**SECURITIESAND EXCHANGE COMMISSION**

**WASHINGTON, DC 20549**

 

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**FORM10-QSB/A**

 
| ý | **QUARTERLY REPORT UNDER SECTION 13  OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**  |
|--------|-----------------------------------------------------------------------------------------|
|   |                                                                                    |
|   | **FOR THE QUARTERLY PERIOD ENDED MARCH 30, 2003**                                  |
|   |                                                                                    |
| **o**  | **TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |

 

**Commission File Number 000-29643**

 

**GRANITECITY FOOD & BREWERY LTD.**

(Exact Name of Small Business Issuer 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 whetherthe issuer:  (1) filed all reportsrequired to be filed by Section 13 or 15(d) of the Exchange Act during the past12 months (or such shorter period that the registrant was required to file suchreports), and (2) has been subject to such filing requirements for the past 90days.

 

Yes  ý   No  o.

 

As of April30, 2003, the issuer had outstanding 3,869,814 shares of common stock and1,000,000 Class A Warrants.  The numberof outstanding shares of common stock includes the shares issuable uponseparation of the units, each consisting of one share of common stock and oneredeemable Class A Warrant, sold in the issuer’s initial public offering.

 

TransitionalSmall Business Disclosure Format:

Yes  o   No  ý.

 

 

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**PART I****   FINANCIALINFORMATION**

 

**ITEM1  Financial Statements**

 

**GRANITE CITY FOOD & BREWERY LTD.**

 

**CONDENSEDBALANCE SHEET**

**(Unaudited)**

** **
| ** **                                                                                                                     | ** ** | **March 30, 2003  (Restated)** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------|------------|
| **ASSETS:**                                                                                                                    |       |                                |       |
| Current assets:                                                                                                                |       |                                |       |
| Cash                                                                                                                           |       | $                                   | 4,115,966  |   |
| Inventory                                                                                                                      |       | 92,385                              |       |
| Prepaids and other                                                                                                             |       | 200,149                             |       |
| Total current assets                                                                                                           |       | 4,408,500                           |       |
|                                                                                                                           |       |                                |       |
| Property and equipment, net                                                                                                    |       | 9,252,973                           |       |
| Intangible assets and other                                                                                                    |       | 332,577                             |       |
| Total assets                                                                                                                   |       | $                                   | 13,994,050 |   |
|                                                                                                                           |       |                                |       |
| **LIABILITIES AND SHAREHOLDERS’ EQUITY:**                                                                                 |       |                                |       |
| Current liabilities:                                                                                                           |       |                                |       |
| Accounts payable                                                                                                               |       | $                                   | 427,511    |   |
| Accrued expenses                                                                                                               |       | 720,499                             |       |
| Long-term debt, current portion                                                                                                |       | 32,106                              |       |
| Capital lease obligations, current portion                                                                                     |       | 267,691                             |       |
| Total current liabilities                                                                                                      |       | 1,447,807                           |       |
|                                                                                                                           |       |                                |       |
| Long-term debt, net of current portion                                                                                         |       | 1,434,377                           |       |
| Capital lease obligations, net of current  portion                                                                             |       | 3,629,403                           |       |
| Total liabilities                                                                                                              |       | 6,511,587                           |       |
|                                                                                                                           |       |                                |       |
| Shareholders’ equity:                                                                                                     |       |                                |       |
| Common stock, $0.01 par value, 90,000,000  shares authorized;  3,869,814 shares issued and outstanding                         |       | 38,698                              |       |
| Preferred stock, $0.01 par value,  10,000,000 authorized;  54,100 Series A Convertible Preferred shares issued and outstanding |       | 541                                 |       |
| Additional paid-in capital                                                                                                     |       | 11,170,004                          |       |
| Accumulated deficit                                                                                                            |       | (3,726,780                          | )          |
| Total shareholders’ equity                                                                                                |       | 7,482,463                           |       |
|                                                                                                                           |       |                                |       |
| Total liabilities and shareholders’ equity                                                                                |       | $                                   | 13,994,050 |   |

 

See notes to condensed financial statements.

 

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**GRANITE CITY FOOD & BREWERY LTD.**

 

**CONDENSEDSTATEMENTS OF OPERATIONS**

**(Unaudited)**

 
| ** **                                              | ** ** | **Thirteen Weeks Ended** | ** ** |
|---------------------------------------------------------|------------|--------------------------|------------|
| ** **                                              | ** ** | **March 31, 2002**  | ** ** | **March 30, 2003** | ** ** |
|                                                    |       |                     |       |   |   |
| Restaurant revenues                                     |       | $                        | 3,114,340  |   | $ | 2,870,160 |   |
|                                                    |       |                     |       |   |   |
| Cost of sales:                                          |       |                     |       |   |   |
| Food, beverage and retail                               |       | 906,752                  |       | 818,882 |   |
| Labor                                                   |       | 1,075,127                |       | 985,833 |   |
| Direct and occupancy                                    |       | 663,715                  |       | 663,267 |   |
| Total cost of sales                                     |       | 2,645,594                |       | 2,467,982 |   |
|                                                    |       |                     |       |   |   |
| General and administrative                              |       | 215,424                  |       | 293,617 |   |
| Depreciation and amortization                           |       | 190,783                  |       | 193,036 |   |
|                                                    |       |                     |       |   |   |
| Operating income (loss)                                 |       | 62,539                   |       | (84,475 | ) |
|                                                    |       |                     |       |   |   |
| Interest:                                               |       |                     |       |   |   |
| Income                                                  |       | 157                      |       | 23,301 |   |
| Expense                                                 |       | (139,552                 | )          | (123,448 | ) |
| Other income, net                                       |       | 47,187                   |       | — |   |
| Net other expense                                       |       | (92,208                  | )          | (100,147 | ) |
|                                                    |       |                     |       |   |   |
| Net loss                                                |       | $                        | (29,669    | ) | $ | (184,622 | ) |
|                                                    |       |                     |       |   |   |
| Loss per common share, basic and diluted                |       | $                        | (0.01      | ) | $ | (0.07 | ) |
|                                                    |       |                     |       |   |   |
| Weighted average shares outstanding, basic  and diluted |       | 3,807,394                |       | 3,845,315 |   |

 

See notes to condensed financial statements.

 

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**GRANITE CITY FOOD & BREWERY LTD.**

 

**CONDENSEDSTATEMENTS OF CASH FLOWS**

**(Unaudited)**

** **
| ** **                                                                                 | ** ** | **Thirteen Weeks Ended** | ** ** |
|--------------------------------------------------------------------------------------------|------------|--------------------------|------------|
| ** **                                                                                 | ** ** | **March 31, 2002**  | ** ** | **March 30, 2003** | ** ** |
|                                                                                       |       |                     |       |   |   |
| Cash flows from operating activities:                                                      |       |                     |       |   |   |
| Net loss                                                                                   |       | $                        | (29,669    | ) | $ | (184,622 | ) |
| Adjustments to reconcile net loss to net  cash provided by (used in) operating activities: |       |                     |       |   |   |
| Depreciation and amortization                                                              |       | 190,783                  |       | 193,036 |   |
| Decrease (increase) in:                                                                    |       |                     |       |   |   |
| Inventory                                                                                  |       | 11,536                   |       | 9,990 |   |
| Prepaids and other                                                                         |       | (82,945                  | )          | (93,492 | ) |
| Increase (decrease) in:                                                                    |       |                     |       |   |   |
| Accounts payable                                                                           |       | 100,052                  |       | 94,155 |   |
| Accrued expenses                                                                           |       | (63,892                  | )          | (175,235 | ) |
| Net cash provided by (used in) operating  activities                                       |       | 125,865                  |       | (156,168 | ) |
|                                                                                       |       |                     |       |   |   |
| Cash flows from investing activities:                                                      |       |                     |       |   |   |
| Purchase of:                                                                               |       |                     |       |   |   |
| Property and equipment                                                                     |       | (371,345                 | )          | (385,908 | ) |
| Intangible assets and other                                                                |       | (50                      | )          | — |   |
| Net cash used in investing activities                                                      |       | (371,395                 | )          | (385,908 | ) |
|                                                                                       |       |                     |       |   |   |
| Cash flows from financing activities:                                                      |       |                     |       |   |   |
| Payments on capital lease obligations                                                      |       | (59,133                  | )          | (64,642 | ) |
| Payments on long term-debt                                                                 |       | (7,349                   | )          | (7,567 | ) |
| Payment of dividends                                                                       |       | —                   |       | (71,999 | ) |
| Proceeds from:                                                                             |       |                     |       |   |   |
| Related parties                                                                            |       | 100,000                  |       | — |   |
| Issuance of securities                                                                     |       | 1,650                    |       | 1,280,408 |   |
| Net cash provided by financing activities                                                  |       | 35,168                   |       | 1,136,200 |   |
|                                                                                       |       |                     |       |   |   |
| Net increase (decrease) in cash                                                            |       | (210,362                 | )          | 594,124 |   |
| Cash, beginning                                                                            |       | 384,394                  |       | 3,521,842 |   |
| Cash, ending                                                                               |       | $                        | 174,032    |   | $ | 4,115,966 |   |

 

See notes to condensed financial statements.

 

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**GRANITE CITY FOOD & BREWERY LTD.**

 

**NOTES TO CONDENSED FINANCIAL STATEMENTS**

**(Unaudited)**

 

Thirteen weeks ended March 31, 2002 and March 30, 2003

 

**1.     Nature of business and basis ofpresentation:**

 

Nature of business:

Granite CityFood & Brewery Ltd. (the “Company”) was formed to develop and operatecasual dining 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. The second facility, located in Sioux Falls, South Dakota, opened inDecember 2000 and a third facility located in Fargo, North Dakota, opened inNovember 2001.

 

The Company’scurrent expansion strategy focuses on development of restaurants in marketswhere management believes the Company’s concept will have broad appeal andattractive restaurant-level economics.

 

Interim financial statements:

The Companyhas prepared the condensed financial statements for the thirteen weeks ended March 31,2002 and March 30, 2003 without audit by the Company’s independentauditors.  In the opinion of theCompany’s management, all adjustments necessary to present fairly the financialposition of the Company at March 30, 2003 and the results of operationsand cash flows for the periods ended March 31, 2002 and March 30,2003 have been made. Those adjustments consist only of normal and recurringadjustments.

 

Certaininformation and note disclosures normally included in the Company’s annualfinancial 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 onMarch 28, 2003, as amended on December 21, 2004.

 

The results ofoperations for the thirteen weeks ended March 30, 2003 are not necessarilyindicative of the results to be expected for the entire year.

 

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 thirteenweeks ended March 31, 2002 and March 30, 2003 are set forth in thefollowing table:

 

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| ** **                                              | ** ** | **Thirteen Weeks Ended** | ** ** |
|---------------------------------------------------------|------------|--------------------------|------------|
| ** **                                              | ** ** | **March 31, 2002**  | ** ** | **March 30, 2003** | ** ** |
|                                                    |       |                     |       |   |   |
| Net loss                                                |       | $                        | (29,699    | ) | $ | (184,622 | ) |
| Less dividends declared                                 |       | —                   |       | (96,349 | ) |
| Net loss available to common shareholders               |       | $                        | (29,699    | ) | $ | (280,971 | ) |
|                                                    |       |                     |       |   |   |
| Loss per common share, basic and diluted                |       | $                        | (0.01      | ) | $ | (0.07 | ) |
|                                                    |       |                     |       |   |   |
| Weighted average shares outstanding, basic  and diluted |       | 3,807,394                |       | 3,845,315 |   |

 

**2.     Stock compensation:**

 

The Company accounts for itsstock-based compensation awards using the intrinsic value method prescribed byAccounting Principles Board (APB) Opinion No. 25, *Accounting for Stock Issued to Employees. *No compensation cost has beenrecognized for options issued to employees when the exercise price of theoptions granted is at least equal to the fair value of the common stock on thedate of grant.  Had compensation costbeen determined consistent with Statement of Financial Accounting Standard(SFAB) No. 123, *Accounting for Stock-BasedCompensation*, as amended by SFAS No. 148, *Accounting for Stock-Based Compensation—Transition and Disclosure,*the Company’s net loss and net loss per common share would have been increasedto the following pro forma amounts:

 
| ** **                                    | ** ** | **Thirteen Weeks Ended** | ** ** |
|-----------------------------------------------|------------|--------------------------|------------|
| ** **                                    | ** ** | **March 31, 2002**  | ** ** | **March 30, 2003** | ** ** |
| Net loss:                                     |       |                     |       |   |   |
| As reported                                   |       | $                        | (29,669    | ) | $ | (184,622 | ) |
| Pro forma                                     |       | $                        | (62,658    | ) | $ | (326,165 | ) |
|                                          |       |                     |       |   |   |
| Net loss per common share, basic and diluted: |       |                     |       |   |   |
| As reported                                   |       | $                        | (0.01      | ) | $ | (0.07 | ) |
| Pro forma                                     |       | $                        | (0.02      | ) | $ | (0.11 | ) |

 

The fair value of each optiongrant for the pro forma disclosure required by SFAS No. 123, as amended by SFASNo. 148, is estimated on the grant date using the Black-Scholes option-pricingmodel with the following assumptions for the grants:

 
| ** **              | ** ** | **2002** | ** ** | **2003**   | ** ** |
|-------------------------|------------|----------|------------|------------|------------|
| Dividend yield          |       | None     |       | None       |       |
| Expected volatility     |       | 101.4    | %          | 89.4       | %          |
| Expected life of option |       | 5 years  |       | 5-10 years |       |
| Risk-free interest rate |       | 3.9      | %          | 4.0        | %          |

 

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**3.     Change in capitalization:**

 

Issuance of preferred stock andwarrants to purchase common stock:

During thefourth quarter of 2002, the Company conducted a private placement to accreditedinvestors of Series A Convertible Preferred Stock and warrants to purchasecommon stock.  The Company sold 55,600shares of preferred stock for aggregate gross proceeds of $5,560,000.  As of April 30, 2003, the outstandingpreferred stock was convertible into an aggregate of 3,518,964 shares of commonstock at a conversion price of $1.58 per share. The preferred stock pays an 8% cumulative dividend in cash or in theCompany's common stock.  The Company mayrequire conversion under certain circumstances. The preferred stock was sold with five-year warrants to purchase anaggregate of 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 $456,000.

 

Exercise of warrants:

As part of thesale of common stock in 1997 and 1998, the Company sold to its privateplacement agent, for $50, a stock purchase warrant for the purchase of 111,950shares of common stock at $1 per share. As of December 29, 2002, 78,150 of such warrants remainedoutstanding.  On February 19, 2003,affiliates of the private placement agent exercised 76,450 warrants on acashless basis.  The remaining 1,700warrants expired February 20, 2003.

 

**4.     Restatement:**

 

The financial statements forthe year ended December 29, 2002 have been restated to record a beneficialconversion feature reducing retained earnings and increasing additionalpaid-in-capital by $1,958,572.  Thebalance sheet presented herein has been restated to reflect this change.

 

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**SIGNATURES**

 

In accordance with therequirements of the Exchange Act, the registrant caused this report to besigned on its behalf by the undersigned, 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 |

 

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**INDEX TOEXHIBITS**

 
| **Exhibit  Number** | ** ** | **Description**                                                                                                                                                                                                               |
|---------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                |       |                                                                                                                                                                                                                          |
| 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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