**UNITEDSTATES****SECURITIES AND 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 SEPTEMBER 26, 2004** |
|--------|------------|------------------------------------------------------------------------------------------------------------------------------------------------|
|   |       |                                                                                                                                           |
| **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 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 andIssuer’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 the ExchangeAct during the past 12 months (or such shorter period that the registrant wasrequired to file such reports), and (2) has been subject to such filingrequirements for the past 90 days.

 

Yes  ý  No  o.

 

As of October 18, 2004, the issuer had outstanding 4,911,640 shares ofcommon stock and 1,000,000 Class A Warrants. The number of outstanding shares of common stock includes the sharesissuable upon separation of the units, each consisting of one share of commonstock and one redeemable Class A Warrant, sold in the issuer’s initial publicoffering.

 

Transitional Small Business Disclosure Format:

Yes  o  No  ý.

 

 

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**PARTI**                                             FINANCIAL INFORMATION

 

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

 

**GRANITE CITY FOOD & BREWERY LTD.**

 

# **CONDENSEDBALANCE SHEETS**

 
| ** **                                                                                                                                                                                                  | ** ** | **December 28, 2003  (Restated)** | ** ** | **September 26, 2004  (Restated)** | ** ** |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|----------------------------------------|------------|-----------------------------------------|------------|
| ** **                                                                                                                                                                                                  | ** ** | **(audited)**                          | ** ** | **(unaudited)**                         | ** ** |
| **ASSETS:**                                                                                                                                                                                                 |       |                                   |       |                                    |       |
| Current assets:                                                                                                                                                                                             |       |                                   |       |                                    |       |
| Cash                                                                                                                                                                                                        |       | $                                      | 1,439,960  |                                    | $          | 2,144,338 |   |
| Inventory                                                                                                                                                                                                   |       | 177,176                                |       | 277,400                                 |       |
| Prepaids and other                                                                                                                                                                                          |       | 145,857                                |       | 271,024                                 |       |
| Total current assets                                                                                                                                                                                        |       | 1,762,993                              |       | 2,692,762                               |       |
|                                                                                                                                                                                                        |       |                                   |       |                                    |       |
| Property and equipment, net                                                                                                                                                                                 |       | 15,177,392                             |       | 22,031,747                              |       |
| Intangible assets and other                                                                                                                                                                                 |       | 381,782                                |       | 394,406                                 |       |
| Total assets                                                                                                                                                                                                |       | $                                      | 17,322,167 |                                    | $          | 25,118,915 |   |
|                                                                                                                                                                                                        |       |                                   |       |                                    |       |
| **LIABILITIES AND SHAREHOLDERS’ EQUITY:**                                                                                                                                                              |       |                                   |       |                                    |       |
| Current liabilities:                                                                                                                                                                                        |       |                                   |       |                                    |       |
| Accounts payable                                                                                                                                                                                            |       | $                                      | 460,160    |                                    | $          | 695,004 |   |
| Accrued expenses                                                                                                                                                                                            |       | 1,293,241                              |       | 1,513,156                               |       |
| Line of credit                                                                                                                                                                                              |       | —                                 |       | 199,102                                 |       |
| Long-term debt, current portion                                                                                                                                                                             |       | 122,584                                |       | 222,596                                 |       |
| Capital lease obligations, current portion                                                                                                                                                                  |       | 362,920                                |       | 501,305                                 |       |
| Total current liabilities                                                                                                                                                                                   |       | 2,238,905                              |       | 3,131,163                               |       |
|                                                                                                                                                                                                        |       |                                   |       |                                    |       |
| Long-term debt, net of current portion                                                                                                                                                                      |       | 2,056,752                              |       | 2,562,413                               |       |
| Capital lease obligations, net of current  portion                                                                                                                                                          |       | 6,702,352                              |       | 11,884,838                              |       |
| Total liabilities                                                                                                                                                                                           |       | 10,998,009                             |       | 17,578,414                              |       |
|                                                                                                                                                                                                        |       |                                   |       |                                    |       |
| Shareholders’ equity:                                                                                                                                                                                  |       |                                   |       |                                    |       |
| Common stock, $0.01 par value, 90,000,000  shares authorized; 4,044,120 and 4,911,640 shares issued and outstanding at December 28,  2003 and September 26, 2004, respectively                    |       | 40,441                                 |       | 49,116                                  |       |
| Preferred stock, $0.01 par value,  10,000,000 authorized; 55,500 and 54,355 Series A Convertible Preferred  shares issued and outstanding December 28, 2003 and September 26,  2004, respectively |       | 555                                    |       | 544                                     |       |
| Additional paid-in capital                                                                                                                                                                                  |       | 12,029,001                             |       | 14,324,906                              |       |
| Stock dividends distributable                                                                                                                                                                               |       | 702                                    |       | —                                  |       |
| Accumulated deficit                                                                                                                                                                                         |       | (5,746,541                             | )          | (6,834,065                              | )          |
| Total shareholders’ equity                                                                                                                                                                             |       | 6,324,158                              |       | 7,540,501                               |       |
|                                                                                                                                                                                                        |       |                                   |       |                                    |       |
| Total liabilities and shareholders’ equity                                                                                                                                                             |       | $                                      | 17,322,167 |                                    | $          | 25,118,915 |   |

 

See notes to condensed financial statements.

 

1

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**GRANITE CITY FOOD & BREWERY LTD.**

 

**CONDENSED STATEMENTS OF OPERATIONS**

**(Unaudited)**

** **
| ** **                                          | ** ** | **Thirteen Weeks Ended**    | ** ** | **Thirty-nine Weeks Ended** | ** ** |
|-----------------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| ** **                                          | ** ** | **September 28, 2003** | ** ** | **September 26, 2004** | ** ** | **September 28, 2003** | ** ** | **September 26, 2004** | ** ** |
|                                                |       |                        |       |                        |       |   |   |   |   |
| Restaurant revenues                                 |       | $                           | 3,786,885  |                        | 9,279,191  |   | $ | 9,768,071 |   | $ | 23,197,994 |   |
|                                                |       |                        |       |                        |       |   |   |   |   |
| Cost of sales:                                      |       |                        |       |                        |       |   |   |   |   |
| Food, beverage and retail                           |       | 1,094,291                   |       | 2,819,515                   |       | 2,822,489 |   | 7,029,332 |   |
| Labor                                               |       | 1,274,087                   |       | 3,096,410                   |       | 3,320,948 |   | 7,666,094 |   |
| Direct and occupancy                                |       | 804,760                     |       | 1,710,215                   |       | 2,121,687 |   | 4,357,408 |   |
| Total cost of sales                                 |       | 3,173,138                   |       | 7,626,140                   |       | 8,265,124 |   | 19,052,834 |   |
|                                                |       |                        |       |                        |       |   |   |   |   |
| Pre-opening                                         |       | 270,729                     |       | —                      |       | 270,729 |   | 748,323 |   |
| General and administrative                          |       | 449,833                     |       | 619,888                     |       | 1,156,256 |   | 1,813,950 |   |
| Depreciation and amortization                       |       | 206,276                     |       | 463,263                     |       | 596,471 |   | 1,178,273 |   |
|                                                |       |                        |       |                        |       |   |   |   |   |
| Operating income (loss)                             |       | (313,091                    | )          | 569,900                     |       | (520,509 | ) | 404,614 |   |
|                                                |       |                        |       |                        |       |   |   |   |   |
| Interest:                                           |       |                        |       |                        |       |   |   |   |   |
| Income                                              |       | 15,266                      |       | 749                         |       | 62,148 |   | 4,941 |   |
| Expense                                             |       | (133,685                    | )          | (326,070                    | )          | (378,860 | ) | (837,368 | ) |
| Other expense, net                                  |       | —                      |       | (23,520                     | )          | — |   | (23,520 | ) |
| Net other expense                                   |       | (118,419                    | )          | (348,841                    | )          | (316,712 | ) | (855,947 | ) |
|                                                |       |                        |       |                        |       |   |   |   |   |
| Net income (loss)                                   |       | (431,510                    | )          | 221,059                     |       | (837,221 | ) | (451,333 | ) |
| Less preferred stock dividends declared             |       | (168,854                    | )          | (108,710                    | )          | (433,935 | ) | (564,526 | ) |
| Net income (loss) available to common  shareholders |       | $                           | (600,364   | )                           | $          | 112,349 |   | $ | (1,271,156 | ) | $ | (1,015,859 | ) |
|                                                |       |                        |       |                        |       |   |   |   |   |
| Income (loss) per common share, basic               |       | $                           | (0.15      | )                           | $          | 0.03 |   | $ | (0.33 | ) | $ | (0.24 | ) |
|                                                |       |                        |       |                        |       |   |   |   |   |
| Income (loss) per common share, diluted             |       | $                           | (0.15      | )                           | $          | 0.02 |   | $ | (0.33 | ) | $ | (0.24 | ) |
|                                                |       |                        |       |                        |       |   |   |   |   |
| Weighted average shares outstanding, basic          |       | 3,947,700                   |       | 4,378,774                   |       | 3,888,038 |   | 4,261,048 |   |
|                                                |       |                        |       |                        |       |   |   |   |   |
| Weighted average shares outstanding,  diluted       |       | 3,947,700                   |       | 9,296,411                   |       | 3,888,038 |   | 4,261,048 |   |

 

See notes to condensed financial statements.

 

2

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**GRANITE CITY FOOD & BREWERY LTD.**

 

**CONDENSED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

** **
| ** **                                                                                 | ** ** | **Thirty-nine Weeks Ended** | ** ** |
|--------------------------------------------------------------------------------------------|------------|-----------------------------|------------|
| ** **                                                                                 | ** ** | **September 28, 2003** | ** ** | **September 26, 2004** | ** ** |
|                                                                                       |       |                        |       |   |   |
| Cash flows from operating activities:                                                      |       |                        |       |   |   |
| Net loss                                                                                   |       | $                           | (837,221   | ) | $ | (451,333 | ) |
| Adjustments to reconcile net loss to net  cash provided by (used in) operating activities: |       |                        |       |   |   |
| Depreciation and amortization                                                              |       | 596,471                     |       | 1,178,273 |   |
| Loss on disposal of asset                                                                  |       | —                      |       | 23,520 |   |
| Stock option/warrant compensation                                                          |       | 9,762                       |       | 19,170 |   |
| Decrease (increase) in:                                                                    |       |                        |       |   |   |
| Inventory                                                                                  |       | (99,364                     | )          | (100,224 | ) |
| Prepaids and other                                                                         |       | (167,159                    | )          | (125,167 | ) |
| Increase (decrease) in:                                                                    |       |                        |       |   |   |
| Accounts payable                                                                           |       | 187,107                     |       | 149,110 |   |
| Accrued expenses                                                                           |       | (6,704                      | )          | 111,205 |   |
| Net cash provided by (used in) operating  activities                                       |       | (317,108                    | )          | 804,554 |   |
|                                                                                       |       |                        |       |   |   |
| Cash flows from investing activities:                                                      |       |                        |       |   |   |
| Purchase of:                                                                               |       |                        |       |   |   |
| Property and equipment                                                                     |       | (1,950,915                  | )          | (2,278,350 | ) |
| Intangible assets and other                                                                |       | (38,578                     | )          | (29,560 | ) |
| Net cash used in investing activities                                                      |       | (1,989,493                  | )          | (2,307,910 | ) |
|                                                                                       |       |                        |       |   |   |
| Cash flows from financing activities:                                                      |       |                        |       |   |   |
| Payments on capital lease obligations                                                      |       | (208,952                    | )          | (354,257 | ) |
| Payments on long term-debt                                                                 |       | (22,907                     | )          | (144,327 | ) |
| Proceeds from line of credit                                                               |       | —                      |       | 199,102 |   |
| Payment of dividends                                                                       |       | (168,384                    | )          | (108,783 | ) |
| Proceeds from long-term debt                                                               |       | 428,572                     |       | 750,000 |   |
| Proceeds from issuance of stock                                                            |       | 1,381,989                   |       | 1,865,999 |   |
| Net cash provided by financing activities                                                  |       | 1,410,318                   |       | 2,207,734 |   |
|                                                                                       |       |                        |       |   |   |
| Net increase (decrease) in cash                                                            |       | (896,283                    | )          | 704,378 |   |
| Cash, beginning                                                                            |       | 3,521,842                   |       | 1,439,960 |   |
| Cash, ending                                                                               |       | $                           | 2,625,559  |   | $ | 2,144,338 |   |
|                                                                                       |       |                        |       |   |   |
| Supplemental disclosure of non-cash  investing activities:                                 |       |                        |       |   |   |
| Buildings acquired under capital lease  agreements                                         |       | $                           | 1,656,114  |   | $ | 5,675,128 |   |

 

See notes to condensed financial statements.

 

3

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**GRANITE CITY FOOD & BREWERY LTD.**

 

**NOTES TO CONDENSED FINANCIAL STATEMENTS**

**(Unaudited)**

 

Thirteen and thirty-nine weeks ended September 28,2003 and September 26, 2004

 

**1.****              Natureof business and 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 made on-premise.  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. Subsequently, the Company opened restaurants in Sioux Falls, SouthDakota; Fargo, North Dakota; West Des Moines, Cedar Rapids and Davenport, Iowa,Lincoln, Nebraska and Minneapolis, Minnesota.

 

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 and thirty-nine weeks ended September 28, 2003 and September 26,2004 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 September 26, 2004 and the results of operations and cash flowsfor the periods ended September 28, 2003 and September 26, 2004 havebeen made. Those adjustments consist only of normal and recurring adjustments.

 

Thebalance sheet at December 28, 2003 has been derived from the auditedfinancial statements at that date, but does not include all of the informationand notes required by generally accepted accounting principles for completefinancial statements.  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 ended December 28,2003, filed with the Securities and Exchange Commission on March 29, 2004, asamended on December 21, 2004.

 

The results of operations for the thirteen and thirty-nine weeks ended September 26,2004 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) lesspreferred stock dividends declared by the weighted average number of commonshares outstanding.  Diluted earnings 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. Diluted earnings also assumes convertible preferred stock is convertedto common stock and increases the outstanding common shares, and net incomeavailable to common shareholders is increased by dividends payable on thatconvertible preferred 

 

4

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stock.  Calculations of the Company’s net income(loss) per common share for the thirteen and thirty-nine weeks ended September 28,2003 and September 26, 2004 are set forth in the following table:

 
| ** **                                    | ** ** | **Thirteen Weeks Ended**    | ** ** | **Thirty-nine Weeks Ended** | ** ** |
|-----------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| ** **                                    | ** ** | **September 28, 2003** | ** ** | **September 26, 2004** | ** ** | **September 28, 2003** | ** ** | **September 26, 2004** | ** ** |
|                                          |       |                        |       |                        |       |   |   |   |   |
| Net income (loss)                             |       | $                           | (431,510   | )                           | $          | 221,059 |   | $ | (837,221 | ) | $ | (451,333 | ) |
| Less dividends declared                       |       | (168,854                    | )          | (108,710                    | )          | (433,935 | ) | (564,526 | ) |
| Net loss available to common shareholders     |       | $                           | (600,364   | )                           | $          | 112,349 |   | $ | (1,271,156 | ) | $ | (1,015,859 | ) |
|                                          |       |                        |       |                        |       |   |   |   |   |
| Income (loss) per common share, basic         |       | $                           | (0.15      | )                           | $          | 0.03 |   | $ | (0.33 | ) | $ | (0.24 | ) |
|                                          |       |                        |       |                        |       |   |   |   |   |
| Income (loss) per common share, diluted       |       | $                           | (0.15      | )                           | $          | 0.02 |   | $ | (0.33 | ) | $ | (0.24 | ) |
|                                          |       |                        |       |                        |       |   |   |   |   |
| Weighted average shares outstanding, basic    |       | 3,947,700                   |       | 4,378,774                   |       | 3,888,038 |   | 4,261,048 |   |
|                                          |       |                        |       |                        |       |   |   |   |   |
| Weighted average shares outstanding,  diluted |       | 3,947,700                   |       | 9,296,411                   |       | 3,888,038 |   | 4,261,048 |   |
|                                               |            |                             |            |                             |            |  |  |  |  |  |  |  |  |  |  |  |

 

**2.****              Stockcompensation:**

 

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 income (loss) and net income(loss) per common share would have been changed to the following pro formaamounts:

 
| ** **                                                                                                                                  | ** ** | **Thirteen Weeks Ended**    | ** ** | **Thirty-nine Weeks Ended** | ** ** |
|---------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|-----------------------------|------------|
| ** **                                                                                                                                  | ** ** | **September 28, 2003** | ** ** | **September 26, 2004** | ** ** | **September 28, 2003** | ** ** | **September 26, 2004** | ** ** |
| Net income (loss):                                                                                                                          |       |                        |       |                        |       |   |   |   |   |
| As reported                                                                                                                                 |       | $                           | (431,510   | )                           | $          | 221,059 |   | $ | (837,221 | ) | $ | (451,333 | ) |
| Less: Total stock-based employee  compensation expense determined under fair value based method for all awards,  net of related tax effects |       | $                           | (58,272    | )                           | $          | (147,677 | ) | $ | (273,285 | ) | $ | (470,199 | ) |
| Pro forma                                                                                                                                   |       | $                           | (489,782   | )                           | $          | 73,382 |   | $ | (1,110,506 | ) | $ | (921,532 | ) |
|                                                                                                                                        |       |                        |       |                        |       |   |   |   |   |
| Net income (loss) per common share                                                                                                          |       |                        |       |                        |       |   |   |   |   |
| Basic as reported                                                                                                                           |       | $                           | (0.15      | )                           | $          | 0.03 |   | $ | (0.33 | ) | $ | (0.24 | ) |
| Basic pro forma                                                                                                                             |       | $                           | (0.17      | )                           | $          | (0.01 | ) | $ | (0.40 | ) | $ | (0.35 | ) |
| Diluted, as reported                                                                                                                        |       | $                           | (0.15      | )                           | $          | 0.02 |   | $ | (0.33 | ) | $ | (0.24 | ) |
| Diluted, pro forma                                                                                                                          |       | $                           | (0.17      | )                           | $          | 0.01 |   | $ | (0.40 | ) | $ | (0.35 | ) |

 

5

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

 
| ** **              | ** ** | **2003**   | ** ** | **2004**   | ** ** |
|-------------------------|------------|------------|------------|------------|------------|
| Dividend yield          |       | None       |       | None       |       |
| Expected volatility     |       | 75.0%      |       | 54.6%      |       |
| Expected life of option |       | 5-10 years |       | 5-10 years |       |
| Risk-free interest rate |       | 4.2%       |       | 4.0%       |       |

 

**3.****              Changein capitalization:**

 

Exercise of warrants and options:

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

 

Duringthe first quarter of 2004, the Company issued an aggregate of 31,645 shares ofcommon stock to accredited investors upon the exercise for cash of warrantsoriginally issued on October 1, 2002, in connection with a private placement ofSeries A Convertible Preferred Stock and warrants.  Each warrant was exercised at $1.58 pershare.

 

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 to purchase oneshare of common stock at an exercise price of $5.00 per share, subject toadjustment.  The agreement that set forththe terms and conditions of these warrants contains certain anti-dilution provisions.  Pursuant to these provisions, the number ofshares purchasable upon exercise of these warrants and the related purchaseprice both required adjustment upon the issuance of common stock in lieu ofcash dividends to the holders of the Company’s Series A Convertible PreferredStock.  These warrants also provide for acashless exercise provision and expire on June 6, 2005.  During the first quarter of 2004, the Companyissued 6,514 units upon the cashless exercise of 19,368 of such warrants.  As a result of these exercises and theanti-dilution adjustments, as of September 26, 2004, the number of unitspurchasable under these warrants was 87,670 and the exercise price was $4.61per unit.

 

Duringthe second quarter of 2004, the Company issued 15,822 shares of common stock toan accredited investor upon the exercise for cash of warrants originally issuedon October 1, 2002, in connection with a private placement of Series AConvertible Preferred Stock and warrants. Each warrant was exercised at $1.58 per share.

 

Duringthe second quarter of 2004, the Company issued 31,645 shares of common stock toan accredited investor upon the conversion of 500 shares of Series AConvertible Preferred Stock originally issued on October 1, 2002.  The convertible preferred stock was convertedat $1.58 per share.

 

As part of the Company’s initial public offering, the Company sold1,000,000 units, each unit consisting of one share of common stock and oneredeemable Class A warrant.  Each Class Awarrant entitles the holder to purchase one share of common stock at anexercise price of $5.00 per share.  Theagreement that set forth the terms and conditions of the Class A Warrantscontains certain anti-dilution provisions. Pursuant to these provisions, the number of shares purchasable uponexercise of these warrants and the related purchase price both requiredadjustment upon the issuance of common stock in lieu of cash dividends to theholders of the Company’s Series A Convertible Preferred Stock. As a result ofthese adjustments and the issuance, pursuant to Registration File No.333-93459, of 1,072 shares of common stock upon the exercise of such warrantsin May 2004 at an exercise price of $4.66, the number of shares 

 

6

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purchasable under these warrants at September 26, 2004 was1,071,889 and the exercise price was $4.66 per share.  The warrants expire on June 6, 2005.

 

On August 18, 2004, one of the Company’s directors exercised a stockoption for the purchase of 5,000 shares of common stock at an exercise price of$1.25 per share.  These options wereissued pursuant to the 1997 Director Stock Option Plan.

 

On September 20, 2004, one of the Company’s employees exercised astock option for the purchase of 3,000 shares of common stock at an exerciseprice of $1.65 per share.  These optionswere issued pursuant to the 1997 Stock Option Plan.

 

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 stockvalued at $1.58 per share.  The closingprice of the 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, 2004through the issuance of an aggregate of 69,414 shares of common stock valued at$1.58 per share.  The closing price ofthe stock on March 23, 2004 was $5.00 per share.  Additionally, $36 cash in lieu of fractionalshares was distributed.

 

On June 15, 2004, the Company authorized cash payment of dividends toholders of its preferred stock as of June 23, 2004.  Such dividends aggregated $108,710 and werepaid on June 30, 2004.

 

On September 9, 2004, the Company authorized cash payment ofdividends to holders of its preferred stock as of September 23, 2004.  Such dividends aggregated $108,710, wereincluded in accrued expenses on the Company’s balance sheet at September 26,2004 and were paid on September 30, 2004.

 

Issuance of common stock and warrants to purchase common stock:

On September 17, 2004, the Company entered into a securities purchase agreementwith accredited investors for the sale of approximately $8.5 million of commonstock and warrants to purchase common stock.  Theagreement provided for securities to be sold at an offering price of $3.25 pershare of common stock, with one warrant for every 2.5 shares of common stocksold.  The warrants have a term of fiveyears and are exercisable at $5.00 per share, subject to certain anti-dilutionadjustments.  The Companycompleted the initial closing of this private placement, generating grossproceeds of $1,925,157 with the sale of 592,356 shares of common stock andissuance of warrants to purchase 236,944 shares of common stock.  In connection with the initial closing, theCompany issued its agent a warrant to purchase 29,618 shares of common stock atan exercise price of $5.00 per share, paid its agent cash commission of $96,258and paid expenses related to the transaction of $125,341.  Completionof the sale of the remaining shares and warrants is subject to approval by theCompany’s shareholders in compliance with Nasdaq Marketplace Rules.

 

**4.****              Lineof credit:**

 

InApril 2004, the Company entered into a revolving line of credit agreement withmaximum availability of $750,000 with an independent financialinstitution.  The Company paid annualinterest at a rate of 6.75% on amounts it borrowed, which interest paymentsaggregated approximately $5,307.  Thisline of credit expired September 1, 2004, at which time the Companyrenewed the line at an annual interest rate of 7.00%.  This line of credit is secured by substantiallyall the personal property of the Company, is guaranteed by one of the Company’sdirectors and expires September 15, 2005. As of September 26, 2004, the Company had $199,102 outstanding onthis line.

 

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**5.****             ****Provision for income taxes:**

 

Aprovision for income taxes was not recorded in the third quarter of 2004because a provision for income tax is not anticipated for the entire fiscalyear 2004.

 

**6.****             ****Restatement:**

** **

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

 

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**SIGNATURES**

 

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

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

 

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**INDEX TO EXHIBITS**

 
| **Exhibit  Number** | ** ** | **Description**                                                                                                                                                                                                                                             |
|---------------------|------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                |       |                                                                                                                                                                                                                                                        |
| 10                  |       | Securities  Purchase Agreement between the Company and the Investors named as signatories  thereto, dated September 17, 2004 (incorporated by reference to our  Registration Statement on Form S-3, filed on October 15, 2004 (File No.  333-119768)). |
|                |       |                                                                                                                                                                                                                                                        |
| 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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