**UNITED STATESSECURITIES 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 JUNE 29,  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 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 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 August 1, 2003, the issuer had outstanding 3,945,392 sharesof common 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**

** **

**GRANITECITY FOOD & BREWERY LTD.**

** **

# **CONDENSED BALANCE SHEET**

**(Unaudited)**

** **
| ** **                                                                                                                     | ** ** | **June 29, 2003  (Restated)** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------|------------|------------------------------------|------------|
| **ASSETS:**                                                                                                                    |       |                               |       |
| Current assets:                                                                                                                |       |                               |       |
| Cash                                                                                                                           |       | $                                  | 3,417,861  |   |
| Inventory                                                                                                                      |       | 102,447                            |       |
| Prepaids and other                                                                                                             |       | 171,332                            |       |
| Total current assets                                                                                                           |       | 3,691,640                          |       |
|                                                                                                                           |       |                               |       |
| Property and equipment, net                                                                                                    |       | 9,604,617                          |       |
| Intangible assets and other                                                                                                    |       | 341,862                            |       |
| Total assets                                                                                                                   |       | $                                  | 13,638,119 |   |
|                                                                                                                           |       |                               |       |
| **LIABILITIES AND  SHAREHOLDERS’ EQUITY:**                                                                                |       |                               |       |
| Current liabilities:                                                                                                           |       |                               |       |
| Accounts payable                                                                                                               |       | $                                  | 329,135    |   |
| Accrued expenses                                                                                                               |       | 644,631                            |       |
| Long-term debt, current portion                                                                                                |       | 32,454                             |       |
| Capital lease obligations, current portion                                                                                     |       | 273,931                            |       |
| Total current liabilities                                                                                                      |       | 1,280,151                          |       |
|                                                                                                                           |       |                               |       |
| Long-term debt, net of current portion                                                                                         |       | 1,426,265                          |       |
| Capital lease obligations, net of current  portion                                                                             |       | 3,558,748                          |       |
| Total liabilities                                                                                                              |       | 6,265,164                          |       |
|                                                                                                                           |       |                               |       |
| Shareholders’ equity:                                                                                                     |       |                               |       |
| Common stock, $0.01 par value, 90,000,000  shares authorized;  3,875,668 shares issued and outstanding                         |       | 38,757                             |       |
| 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                                                                                                     |       | 11,551,024                         |       |
| Stock dividends distributable                                                                                                  |       | 697                                |       |
| Accumulated deficit                                                                                                            |       | (4,218,079                         | )          |
| Total shareholders’ equity                                                                                                |       | 7,372,955                          |       |
|                                                                                                                           |       |                               |       |
| Total liabilities and shareholders’ equity                                                                                |       | $                                  | 13,638,119 |   |

 

See notes tocondensed financial statements.

 

1

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**GRANITECITY FOOD & BREWERY LTD.**

** **

**CONDENSED STATEMENTS OF OPERATIONS**

**(Unaudited)**

** **
| ** **                                              | ** ** | **Thirteen Weeks Ended** | ** ** | **Twenty-six Weeks Ended** | ** ** |
|---------------------------------------------------------|------------|--------------------------|------------|----------------------------|------------|
| ** **                                              | ** ** | **June 30, 2002**   | ** ** | **June 29, 2003**     | ** ** | **June 30, 2002** | ** ** | **June 29, 2003** | ** ** |
|                                                    |       |                     |       |                       |       |   |   |   |   |
| Restaurant revenues                                     |       | $                        | 3,162,279  |                       | $          | 3,111,026 |   | $ | 6,276,619 |   | $ | 5,981,186 |   |
|                                                    |       |                     |       |                       |       |   |   |   |   |
| Cost of sales:                                          |       |                     |       |                       |       |   |   |   |   |
| Food, beverage and retail                               |       | 908,625                  |       | 909,316                    |       | 1,815,378 |   | 1,728,198 |   |
| Labor                                                   |       | 1,076,435                |       | 1,061,028                  |       | 2,151,562 |   | 2,046,861 |   |
| Direct and occupancy                                    |       | 629,289                  |       | 653,660                    |       | 1,293,004 |   | 1,316,927 |   |
| Total cost of sales                                     |       | 2,614,349                |       | 2,624,004                  |       | 5,259,944 |   | 5,091,986 |   |
|                                                    |       |                     |       |                       |       |   |   |   |   |
| General and administrative                              |       | 203,977                  |       | 412,806                    |       | 419,398 |   | 706,423 |   |
| Depreciation and amortization                           |       | 191,535                  |       | 197,159                    |       | 382,320 |   | 390,195 |   |
|                                                    |       |                     |       |                       |       |   |   |   |   |
| Operating income (loss)                                 |       | 152,418                  |       | (122,943                   | )          | 214,957 |   | (207,418 | ) |
|                                                    |       |                     |       |                       |       |   |   |   |   |
| Interest:                                               |       |                     |       |                       |       |   |   |   |   |
| Income                                                  |       | 312                      |       | 23,581                     |       | 470 |   | 46,882 |   |
| Expense                                                 |       | (132,722                 | )          | (121,727                   | )          | (272,275 | ) | (245,175 | ) |
| Other income, net                                       |       | (14,833                  | )          | —                     |       | 32,354 |   | — |   |
| Net other expense                                       |       | (147,243                 | )          | (98,146                    | )          | (239,451 | ) | (198,293 | ) |
|                                                    |       |                     |       |                       |       |   |   |   |   |
| Net income (loss)                                       |       | $                        | 5,175      |                       | $          | (221,089 | ) | $ | (24,494 | ) | $ | (405,711 | ) |
|                                                    |       |                     |       |                       |       |   |   |   |   |
| Earnings (loss) per common share                        |       | $                        | 0.00       |                       | $          | (0.10 | ) | $ | (0.01 | ) | $ | (0.17 | ) |
|                                                    |       |                     |       |                       |       |   |   |   |   |
| Earnings (loss) per common share, assuming  dilution    |       | $                        | 0.00       |                       | $          | (0.10 | ) | $ | (0.01 | ) | $ | (0.17 | ) |
|                                                    |       |                     |       |                       |       |   |   |   |   |
| Weighted average shares outstanding                     |       | 3,809,116                |       | 3,871,101                  |       | 3,808,255 |   | 3,858,208 |   |
|                                                    |       |                     |       |                       |       |   |   |   |   |
| Weighted average shares outstanding,  assuming dilution |       | 3,882,238                |       | 3,871,101                  |       | 3,808,255 |   | 3,858,208 |   |

 

See notes to condensed financial statements.

 

2

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**GRANITE CITYFOOD & BREWERY LTD.**

** **

**CONDENSEDSTATEMENTS OF CASH FLOWS**

**(Unaudited)**

** **
| ** **                                                                                 | ** ** | **Twenty-six Weeks Ended** | ** ** |
|--------------------------------------------------------------------------------------------|------------|----------------------------|------------|
| ** **                                                                                 | ** ** | **June 30, 2002**     | ** ** | **June 29, 2003** | ** ** |
|                                                                                       |       |                       |       |   |   |
| Cash flows from operating activities:                                                      |       |                       |       |   |   |
| Net loss                                                                                   |       | $                          | (24,494    | ) | $ | (405,711 | ) |
| Adjustments to reconcile net loss to net  cash provided by (used in) operating activities: |       |                       |       |   |   |
| Depreciation and amortization                                                              |       | 382,320                    |       | 390,195 |   |
| Decrease (increase) in:                                                                    |       |                       |       |   |   |
| Inventory                                                                                  |       | 12,088                     |       | (72 | ) |
| Prepaids and other                                                                         |       | (170,448                   | )          | (64,675 | ) |
| Increase (decrease) in:                                                                    |       |                       |       |   |   |
| Accounts payable                                                                           |       | 32,996                     |       | (12,833 | ) |
| Accrued expenses                                                                           |       | (85,858                    | )          | (226,753 | ) |
| Net cash provided by (used in) operating  activities                                       |       | 146,604                    |       | (319,849 | ) |
|                                                                                       |       |                       |       |   |   |
| Cash flows from investing activities:                                                      |       |                       |       |   |   |
| Purchase of:                                                                               |       |                       |       |   |   |
| Property and equipment                                                                     |       | (444,265                   | )          | (908,056 | ) |
| Intangible assets and other                                                                |       | (1,827                     | )          | (12,327 | ) |
| Net cash used in investing activities                                                      |       | (446,092                   | )          | (920,383 | ) |
|                                                                                       |       |                       |       |   |   |
| Cash flows from financing activities:                                                      |       |                       |       |   |   |
| Payments on capital lease obligations                                                      |       | (118,972                   | )          | (129,057 | ) |
| Payments on long term-debt                                                                 |       | (14,503                    | )          | (15,331 | ) |
| Payment of dividends                                                                       |       | —                     |       | (168,348 | ) |
| Proceeds from:                                                                             |       |                       |       |   |   |
| Related parties                                                                            |       | 200,000                    |       | — |   |
| Issuance of stock                                                                          |       | 10,087                     |       | 1,448,987 |   |
| Net cash provided by financing activities                                                  |       | 76,612                     |       | 1,136,251 |   |
|                                                                                       |       |                       |       |   |   |
| Net decrease in cash                                                                       |       | (222,876                   | )          | (103,981 | ) |
| Cash, beginning                                                                            |       | 384,394                    |       | 3,521,842 |   |
| Cash, ending                                                                               |       | $                          | 161,518    |   | $ | 3,417,861 |   |

 

See notes tocondensed financial statements.

 

3

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**GRANITECITY FOOD & BREWERY LTD.**

** **

**NOTES TOCONDENSED FINANCIAL STATEMENTS**

**(Unaudited)**

** **

Thirteen andtwenty-six weeks ended June 30, 2002 and June 29, 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. The second facility, located in Sioux Falls, South Dakota, opened inDecember 2000 and a third facility located in Fargo, North Dakota, openedin November 2001.  Construction fornew restaurants is currently underway in West Des Moines and Cedar Rapids,Iowa.  Additionally, the Company hassigned a lease for a site in Davenport, Iowa, for its sixth restaurant.

 

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 financialstatements for the thirteen and twenty-six weeks ended June 30, 2002 andJune 29, 2003 without 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 June 29, 2003 and the results of operations and cash flows forthe periods ended June 30, 2002 and June 29, 2003 have been made.Those adjustments consist only of normal and recurring adjustments.

 

Certain information and note disclosuresnormally included in the Company’s annual financial statements have beencondensed or omitted.  These condensedfinancial statements should be read in conjunction with the financialstatements and notes thereto included in the Company’s Annual Report on Form10-KSB for the fiscal year ended December 29, 2002, filed with theSecurities and Exchange Commission on March 28, 2003, as amended onDecember 21, 2004.

 

The results of operations for the thirteenand twenty-six weeks ended June 29, 2003 are not necessarily indicative ofthe results to be expected for the entire year.

 

Earnings (loss) per share:

Basic earnings (loss) percommon share is calculated by dividing net income (loss) less preferred stockdividends declared by the weighted average number of common sharesoutstanding.  Diluted earnings (loss) percommon share assumes that outstanding common shares were increased by sharesissuable upon exercise of stock options and warrants for which market priceexceeds exercise price, less shares which could have been purchased by theCompany with the related proceeds. Calculations of the Company’s net earnings (loss) per common share forthe thirteen and twenty-six weeks ended June 30, 2002 and June 29,2003 are set forth in the following table:

 

4

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| ** **                                              | ** ** | **Thirteen Weeks Ended** | ** ** | **Twenty-six Weeks Ended** | ** ** |
|---------------------------------------------------------|------------|--------------------------|------------|----------------------------|------------|
| ** **                                              | ** ** | **June 30, 2002**   | ** ** | **June 29, 2003**     | ** ** | **June 30, 2002** | ** ** | **June 29, 2003** | ** ** |
|                                                    |       |                     |       |                       |       |   |   |   |   |
| Net income (loss)                                       |       | $                        | 5,175      |                       | $          | (221,089 | ) | $ | (24,494 | ) | $ | (405,711 | ) |
| Less dividends declared                                 |       | —                   |       | (168,732                   | )          | — |   | (265,081 | ) |
| Net income (loss) available to common shareholders      |       | $                        | 5,175      |                       | $          | (389,821 | ) | $ | (24,494 | ) | $ | (670,792 | ) |
|                                                    |       |                     |       |                       |       |   |   |   |   |
| Income (loss) per common share                          |       | $                        | 0.00       |                       | $          | (0.10 | ) | $ | (0.01 | ) | $ | (0.17 | ) |
|                                                    |       |                     |       |                       |       |   |   |   |   |
| Income (loss) per common share, assuming dilution       |       | $                        | 0.00       |                       | $          | (0.10 | ) | $ | (0.01 | ) | $ | (0.17 | ) |
|                                                    |       |                     |       |                       |       |   |   |   |   |
| Weighted average shares outstanding                     |       | 3,809,116                |       | 3,871,101                  |       | 3,808,255 |   | 3,858,208 |   |
|                                                    |       |                     |       |                       |       |   |   |   |   |
| Weighted average shares outstanding, assuming  dilution |       | 3,882,238                |       | 3,871,101                  |       | 3,808,255 |   | 3,858,208 |   |

 

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

** **

The Company accounts for its stock-basedcompensation awards using the intrinsic value method prescribed by AccountingPrinciples Board (APB) Opinion No. 25, *Accountingfor Stock Issued to Employees. *Nocompensation cost has been recognized for options issued to employees when theexercise price of the options granted is at least equal to the fair value ofthe common stock on the date of grant. Had compensation cost been determined consistent with Statement ofFinancial Accounting Standard (SFAS) No. 123, *Accountingfor Stock-Based Compensation*, as amended by SFAS No. 148, *Accounting for Stock-Based Compensation—Transitionand Disclosure,* the Company’s net income (loss) and net income(loss) per common share would have been changed to the following pro formaamounts:

 
| ** **                         | ** ** | **Thirteen Weeks Ended** | ** ** | **Twenty-six Weeks Ended** | ** ** |
|------------------------------------|------------|--------------------------|------------|----------------------------|------------|
| ** **                         | ** ** | **June 30, 2002**   | ** ** | **June 29, 2003**     | ** ** | **June 30, 2002** | ** ** | **June 29, 2003** | ** ** |
| Net income (loss):                 |       |                     |       |                       |       |   |   |   |   |
| As reported                        |       | $                        | 5,175      |                       | $          | (221,089 | ) | $ | (24,494 | ) | $ | (405,711 | ) |
| Pro forma                          |       | $                        | (27,813    | )                          | $          | (294,559 | ) | $ | (90,471 | ) | $ | (620,724 | ) |
|                               |       |                     |       |                       |       |   |   |   |   |
| Net income (loss) per common share |       |                     |       |                       |       |   |   |   |   |
| Basic and diluted as reported      |       | $                        | (0.00      | )                          | $          | (0.10 | ) | $ | (0.01 | ) | $ | (0.17 | ) |
| Basic and diluted pro forma        |       | $                        | (0.01      | )                          | $          | (0.12 | ) | $ | (0.02 | ) | $ | (0.23 | ) |

 

The fair value of each option grant for thepro forma disclosure required by SFAS No. 123, as amended by SFAS No. 148, isestimated on the grant date using the Black-Scholes option-pricing model withthe following assumptions for the grants:

 

5

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| ** **              | ** ** | **2002** | ** ** | **2003**   | ** ** |
|-------------------------|------------|----------|------------|------------|------------|
| Dividend yield          |       | None     |       | None       |       |
| Expected volatility     |       | 101.4    | %          | 78.6       | %          |
| Expected life of option |       | 5 years  |       | 5-10 years |       |
| Risk-free interest rate |       | 3.9      | %          | 3.4        | %          |

** **

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

** **

Issuance of preferred stock and warrants topurchase common stock:

During the fourth quarter of 2002, theCompany conducted a private placement to accredited investors of Series AConvertible Preferred Stock and warrants to purchase common stock.  The Company sold 55,600 shares of preferredstock for aggregate gross proceeds of $5,560,000.  The outstanding preferred stock isconvertible 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 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 $471,000.

 

Exercise of warrants:

As part of the sale of common stock in 1997and 1998, the Company sold to its private placement agent, for $50, a stockpurchase warrant for the purchase of 111,950 shares of common stock at $1 pershare.  As of December 29, 2002,78,150 of such warrants remained outstanding. On February 19, 2003, affiliates of the private placement agentexercised 76,450 warrants on a cashless basis. The remaining 1,700 warrants expired February 20, 2003.

 

On June 10, 2003, 15,822 of the1,759,473 warrants sold with the Series A Convertible Preferred Stock, wereexercised on a cashless basis.

 

Dividends:

On March 21, 2003, the Companyauthorized payment of dividends to holders of its preferred stock as of that date.  Such dividends aggregated $96,349 and werepaid in cash on March 31, 2003.

 

On June 23, 2003, the Company authorizedpayment of dividends to holders of its preferred stock as of that date.  Such dividends were paid June 30, 2003through the issuance of an aggregate of 69,724 shares of common stock and $36cash in lieu of fractional shares.

 

**4.     Restatement:**

 

The financial statements for the year endedDecember 29, 2002 have been restated to record a beneficial conversion featurereducing retained earnings and 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 Exchange Act,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**                                                                                                                                                                                                               |
|---------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                |       |                                                                                                                                                                                                                          |
| 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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