | **Thirty-nine Weeks Ended** | ** ** |
|---------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| ** **                                              | ** ** | **September 29,  2002**  | ** ** | **September 28,  2003**     | ** ** | **September 29,  2002** | ** ** | **September 28,  2003** | ** ** |
|                                                    |       |                     |       |                        |       |   |   |   |   |
| Restaurant revenues                                     |       | $                        | 3,159,837  |                        | $          | 3,786,885 |   | $ | 9,436,453 |   | $ | 9,768,071 |   |
|                                                    |       |                     |       |                        |       |   |   |   |   |
| Cost of sales:                                          |       |                     |       |                        |       |   |   |   |   |
| Food, beverage and retail                               |       | 895,748                  |       | 1,094,291                   |       | 2,711,118 |   | 2,822,489 |   |
| Labor                                                   |       | 1,046,846                |       | 1,274,087                   |       | 3,198,404 |   | 3,320,948 |   |
| Direct and occupancy                                    |       | 661,931                  |       | 804,760                     |       | 1,954,940 |   | 2,121,687 |   |
| Total cost of sales                                     |       | 2,604,525                |       | 3,173,138                   |       | 7,864,462 |   | 8,265,124 |   |
|                                                    |       |                     |       |                        |       |   |   |   |   |
| Pre-opening                                             |       | —                   |       | 270,729                     |       | — |   | 270,729 |   |
| General and administrative                              |       | 254,380                  |       | 449,833                     |       | 673,778 |   | 1,156,256 |   |
| Depreciation and amortization                           |       | 192,053                  |       | 206,276                     |       | 574,373 |   | 596,471 |   |
|                                                    |       |                     |       |                        |       |   |   |   |   |
| Operating income (loss)                                 |       | 108,879                  |       | (313,091                    | )          | 323,840 |   | (520,509 | ) |
|                                                    |       |                     |       |                        |       |   |   |   |   |
| Interest:                                               |       |                     |       |                        |       |   |   |   |   |
| Income                                                  |       | 17                       |       | 15,266                      |       | 487 |   | 62,148 |   |
| Expense                                                 |       | (132,091                 | )          | (133,685                    | )          | (404,366 | ) | (378,860 | ) |
| Other income, net                                       |       | —                   |       | —                      |       | 32,355 |   | — |   |
| Net other expense                                       |       | (132,074                 | )          | (118,419                    | )          | (371,524 | ) | (316,712 | ) |
|                                                    |       |                     |       |                        |       |   |   |   |   |
| Net loss                                                |       | $                        | (23,195    | )                           | $          | (431,510 | ) | $ | (47,684 | ) | $ | (837,221 | ) |
|                                                    |       |                     |       |                        |       |   |   |   |   |
| Loss per common share, basic and diluted                |       | $                        | (0.01      | )                           | $          | (0.15 | ) | $ | (0.01 | ) | $ | (0.33 | ) |
|                                                    |       |                     |       |                        |       |   |   |   |   |
| Weighted average shares outstanding, basic  and diluted |       | 3,819,825                |       | 3,947,700                   |       | 3,812,108 |   | 3,888,038 |   |

 

See notes to condensed financial statements.

 

2

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**GRANITE CITY FOOD & BREWERY LTD.**

 

**CONDENSED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

** **
| ** **                                                                                 | ** ** | **Thirty-nine Weeks Ended** | ** ** |
|--------------------------------------------------------------------------------------------|------------|-----------------------------|------------|
| ** **                                                                                 | ** ** | **September 29,  2002**     | ** ** | **September 28,  2003** | ** ** |
|                                                                                       |       |                        |       |   |   |
| Cash flows from operating activities:                                                      |       |                        |       |   |   |
| Net loss                                                                                   |       | $                           | (47,684    | ) | $ | (837,221 | ) |
| Adjustments to reconcile net loss to net  cash provided by (used in) operating activities: |       |                        |       |   |   |
| Depreciation and amortization                                                              |       | 574,373                     |       | 596,471 |   |
| Stock option/warrant compensation                                                          |       | —                      |       | 9,762 |   |
| Decrease (increase) in:                                                                    |       |                        |       |   |   |
| Inventory                                                                                  |       | 23,328                      |       | (99,364 | ) |
| Prepaids and other                                                                         |       | (72,046                     | )          | (167,159 | ) |
| Increase (decrease) in:                                                                    |       |                        |       |   |   |
| Accounts payable                                                                           |       | 91,961                      |       | 187,107 |   |
| Accrued expenses                                                                           |       | (190,109                    | )          | (6,704 | ) |
| Net cash provided by (used in) operating  activities                                       |       | 379,823                     |       | (317,108 | ) |
|                                                                                       |       |                        |       |   |   |
| Cash flows from investing activities:                                                      |       |                        |       |   |   |
| Purchase of:                                                                               |       |                        |       |   |   |
| Property and equipment                                                                     |       | (448,556                    | )          | (1,950,915 | ) |
| Intangible assets and other                                                                |       | (3,809                      | )          | (38,578 | ) |
| Net cash used in investing activities                                                      |       | (452,365                    | )          | (1,989,493 | ) |
|                                                                                       |       |                        |       |   |   |
| Cash flows from financing activities:                                                      |       |                        |       |   |   |
| Payments on capital lease obligations                                                      |       | (179,896                    | )          | (208,952 | ) |
| Payments on long term-debt                                                                 |       | (21,458                     | )          | (22,907 | ) |
| Other non-current assets                                                                   |       | (208,141                    | )          | — |   |
| Payment of dividends                                                                       |       | —                      |       | (168,384 | ) |
| Proceeds from:                                                                             |       |                        |       |   |   |
| Long-term debt                                                                             |       | —                      |       | 428,572 |   |
| Related parties                                                                            |       | 200,000                     |       | — |   |
| Issuance of stock                                                                          |       | 20,087                      |       | 1,381,989 |   |
| Net cash provided by (used in) financing  activities                                       |       | (189,408                    | )          | 1,410,318 |   |
|                                                                                       |       |                        |       |   |   |
| Net decrease in cash                                                                       |       | (261,950                    | )          | (896,283 | ) |
| Cash, beginning                                                                            |       | 384,394                     |       | 3,521,842 |   |
| Cash, ending                                                                               |       | $                           | 122,444    |   | $ | 2,625,559 |   |

 

See notes to condensed financial statements.

 

3

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**GRANITE CITY FOOD & BREWERY LTD.**

 

**NOTES TO CONDENSED FINANCIAL STATEMENTS**

**(Unaudited)**

 

Thirteen and thirty-nine weeks endedSeptember 29, 2002 and September 28, 2003

 

**1.****              Nature of businessand basis of presentation:**

 

Nature of business:

Granite City Food& Brewery Ltd. (the “Company”) was formed to develop and operate casualdining restaurants featuring on-premises breweries.  The Company is developing theserestaurant-microbreweries, known as Granite City Food & Brewery®, inselected markets throughout the United States. The theme is casual dining with a wide variety of menu items that areprepared fresh daily, combined with freshly brewed hand-crafted beers.  The Company produces its beer using a processcalled Fermentus InterruptusTM, which is intended to maintain high beer qualitywhile enhancing overall profitability by reducing unit-level brewingcosts.  The first facility, located inSt. Cloud, Minnesota, opened in July 1999, a second facility opened in SiouxFalls, South Dakota, in December 2000, and a third facility, located in Fargo,North Dakota, opened in November 2001. Our fourth facility opened in September 2003 in West Des Moines,Iowa.  Construction for new restaurantsis currently underway in Cedar Rapids and Davenport, Iowa.

 

The Company’s currentexpansion strategy focuses on development of restaurants in markets wheremanagement believes the Company’s concept will have broad appeal and attractiverestaurant-level economics.

 

Interim financial statements:

The Company has prepared the condensed financial statements for thethirteen and thirty-nine weeks ended September 29, 2002 and September 28, 2003without audit by the Company’s independent auditors.  In the opinion of the Company’s management,all adjustments necessary to present fairly the financial position of theCompany at September 28, 2003 and the results of operations and cash flows forthe periods ended September 29, 2002 and September 28, 2003 have been made.Those adjustments consist only of normal and recurring adjustments.

 

Certain information and note disclosures normally included in theCompany’s annual financial statements have been condensed or omitted.  These condensed financial statements shouldbe read in conjunction with the financial statements and notes thereto includedin the Company’s Annual Report on Form 10-KSB for the fiscal year endedDecember 29, 2002, filed with the Securities and Exchange Commission on March28, 2003, as amended on December 21, 2004.

 

The results of operations for the thirteen and thirty-nine weeks endedSeptember 28, 2003 are not necessarily indicative of the results to be expectedfor the entire year.

 

4

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Earnings (loss) per share:

Basic earnings(loss) per common share is calculated by dividing net income (loss) lesspreferred stock dividends declared by the weighted average number of commonshares outstanding.  Diluted earnings(loss) per common share assumes that outstanding common shares were increasedby shares issuable upon exercise of stock options and warrants for which marketprice exceeds exercise price, less shares which could have been purchased bythe Company with the related proceeds. Calculations of the Company’s net loss per common share for the thirteenand thirty-nine weeks ended September 29, 2002 and September 28, 2003 are setforth in the following table:

 
| ** **                                              | ** ** | **Thirteen Weeks Ended** | ** ** | **Thirty-nine Weeks Ended** | ** ** |
|---------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| ** **                                              | ** ** | **September 29,  2002**  | ** ** | **September 28,  2003**     | ** ** | **September 29,  2002** | ** ** | **September 28,  2003** | ** ** |
|                                                    |       |                     |       |                        |       |   |   |   |   |
| Net loss                                                |       | $                        | (23,195    | )                           | $          | (431,510 | ) | $ | (47,684 | ) | $ | (837,221 | ) |
| Less dividends declared                                 |       | —                   |       | (168,854                    | )          | — |   | (433,935 | ) |
| Net loss available to common shareholders               |       | $                        | (23,195    | )                           | $          | (600,364 | ) | $ | (47,684 | ) | $ | (1,271,156 | ) |
|                                                    |       |                     |       |                        |       |   |   |   |   |
| Loss per common share, basic and diluted                |       | $                        | (0.01      | )                           | $          | (0.15 | ) | $ | (0.01 | ) | $ | (0.33 | ) |
|                                                    |       |                     |       |                        |       |   |   |   |   |
| Weighted average shares outstanding, basic and  diluted |       | 3,819,825                |       | 3,947,700                   |       | 3,812,108 |   | 3,888,038 |   |

 

**2.****              Stock compensation:**

 

The Company accounts for its stock-based compensation awards using theintrinsic value method prescribed by Accounting Principles Board (APB) OpinionNo. 25, *Accounting for Stock Issued toEmployees. *No compensationcost has been recognized for options issued to employees when the exerciseprice of the options granted is at least equal to the fair value of the commonstock on the date of grant.  Hadcompensation cost been determined consistent with Statement of FinancialAccounting Standard (SFAS) No. 123, *Accountingfor Stock-Based Compensation*, as amended by SFAS No. 148, *Accounting for Stock-Based Compensation-Transition andDisclosure,* the Company’s net loss and net loss per common sharewould have been changed to the following pro forma amounts: 

 
| ** **                                                                                                                                  | ** ** | **Thirteen Weeks Ended** | ** ** | **Thirty-nine Weeks Ended** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                                  | ** ** | **September 29,  2002**  | ** ** | **September 28,  2003**     | ** ** | **September 29,  2002** | ** ** | **September 28,  2003** | ** ** |
| Net income (loss):                                                                                                                          |       |                     |       |                        |       |   |   |   |   |
| As reported                                                                                                                                 |       | $                        | (23,195    | )                           | $          | (431,510 | ) | $ | (47,684 | ) | $ | (837,221 | ) |
|                                                                                                                                        |       |                     |       |                        |       |   |   |   |   |
| Less: Total stock-based employee compensation  expense determined under fair value based method for all awards, net of  related tax effects |       | $                        | (34,703    | )                           | $          | (58,272 | ) | $ | (100,680 | ) | $ | (273,285 | ) |
| Pro forma                                                                                                                                   |       | $                        | (57,898    | )                           | $          | (489,782 | ) | $ | (148,364 | ) | $ | (1,110,506 | ) |
|                                                                                                                                        |       |                     |       |                        |       |   |   |   |   |
| Net income (loss) per common share                                                                                                          |       |                     |       |                        |       |   |   |   |   |
| Basic and diluted as reported                                                                                                               |       | $                        | (0.01      | )                           | $          | (0.15 | ) | $ | (0.01 | ) | $ | (0.33 | ) |
| Basic and diluted pro forma                                                                                                                 |       | $                        | (0.02      | )                           | $          | (0.17 | ) | $ | (0.04 | ) | $ | (0.40 | ) |

 

5

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The fair value of each option grant for the pro forma disclosurerequired by SFAS No. 123, as amended by SFAS No. 148, is estimated on the grantdate using the Black-Scholes option-pricing model with the followingassumptions for the grants:

 
| ** **              | ** ** | **2002** | ** ** | **2003**   | ** ** |
|-------------------------|------------|----------|------------|------------|------------|
| Dividend yield          |       | None     |       | None       |       |
| Expected volatility     |       | 101.4    | %          | 75.0       | %          |
| Expected life of option |       | 5 years  |       | 5-10 years |       |
| Risk-free interest rate |       | 3.9      | %          | 4.2        | %          |

 

**3.****              Change incapitalization:**

 

Issuance of preferred stock and warrants to purchase common stock:

During the fourth quarter of 2002, the Company conducted a privateplacement to accredited investors of Series A Convertible Preferred Stock andwarrants to purchase common stock.  TheCompany sold 55,600 shares of preferred stock for aggregate gross proceeds of$5,560,000.  The outstanding preferredstock is convertible into an aggregate of 3,518,964 shares of common stock at aconversion price of $1.58 per share.  Thepreferred stock pays an 8% cumulative dividend in cash or in the Company’scommon stock.  The Company may requireconversion under certain circumstances. The preferred stock was sold with five-year warrants to purchase an aggregateof 1,759,473 shares of common stock at an exercise price of $1.58 pershare.  In connection with suchplacement, the Company issued its agents warrants to purchase an aggregate of288,604 shares of common stock at an exercise price of $1.58 per share and paidits agents cash commissions aggregating $471,000.

 

Exercise of warrants and options:

As part of the sale of common stock in 1997 and 1998, the Company soldto its private placement agent, for $50, a stock purchase warrant for thepurchase of 111,950 shares of common stock at $1 per share.  As of December 29, 2002, 78,150 of suchwarrants remained outstanding.  OnFebruary 19, 2003, affiliates of the private placement agent exercised 76,450warrants on a cashless basis.  Theremaining 1,700 warrants expired February 20, 2003.

 

On June 10, 2003, 15,822 of the 1,759,473 warrants sold with the SeriesA Convertible Preferred Stock, were exercised on a cashless basis, resulting inan issuance of 5,854 shares of common stock..

 

On August 18, 2003, one of our directors exercised a stock option forthe purchase of 5,000 shares of common stock at an exercise price of $1.00 pershare.  These options were issuedpursuant to the 1997 Director Stock Option Plan.

 

Dividends:

On March 21, 2003, the Company authorized payment of dividends toholders of its preferred stock as of that date. Such dividends aggregated $96,349 and were paid in cash on March 31,2003.

 

On June 23, 2003, the Company authorized payment of dividends toholders of its preferred stock as of that date. Such dividends were paid on June 30, 2003 through the issuance of anaggregate of 69,724 shares of common stock and $36 cash in lieu of fractionalshares.

 

On September 22, 2003, the Company authorized payment of dividends toholders of its preferred stock as of that date. Such dividends were paid on September 30, 2003 through the issuance ofan aggregate of 70,356 shares of common stock and $38 cash in lieu offractional shares.

 

**4.****              Restatement:**

 

The financial statements for the year ended December 29,2002 have beenrestated to record a beneficial conversion feature reducing retained earningsand increasing additional paid-in-capital by $1,958,572.  The balance sheet presented herein has beenrestated to reflect this change.

 

6

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**SIGNATURES**

 

In accordance with the requirements of the ExchangeAct, the registrant caused this report to be signed on its behalf by theundersigned, thereunto duly authorized.

 

 
|   |              | GRANITE CITY FOOD & BREWERY LTD. |
|--------|-------------------|--------------------------------------|
|   |              |                                 |   |
|   |              |                                 |   |
| Date:  | December 21, 2004 |                                 | By: |   | /s/ Monica A. Underwood |   |
|   |              |                                 | Monica A. Underwood |
|   |              |                                 | Interim Chief Financial Officer and  Corporate Controller |
|        |                   |                                      |  |  |  |  |

 

7

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**INDEX TO EXHIBITS**

 
| **Exhibit Number** | ** ** | **Description**                                                                                                                                                                                                               |
|--------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|               |       |                                                                                                                                                                                                                          |
| 10.1               |       | Loan Agreement between Granite City Food & Brewery Ltd. and First  National Bank, dated August 28, 2003.*                                                                                                                 |
|               |       |                                                                                                                                                                                                                          |
| 10.2               |       | Term Note for the  principal sum of $750,000 issued by Granite City Food & Brewery Ltd.,  Maker, to First National Bank, Payee, dated August 28, 2003.*                                                                   |
|               |       |                                                                                                                                                                                                                          |
| 10.3               |       | Security Agreement between  Granite City Food & Brewery Ltd. and First National Bank, dated August  28, 2003.*                                                                                                            |
|               |       |                                                                                                                                                                                                                          |
| 31.1               |       | Certification by  Steven J. Wagenheim, President and Chief Executive Officer of the Company,  pursuant to Exchange Act Rule 13a-14, as adopted pursuant to Section 302 of  the Sarbanes-Oxley Act of 2002.                    |
|               |       |                                                                                                                                                                                                                          |
| 31.2               |       | Certification by  Monica A. Underwood, Interim Chief Financial Officer and Corporate Controller  of the Company, pursuant to Exchange Act Rule 13a-14, as adopted pursuant to  Section 302 of the Sarbanes-Oxley Act of 2002. |
|               |       |                                                                                                                                                                                                                          |
| 32.1               |       | Certification by  Steven J. Wagenheim, President and Chief Executive Officer of the Company,  pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley Act of 2002.                      |
|               |       |                                                                                                                                                                                                                          |
| 32.2               |       | Certification by Monica A. Underwood, Interim Chief Financial Officer  and Corporate Controller of the Company, pursuant to 18 U.S.C. Section 1350,  as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002     |

 

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* Previously filed.

 

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