**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  MARCH 28, 2004** |
|------------|-------------------------------------------------------------------------------------------------------------------------------------------------|

 
| **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 asSpecified 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)filed all reports required to be filed by Section 13 or 15(d) of theExchange Act during the past 12 months (or such shorter period that theregistrant was required to file such reports), and (2) has been subject to suchfiling requirements for the past 90 days.

 

Yes ý  No o.

 

As of April 26, 2004, the issuer had outstanding 4,262,745 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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**PARTI          FINANCIAL INFORMATION**

 

**ITEM 1**** Financial Statements**

 

**GRANITE CITY FOOD & BREWERY LTD.**

 

# **CONDENSED BALANCE SHEET**

**(Unaudited)**

 
| ** **                                                                                                                     | ** ** | **March 28, 2004  (Restated)** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------|------------|-------------------------------------|------------|
| **ASSETS:**                                                                                                                    |       |                                |       |
| Current assets:                                                                                                                |       |                                |       |
| Cash                                                                                                                           |       | $                                   | 504,483    |   |
| Inventory                                                                                                                      |       | 200,297                             |       |
| Prepaids and other                                                                                                             |       | 185,962                             |       |
| Total current assets                                                                                                           |       | 890,742                             |       |
|                                                                                                                           |       |                                |       |
| Property and equipment, net                                                                                                    |       | 17,850,612                          |       |
| Intangible assets and other                                                                                                    |       | 395,769                             |       |
| Total assets                                                                                                                   |       | $                                   | 19,137,123 |   |
|                                                                                                                           |       |                                |       |
| **LIABILITIES AND  SHAREHOLDERS’ EQUITY:**                                                                                |       |                                |       |
| Current liabilities:                                                                                                           |       |                                |       |
| Accounts payable                                                                                                               |       | $                                   | 328,901    |   |
| Accrued expenses                                                                                                               |       | 1,031,493                           |       |
| Long-term debt, current portion                                                                                                |       | 215,294                             |       |
| Capital lease obligations, current portion                                                                                     |       | 408,427                             |       |
| Total current liabilities                                                                                                      |       | 1,984,115                           |       |
|                                                                                                                           |       |                                |       |
| Long-term debt, net of current portion                                                                                         |       | 2,675,135                           |       |
| Capital lease obligations, net of current  portion                                                                             |       | 8,400,506                           |       |
| Total liabilities                                                                                                              |       | 13,059,756                          |       |
|                                                                                                                           |       |                                |       |
| Shareholders’ equity:                                                                                                     |       |                                |       |
| Common stock, $0.01 par value, 90,000,000  shares authorized; 4,193,331 shares issued and outstanding                          |       | 41,933                              |       |
| Preferred stock, $0.01 par value,  10,000,000 authorized; 54,855 Series A Convertible Preferred shares issued  and outstanding |       | 549                                 |       |
| Additional paid-in capital                                                                                                     |       | 12,515,410                          |       |
| Stock dividends distributable                                                                                                  |       | 694                                 |       |
| Accumulated deficit                                                                                                            |       | (6,481,219                          | )          |
| Total shareholders’ equity                                                                                                |       | 6,077,367                           |       |
|                                                                                                                           |       |                                |       |
| Total liabilities and shareholders’ equity                                                                                |       | $                                   | 19,137,123 |   |

 

See notes to condensed financial statements.

 

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**GRANITE CITY FOOD & BREWERY LTD.**

 

**CONDENSED STATEMENTS OF OPERATIONS**

**(Unaudited)**

 
| ** **                                              | ** ** | **Thirteen Weeks Ended** | ** ** |
|---------------------------------------------------------|------------|--------------------------|------------|
| ** **                                              | ** ** | **March 30, 2003**  | ** ** | **March 28, 2004** | ** ** |
|                                                    |       |                     |       |   |   |
| Restaurant revenues                                     |       | $                        | 2,870,160  |   | $ | 6,292,871 |   |
|                                                    |       |                     |       |   |   |
| Cost of sales:                                          |       |                     |       |   |   |
| Food, beverage and retail                               |       | 818,882                  |       | 1,876,115 |   |
| Labor                                                   |       | 985,833                  |       | 2,043,221 |   |
| Direct and occupancy                                    |       | 663,267                  |       | 1,264,862 |   |
| Total cost of sales                                     |       | 2,467,982                |       | 5,184,198 |   |
|                                                    |       |                     |       |   |   |
| Pre-opening                                             |       | —                   |       | 264,974 |   |
| General and administrative                              |       | 293,617                  |       | 588,584 |   |
| Depreciation and amortization                           |       | 193,036                  |       | 330,040 |   |
|                                                    |       |                     |       |   |   |
| Operating loss                                          |       | (84,475                  | )          | (74,925 | ) |
|                                                    |       |                     |       |   |   |
| Interest:                                               |       |                     |       |   |   |
| Income                                                  |       | 23,301                   |       | 3,971 |   |
| Expense                                                 |       | (123,448                 | )          | (232,173 | ) |
| Net other expense                                       |       | (100,147                 | )          | (228,202 | ) |
|                                                    |       |                     |       |   |   |
| Net loss                                                |       | (184,622                 | )          | (303,127 | ) |
| Less preferred stock dividends declared                 |       | (96,349                  | )          | (347,106 | ) |
| Net loss available to common shareholders               |       | $                        | (280,971   | ) | $ | (650,233 | ) |
|                                                    |       |                     |       |   |   |
| Loss per common share, basic and diluted                |       | $                        | (0.07      | ) | $ | (0.16 | ) |
|                                                    |       |                     |       |   |   |
| Weighted average shares outstanding, basic  and diluted |       | 3,845,315                |       | 4,132,933 |   |

 

See notes to condensed financial statements.

 

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**GRANITE CITY FOOD & BREWERY LTD.**

 

**CONDENSED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

 
| ** **                                                                                 | ** ** | **Thirteen Weeks Ended** | ** ** |
|--------------------------------------------------------------------------------------------|------------|--------------------------|------------|
| ** **                                                                                 | ** ** | **March 30, 2003**  | ** ** | **March 28, 2004** | ** ** |
|                                                                                       |       |                     |       |   |   |
| Cash flows from operating activities:                                                      |       |                     |       |   |   |
| Net loss                                                                                   |       | $                        | (184,622   | ) | $ | (303,127 | ) |
| Adjustments to reconcile net loss to net  cash provided by (used in) operating activities: |       |                     |       |   |   |
| Depreciation and amortization                                                              |       | 193,036                  |       | 330,040 |   |
| Stock option/warrant compensation                                                          |       | —                   |       | 6,390 |   |
| Decrease (increase) in:                                                                    |       |                     |       |   |   |
| Inventory                                                                                  |       | 9,990                    |       | (23,121 | ) |
| Prepaids and other                                                                         |       | (93,492                  | )          | (40,105 | ) |
| Increase (decrease) in:                                                                    |       |                     |       |   |   |
| Accounts payable                                                                           |       | 94,155                   |       | (179,970 | ) |
| Accrued expenses                                                                           |       | (175,235                 | )          | (261,748 | ) |
| Net cash used in operating activities                                                      |       | (156,168                 | )          | (471,641 | ) |
|                                                                                       |       |                     |       |   |   |
| Cash flows from investing activities:                                                      |       |                     |       |   |   |
| Purchase of:                                                                               |       |                     |       |   |   |
| Property and equipment                                                                     |       | (385,908                 | )          | (1,100,170 | ) |
| Intangible assets and other                                                                |       | —                   |       | (18,366 | ) |
| Net cash used in investing activities                                                      |       | (385,908                 | )          | (1,118,536 | ) |
|                                                                                       |       |                     |       |   |   |
| Cash flows from financing activities:                                                      |       |                     |       |   |   |
| Payments on capital lease obligations                                                      |       | (64,642                  | )          | (106,339 | ) |
| Payments on long term-debt                                                                 |       | (7,567                   | )          | (38,907 | ) |
| Payment of dividends                                                                       |       | (71,999                  | )          | (36 | ) |
| Proceeds from:                                                                             |       |                     |       |   |   |
| Issuance of long-term debt                                                                 |       | —                   |       | 750,000 |   |
| Issuance of stock                                                                          |       | 1,280,408                |       | 49,982 |   |
| Net cash provided by financing activities                                                  |       | 1,136,200                |       | 654,700 |   |
|                                                                                       |       |                     |       |   |   |
| Net increase (decrease) in cash                                                            |       | 594,124                  |       | (935,477 | ) |
| Cash, beginning                                                                            |       | 3,521,842                |       | 1,439,960 |   |
| Cash, ending                                                                               |       | $                        | 4,115,966  |   | $ | 504,483 |   |

 

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 30, 2003 andMarch 28, 2004

 

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

 

Nature of business:

Granite City Food & Brewery Ltd. (“the Company”) was formed todevelop and operate casual dining restaurants featuring on-premisebreweries.  The Company is developingthese restaurant-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 madeon-premise.  The Company produces itsbeer using a process called Fermentus InterruptusTM, which is intended tomaintain high beer quality while enhancing overall profitability by reducingunit-level brewing costs.  The firstfacility, located in St. Cloud, Minnesota, opened in July 1999.  Subsequently, the Company opened restaurantsin Sioux Falls, South Dakota; Fargo, North Dakota; and West Des Moines, CedarRapids and Davenport, Iowa.

 

The Company’s current expansion strategy focuses on development ofrestaurants in markets where management believes the Company’s concept willhave broad appeal and attractive restaurant-level economics.

 

Interim financial statements:

The Company has prepared the condensed financial statements for thethirteen weeks ended March 30, 2003 and March 28, 2004 without auditby the Company’s independent auditors. In the opinion of the Company’s management, all adjustments necessary topresent fairly the financial position of the Company at March 28, 2004 andthe results of operations and cash flows for the periods ended March 30,2003 and March 28, 2004  have beenmade. 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 28, 2003, filed with the Securities and Exchange Commission onMarch 29, 2004, as amended on December 21, 2004.

 

The results of operations for the thirteen weeks ended March 28,2004 are not necessarily indicative of the results to be expected for theentire year.

 

Earnings (loss) per share:

Basic earnings(loss) per common share is calculated by dividing net income (loss) less preferredstock dividends 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 loss per common share for the thirteenweeks ended March 30, 2003 and March 28, 2004 are set forth in thefollowing table:

 

4

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| ** **                                              | ** ** | **Thirteen Weeks Ended** | ** ** |
|---------------------------------------------------------|------------|--------------------------|------------|
| ** **                                              | ** ** | **March 30, 2003**  | ** ** | **March 28, 2004** | ** ** |
|                                                    |       |                     |       |   |   |
| Net loss                                                |       | $                        | (184,622   | ) | $ | (303,127 | ) |
| Less dividends declared                                 |       | (96,349                  | )          | (347,106 | ) |
| Net loss available to common shareholders               |       | $                        | (280,971   | ) | $ | (650,233 | ) |
|                                                    |       |                     |       |   |   |
| Loss per common share, basic and diluted                |       | $                        | (0.07      | ) | $ | (0.16 | ) |
|                                                    |       |                     |       |   |   |
| Weighted average shares outstanding, basic  and diluted |       | 3,845,315                |       | 4,132,933 |   |

 

**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—Transitionand Disclosure,* the Company’s net loss and net loss per common sharewould have been changed to the following pro forma amounts:

 
| ** **                                                                                                                                  | ** ** | **Thirteen Weeks Ended** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------|------------|
| ** **                                                                                                                                  | ** ** | **March 30, 2003**  | ** ** | **March 28, 2004** | ** ** |
| Net income (loss):                                                                                                                          |       |                     |       |   |   |
| As reported                                                                                                                                 |       | $                        | (184,622   | ) | $ | (303,127 | ) |
| Less: Total stock-based employee  compensation expense determined under fair value based method for all awards,  net of related tax effects |       | $                        | (141,543   | ) | $ | (153,692 | ) |
| Pro forma                                                                                                                                   |       | $                        | (326,165   | ) | $ | (456,819 | ) |
|                                                                                                                                        |       |                     |       |   |   |
| Net income (loss) per common share                                                                                                          |       |                     |       |   |   |
| Basic and diluted as reported                                                                                                               |       | $                        | (0.07      | ) | $ | (0.16 | ) |
| Basic and diluted pro forma                                                                                                                 |       | $                        | (0.11      | ) | $ | (0.19 | ) |

 

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:

 
| ** **              | ** ** | **2003**   | ** ** | **2004**   | ** ** |
|-------------------------|------------|------------|------------|------------|------------|
| Dividend yield          |       | None       |       | None       |       |
| Expected volatility     |       | 89.4%      |       | 72.9%      |       |
| Expected life of option |       | 5-10 years |       | 5-10 years |       |
| Risk-free interest rate |       | 4.0%       |       | 3.8%       |       |

 

5

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

 

Exercise of warrants and options:

 

Duringthe first quarter of 2004, we issued an aggregate of 40,822 shares of commonstock to accredited investors, upon the conversion of 645 shares of our SeriesA Convertible Preferred Stock originally issued on October 1, 2002.  The convertible preferred stock was convertedat $1.58 per share.

 

DuringMarch 2004, we issued 31,645 shares of common stock to accreditedinvestors upon the exercise for cash of warrants originally issued onOctober 1, 2002, in connection with a private placement of Series AConvertible Preferred Stock and warrants. Each warrant was exercised at $1.58 per share.

 

As part of the Company’s initial public offering, the Company sold tothe underwriter, for $100, stock purchase warrants for the purchase of anaggregate of 100,000 units exercisable at $4.95 per unit after June 6,2001. Each unit consists of one share of common stock and one warrant topurchase one share of common stock at an exercise price of $5.00 per share,subject to adjustment.  The agreementthat set forth the terms and conditions of these warrants contains certainanti-dilution provisions.  Pursuant tothese provisions, the number of shares purchasable upon exercise of thesewarrants and the related purchase price both required adjustment each time theCompany issues common stock in lieu of cash dividends to the holders of theCompany’s Series A Convertible Preferred Stock. These warrants also provide for a cashless exercise provision and expireon June 6, 2005.  InMarch 2004, the Company issued 6,514 units upon the cashless exercise of19,368 of such warrants.  As a result ofthese exercises and the anti-dilution adjustments, as of March 28, 2004,the number of units purchasable under this agreement was 86,175 and theexercise price was $4.69.

 

Dividends:

OnDecember 10, 2003, the Company authorized payment of dividends to holdersof its preferred stock as of December 23, 2003.  Such dividends were paid on December 31,2003 through the issuance of an aggregate of 70,230 shares of common stock valuedat $1.58 per share.  The closing price ofthe stock on December 23, 2003 was $3.97 per share.  Additionally, $37 cash in lieu of fractionalshares was distributed.

 

On March 11, 2004, the Company authorized payment of dividends toholders of its preferred stock as of March 23, 2004.  Such dividends were paid on March 31,2004 through the issuance of an aggregate of 69,414 shares of common stockvalued at $1.58 per share.  The closingprice of the stock on March 23, 2004 was $5.00 per share.  Additionally, $36 cash in lieu of fractionalshares was distributed.

 

**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**

 

 

Inaccordance with the requirements of the Exchange Act, the registrant causedthis report to be signed on its behalf by the undersigned, thereunto dulyauthorized.

 

 
|                               |   | 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               |       | Business Loan  Agreement between Granite City Food & Brewery Ltd. and First National  Bank, dated April 14, 2004.*                                                                                                           |
|               |       |                                                                                                                                                                                                                                  |
| 10.2               |       | Promissory Note  for the principal sum of $750,000 issued by Granite City Food & Brewery  Ltd., Borrower, to First National Bank, Lender, dated April 14, 2004.*                                                             |
|               |       |                                                                                                                                                                                                                                  |
| 10.3               |       | Commercial  Guarantee Agreement between Granite City Food & Brewery Ltd., Borrower,  First National Bank, Lender, and Steven J. Wagenheim, Guarantor, dated  April 14, 2004.*                                                |
|               |       |                                                                                                                                                                                                                                  |
| 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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*      Previouslyfiled

 

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