-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FfZv0ecCI8KiEHdHaHpFJ88tnVtf8ovuSny+Wk95K2TyO0rsErFEEnM9XpldWrZO eGOjdLM0UZ2LHVXG8nituQ== 0000950134-03-011338.txt : 20030812 0000950134-03-011338.hdr.sgml : 20030812 20030811181305 ACCESSION NUMBER: 0000950134-03-011338 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20030629 FILED AS OF DATE: 20030812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FAMOUS DAVES OF AMERICA INC CENTRAL INDEX KEY: 0001021270 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 411782300 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-21625 FILM NUMBER: 03835544 BUSINESS ADDRESS: STREET 1: 7657 ANAGRAM DR CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 BUSINESS PHONE: 612-557-57 MAIL ADDRESS: STREET 1: 7657 ANAGRAM DR CITY: EDEN PRAIRIE STATE: MN ZIP: 55344 10-Q 1 c78867e10vq.txt FORM 10-Q U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q [X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 29, 2003 [ ] Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ____________________ to _________________ Commission file number 0-21625 ------- FAMOUS DAVE'S OF AMERICA, INC. (Exact Name of Registrant as Specified in Its Charter) Minnesota 41-1782300 (State or other Jurisdiction of (I.R.S. Employer Identification No.) Incorporation or Organization) 8091 Wallace Road, Eden Prairie, MN 55344 (Address of Principal Executive Offices) (952) 294-1300 (Registrant's Telephone Number, Including Area Code) (Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report) Indicate by check whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes No X ----- ----- At August 6, 2003 there were 12,119,382 shares of common stock, $.01 par value, outstanding. FAMOUS DAVE'S OF AMERICA, INC. JUNE 29, 2003 TABLE OF CONTENTS
PAGE NO. -------- PART I FINANCIAL INFORMATION Item 1 Condensed Consolidated Financial Statements Condensed Consolidated Balance Sheets - June 29, 2003 and December 29, 2002 3 Condensed Consolidated Statements of Operations - For the twenty-six and thirteen weeks ended June 29, 2003 and June 30, 2002 4 Condensed Consolidated Statements of Cash Flows - For the twenty-six weeks ended June 29, 2003 and June 30, 2002 5 Notes to Condensed Consolidated Financial Statements 6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 12 Item 3 Quantitative and Qualitative Disclosures About Market Risk 20 Item 4 Controls and Procedures 20 PART II OTHER INFORMATION Item 1 Legal Proceedings 20 Item 4 Submission of Matters to a Vote of Security Holders 20 Item 6 Exhibits and Reports on Form 8-K 21 SIGNATURES 22
2 FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS JUNE 29, 2003 AND DECEMBER 29, 2002 (IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED) (AUDITED) JUNE 29, DECEMBER 29, ----------- ------------ 2003 2002 ----------- ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $ 6,144 $ 9,473 Accounts receivable, net 1,422 1,026 Inventories 2,062 1,775 Prepaids and other current assets 1,472 1,276 -------- -------- Total current assets 11,100 13,550 PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET 50,672 51,861 OTHER ASSETS: Notes receivable, net of current portion 1,244 1,364 Deposits 394 375 Debt issuance costs, net 622 653 Deferred tax asset 8,676 7,014 -------- -------- TOTAL ASSETS $ 72,708 $ 74,817 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current portion of long-term debt $ 401 $ 387 Current portion of capital lease obligations 583 708 Accounts payable 2,200 3,459 Accrued payroll and related taxes 1,490 1,036 Other current liabilities 1,991 2,191 -------- -------- Total current liabilities 6,665 7,781 LONG-TERM DEBT, NET OF CURRENT PORTION 13,489 12,422 FINANCING LEASE OBLIGATION 4,500 4,500 CAPITAL LEASE OBLIGATIONS, NET OF CURRENT PORTION 194 432 DEFERRED RENT 2,421 2,117 DEFERRED GAIN, NET OF CURRENT PORTION 254 273 -------- -------- Total liabilities 27,523 27,525 -------- -------- SHAREHOLDERS' EQUITY: Common stock, $.01 par value, 100,000 shares authorized, 11,605 and 11,388 shares issued and outstanding 116 114 Additional paid-in capital 54,710 54,222 Accumulated deficit (9,641) (7,044) -------- -------- Total shareholders' equity 45,185 47,292 -------- -------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 72,708 $ 74,817 ======== ========
See accompanying notes to condensed consolidated financial statements. 3 FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA AND SHARES OUTSTANDING) (UNAUDITED)
THIRTEEN WEEKS ENDED TWENTY SIX WEEKS ENDED ------------------------------- ------------------------------- JUNE 29, JUNE 30, JUNE 29, JUNE 30, 2003 2002 2003 2002 ------------ ------------ ------------ ------------ REVENUES $ 25,941 $ 24,207 $ 48,948 $ 45,413 COSTS AND EXPENSES: Food and beverage costs 7,326 7,194 13,888 13,875 Labor and benefits 7,099 6,361 13,764 12,158 Operating expenses 5,892 5,148 11,258 9,737 Depreciation and amortization 1,247 1,146 2,489 2,276 Asset impairment charge 3,474 0 3,474 0 Pre-opening expenses 284 318 506 330 General and administrative 2,124 2,020 4,298 3,791 ------------ ------------ ------------ ------------ Total costs and expenses 27,446 22,187 49,677 42,167 ------------ ------------ ------------ ------------ INCOME (LOSS) FROM OPERATIONS (1,505) 2,020 (729) 3,246 ------------ ------------ ------------ ------------ OTHER INCOME (EXPENSE): Interest income 58 137 120 207 Interest expense (471) (361) (863) (751) Gain on sale of property and equipment 10 2 19 772 Other income (expense) (556) 84 (652) 123 Equity in loss of unconsolidated affiliate 0 (120) (2,155) (548) ------------ ------------ ------------ ------------ Total other income (expense) (959) (258) (3,531) (197) ------------ ------------ ------------ ------------ INCOME (LOSS) BEFORE INCOME TAXES (2,464) 1,762 (4,260) 3,049 INCOME TAX BENEFIT (EXPENSE) 961 (691) 1,662 (1,189) ------------ ------------ ------------ ------------ NET INCOME (LOSS) $ (1,503) $ 1,071 $ (2,598) $ 1,860 ============ ============ ============ ============ BASIC NET INCOME (LOSS) PER COMMON SHARE $ (0.13) $ 0.09 $ (0.23) $ 0.16 ============ ============ ============ ============ DILUTED NET INCOME (LOSS) PER COMMON SHARE $ (0.13) $ 0.09 $ (0.23) $ 0.16 ============ ============ ============ ============ WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - BASIC 11,448,381 11,348,107 11,419,918 11,283,920 ============ ============ ============ ============ WEIGHTED AVERAGE COMMON SHARES OUTSTANDING - DILUTED 11,448,381 11,998,155 11,419,918 11,964,679 ============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements. 4 FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
TWENTY SIX WEEKS ENDED JUNE 29, JUNE 30, 2003 2002 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ (2,598) $ 1,860 Adjustments to reconcile net income (loss) to cash flows from operating activities Depreciation 2,489 2,276 Amortization of debt issuance costs 39 27 Loss (gain) on disposal of property 366 (772) Asset impairment charge 3,474 0 Deferred tax asset (1,662) 1,189 Deferred rent 304 427 Equity in loss of unconsolidated affiliate 2,155 548 Changes in operating assets and liabilities: Accounts receivable, net (396) 405 Inventories (287) (283) Prepaids and other current assets (149) (122) Deposits (19) 95 Accounts payable (1,259) 1,847 Accrued payroll and related taxes 454 (103) Other current liabilities (200) (334) -------- -------- Cash flows from operating activities 2,711 7,060 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of property, equipment, and leasehold improvements 0 2,983 Purchases of property, equipment and leasehold improvements (3,888) (5,318) Investment in unconsolidated affiliate (2,155) (687) Repayments of advances from investment in unconsolidated affiliate 0 392 Advances on notes receivable 0 (887) Payments received on notes receivable 74 908 -------- -------- Cash flows from investing activities (5,969) (2,609) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Payments for debt issuance costs (9) 0 Net payments on line of credit 0 (100) Payments on long-term debt (190) (1,057) Payments on capital lease obligations (364) (488) Proceeds from exercise of stock options and warrants 492 566 -------- -------- Cash flows from financing activities (71) (1,079) -------- -------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (3,329) 3,372 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 9,473 7,398 -------- -------- CASH AND CASH EQUIVALENTS, END OF PERIOD $ 6,144 $ 10,770 ======== ======== NON-CASH INVESTING AND FINANCING ACTIVITIES: Stock options issued for debt issuance costs $ 0 $ 41 ======== ======== Equipment purchased under capital lease obligations $ 0 $ 45 ======== ======== Common stock issued in connection with property acquired $ 0 $ 206 ======== ======== Equipment purchased with notes payable $ 0 $ 1,423 ======== ========
See accompanying notes to condensed consolidated financial statements. 5 FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) JUNE 29, 2003 (1) GENERAL Famous Dave's of America, Inc. ("Famous Dave's" or our "Company") owns and operates or franchises restaurants under the name "Famous Dave's" throughout various regions of the United States. As of June 29, 2003, there were 83 Famous Dave's restaurants including 43 company-operated and 40 franchise-operated. Our restaurants, the majority of which offer full table service, feature hickory smoked, off-the-grill favorites served in one of our two casual formats: a "northwoods" style lodge, or a nostalgic roadhouse "shack". We seek to differentiate ourselves by providing high quality food in these distinctive and comfortable environments. At June 29, 2003, there were five franchised restaurants in development. As of June 30, 2002 we operated or franchised 64 restaurants, with three additional company-owned and two franchised units in development. (2) BASIS OF FINANCIAL STATEMENT PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared by us following the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations. Although we believe that the disclosures are adequate to make the information presented not misleading, it is suggested that these interim condensed consolidated financial statements be read in conjunction with our most recent audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended December 29, 2002. In our opinion, all adjustments (which include only normal recurring adjustments) necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented have been made. (3) IMPAIRMENT OF LONG-LIVED ASSETS Restaurant sites are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of restaurant sites to be held and used is measured by a comparison of the carrying amount of the restaurant site to future net cash flows expected to be generated on a restaurant-by-restaurant basis. If such a restaurant site is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the restaurant site exceeds the fair value. Restaurant sites to be disposed of are reported at the lower of their carrying amount or fair value on a restaurant-by-restaurant basis, less estimated costs to sell. After evaluating revenue and cash flow projections at company-operated restaurants, we recorded $3.5 million in impairment charges for five under-performing restaurants during the second quarter ended June 29, 2003. Four of these restaurants were opened within the past 12 months and have produced revenues significantly below expectations. We are reviewing our options relative to all of these properties, which may include the sale or closing of the restaurants. Our Company expects to incur an additional $600,000 in lease buyout and related expenses over the next two quarters. 6 FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) JUNE 29, 2003 (4) RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146 requires the recognition of a liability for a cost associated with an exit or disposal activity when the liability is incurred versus the date our Company commits to an exit plan. In addition, SFAS No. 146 states the liability should be initially measured at fair value. The requirements of SFAS No. 146 are effective for exit or disposal activities that are initiated after December 31, 2002. Our Company believes the adoption of SFAS No. 146 will not have a material effect on our Company's consolidated financial position or results of operations. Effective for the year ended December 31, 2002, our Company adopted the disclosure provisions of SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure." SFAS No. 148 amends the disclosure and certain transition provisions of Statement 123, "Accounting for Stock-Based Compensation." The additional disclosure requirements of this pronouncement have not had a material impact on our Company's financial position or results of operations. In April 2003, the FASB issued SFAS 149, "Amendment of Statement 133 on Derivative Instruments and Hedging Activities". This statement amends SFAS 133, Accounting for Derivative Instruments and Hedging Activities, to clarify financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities. The changes in this statement improve financial reporting by requiring that contracts with comparable characteristics be accounted for similarly, resulting in more consistent reporting of contracts as either derivatives or hybrid instruments. This statement is effective for contracts entered into or modified after June 30, 2003. Because our Company does not currently utilize derivative instruments or engage in hedging activities, management does not believe the adoption of this statement will have any immediate material impact on our Company. In May 2003, the FASB issued SFAS 150, "Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity". This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. It requires that an issuer classify a financial instrument that is within its scope as a liability (or an asset in some circumstances). Many of those instruments were previously classified as equity. The changes in this statement will result in a more complete depiction of an entity's liabilities and equity and will, thereby, assist investors and creditors in assessing the amount, timing, and likelihood of potential future cash outflows and equity share issuances. Reliability of accounting information will be improved by providing a portrayal of an entity's capital structure that is unbiased, verifiable, and more representationally faithful than information reported prior to issuance of this statement. This statement is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the beginning of the first interim period beginning after June 15, 2003. We do not believe the adoption of this statement will have any immediate material impact on our Company. 7 FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) JUNE 29, 2003 (5) NET INCOME (LOSS) PER SHARE OF COMMON STOCK Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding during the reporting period. Our Company's diluted net income (loss) per share is computed by dividing net income (loss) by the sum of the weighted average number of shares of common stock outstanding and common share equivalents, when dilutive, for the reporting period. Following is a table (in thousands, except per share data) of a reconciliation of basic and diluted net income (loss) per common share:
Thirteen Weeks Ended Twenty Six Weeks Ended -------------------------- -------------------------- June 29, June 30, June 29, June 30, 2003 2002 2003 2002 -------- -------- -------- -------- NET INCOME (LOSS) PER SHARE - BASIC: Net income (loss) $ (1,503) $ 1,071 $ (2,598) $ 1,860 Weighted average shares - outstanding 11,448 11,348 11,420 11,284 Net income (loss) per share - basic $ (0.13) $ 0.09 $ (0.23) $ 0.16 NET INCOME (LOSS) PER SHARE -DILUTED: Net income (loss) $ (1,503) $ 1,071 $ (2,598) $ 1,860 Weighted average shares outstanding 11,448 11,348 11,420 11,284 Dilutive impact of common stock equivalents outstanding 0 650 0 681 -------- -------- -------- -------- Weighted average shares and potential dilutive shares outstanding 11,448 11,998 11,420 11,965 Net income (loss) per share - dilutive $ (0.13) $ 0.09 $ (0.23) $ 0.16
Options and warrants to purchase approximately 1,218,000 and 22,500 shares of common stock with a weighted average exercise price of $3.84 and $8.08 were outstanding at June 29, 2003 and June 30, 2002, respectively, but were excluded from the 13 week diluted computation because they were anti-dilutive. Options and warrants to purchase approximately 1,595,000 and 58,000 shares of common stock with a weighted average exercise price of $3.53 and $7.85 were outstanding at June 29, 2003 and June 30, 2002, respectively, but were excluded from the 26 week diluted computation because they were anti-dilutive. 8 FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) JUNE 29, 2003 (6) STOCK-BASED COMPENSATION In accordance with Accounting Principles Board (APB) Opinion No. 25, our Company uses the intrinsic value-based method for measuring stock-based compensation cost which measures compensation cost as the excess, if any, of the quoted market price of our Company's common stock at the grant date over the amount the employee must pay for the stock. Our Company's policy is to grant stock options at fair value at the date of grant. The following table illustrates the effect on net income (loss) and net income (loss) per share if our Company had applied the fair value recognition provisions of FASB Statement No. 123, "Accounting for Stock-Based Compensation", to stock-based employee compensation (in thousands, except per share data).
Thirteen Weeks Ended Twenty-Six Weeks Ended ----------------------------- ----------------------------- June 29, June 30, June 29, June 30, 2003 2002 2003 2002 ---------- ---------- ---------- ---------- Net income (loss) as reported $ (1,503) $ 1,071 $ (2,598) $ 1,860 Less: Compensation expense determined under the fair value method, net of tax (243) (267) (487) (402) --------- --------- --------- --------- Pro forma net income (loss) $ (1,746) $ 804 $ (3,085) $ 1,458 ========= ========= ========= ========= Net income (loss) per share: Basic - as reported $ (0.13) $ 0.09 $ (0.23) $ 0.16 Basic - pro forma (0.15) 0.07 (0.27) 0.13 Diluted - as reported (0.13) 0.09 (0.23) 0.16 Diluted - pro forma (0.15) 0.07 (0.27) 0.12
(7) INCOME FROM FRANCHISEES As of June 29, 2003 we had 40 franchise-operated restaurants in 18 different states. All of our franchise agreements require that each restaurant operate in accordance with our operating procedures, adhere to the menu established by us and meet all quality, service and cleanliness standards. (8) RELATED PARTY TRANSACTIONS S&D LAND HOLDINGS, INC. - S&D Land Holdings, Inc. ("S&D"), is a company wholly owned by our Company's founding shareholder and Chairman. Through May 29, 2003, we leased three real estate units from S&D. On May 29, 2003, our Company acquired all of S&D's interest in one of these properties and negotiated a new operating lease directly with the landlord. Our Company paid S&D $243,707 as full consideration for the assignment of the lease and termination of the sublease. This amount represented the unamortized balance of S&D's original purchase price of the leasehold interest utilizing the 10% interest factor that was assumed by S&D and our Company on January 1, 1996 at the time the sublease was executed. 9 FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) JUNE 29, 2003 (9) INCOME TAXES At June 29, 2003, our Company had federal and state net operating loss carryforwards ("NOL's") for tax reporting purposes of approximately $14.4 million, which, if not used, will begin to expire in 2011, and tax credit carry forwards of approximately $1.0 million which, if not used, will also begin to expire in 2011. Future changes in ownership of our Company may place limitations on the use of these net operating loss carry forwards. Our Company utilizes the liability method of accounting for income taxes. Deferred tax assets and liabilities are recognized for the expected future tax consequences attributable to temporary differences between the financial statement and income tax reporting bases of assets and liabilities. (10) NOTES PAYABLE We incurred one new note payable during the second quarter ended June 29,2003, with GE Capital Franchise Finance Corporation, of approximately $1,272,000. The note is payable in estimated monthly installments of $11,000, which includes an initial variable interest rate of approximately 7.5%, and is secured by the real estate and equipment at one of our new company-owned restaurants. As of June 29, 2003, future principal payments on the outstanding notes were approximately $13.9 million. (11) FINANCING LEASE OBLIGATIONS We did not incur any new financing lease obligations during the second quarter ended June 29, 2003. As of June 29, 2003, future principal financing lease obligation payments were approximately $4.5 million. (12) CAPITAL LEASE OBLIGATIONS We did not incur any new capital lease obligations during the second quarter ended June 29, 2003. As of June 29, 2003, future principal capital lease obligation payments were approximately $777,000. (13) DEFERRED GAIN AND NOTE RECEIVABLE During the second quarter ended July 2, 2000, our Company sold property and equipment at two of its company-operated restaurants. These restaurants were converted to franchises. Our Company financed part of the sale price on each transaction with notes that bear interest at 9.6% and 12% and require monthly payments of principal and interest. The principal balance on these note receivables were approximately $736,000 as of June 29, 2003. They are secured by equipment and mature July 2010. The note receivable for the sale of one restaurant was approximately 90% of the selling price. We recorded a deferred gain on this sale and are recognizing the gain over the term of the note receivable. We did not incur any new note receivable lease obligations during the second quarter ended June 29, 2003. Included in the notes receivable balance are several notes with franchisees relating to the sale of assets. This information is detailed in our Company's Form 10-K for the fiscal year ended December 29, 2002. The total notes receivable balance as of June 29, 2003 was approximately $1.45 million. (14) COMMITMENTS AND CONTINGENCIES None. 10 FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) JUNE 29, 2003 (15) INVESTMENT IN AND ADVANCES TO UNCONSOLIDATED SUBSIDIARY On February 26, 2003, our Company completed a transaction in which we disposed of our 40% interest in FUMUME, LLC. As a result, our obligations under the Operating Agreement and Management Agreement were terminated, including any obligation to fund cash operating losses. On March 21, 2003, our Company completed a transaction with the landlord at the Chicago location that terminated our obligations under the lease. Under the agreement, we paid lease termination fees of approximately $1.6 million and were responsible for rent and property taxes through April 30, 2003. Losses related to this equity investment, including the lease termination fee, were approximately $2.2 million, which were recorded in the first quarter ended March 30, 2003. For the quarter ended June 29, 2003, our Company no longer had any equity interests or obligations and incurred no losses related to this equity investment. 11 FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ITEM 2. Management's Discussion and Analysis OVERVIEW The business of Famous Dave's of America, Inc. ("Famous Dave's" or our "Company") is to develop, own, operate and franchise casual dining restaurants under the name "Famous Dave's." As of June 29, 2003, we owned & operated or franchised 83 restaurants, with locations shown in the table below. In addition, we have signed development agreements representing commitments to develop an additional 148 franchised restaurants.
JUNE 29, 2003 JUNE 30, 2002 -------------------------------------------- -------------------------------------------- COMPANY COMPANY OWNED FRANCHISED TOTAL OWNED FRANCHISED TOTAL STATE RESTAURANTS RESTAURANTS RESTAURANTS RESTAURANTS RESTAURANTS RESTAURANTS ----- ----------- ----------- ----------- ----------- ----------- ----------- Alabama 0 1 1 0 1 1 Arkansas 1 0 1 0 0 0 Georgia 3 1 4 0 1 1 Illinois 9 4 13 9 4 13 Indiana 0 1 1 0 1 1 Iowa 3 1 4 3 0 3 Kansas 0 1 1 0 0 0 Kentucky 0 1 1 0 1 1 Maryland 5 0 5 5 0 5 Michigan 0 1 1 0 0 0 Minnesota 12 6 18 12 6 18 Montana 0 1 1 0 0 0 Nebraska 1 4 5 1 2 3 New Jersey 0 3 3 0 1 1 North Dakota 0 1 1 0 1 1 Ohio 0 1 1 0 1 1 Oklahoma 1 0 1 0 0 0 South Dakota 0 1 1 0 1 1 Tennessee 0 3 3 0 1 1 Texas 2 0 2 0 0 0 Utah 0 2 2 2 0 2 Virginia 6 0 6 5 0 5 Wisconsin 0 7 7 0 6 6 ----------- ----------- ----------- ----------- ----------- ----------- 43 40 83 37 27 64
Our future additional revenues and profits will depend upon various factors, including additional market acceptance of the Famous Dave's concept, the quality of our restaurant operations, the ability to successfully expand into new markets, our ability to raise additional financing as required and general economic conditions. There can be no assurance that we will successfully implement our expansion plans, in which case we will continue to be dependent on revenues from existing operations. We also face all of the risks, expenses and difficulties frequently encountered in the development of an expanding business. Furthermore, to the extent that our expansion strategy is successful, we must manage the transition to multiple-site and higher-volume operations, the control of overhead expenses and the addition and retention of necessary personnel. 12 FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Components of operating expenses include operating payroll and employee benefits, occupancy costs, repairs and maintenance, advertising and promotion. Certain of these costs are variable and will increase with sales volume. The primary fixed costs are corporate and restaurant management and occupancy costs. Our experience is that when a new restaurant opens, it incurs higher than normal levels of labor and food costs until operations stabilize, usually during the first three months of operation. As restaurant management and staff gain experience after the opening of a new restaurant, improvements are seen in expense controls such as labor scheduling, food cost management and operating expenses, and expense levels are brought down to levels similar to those at our more established restaurants. General and administrative expenses include all corporate and administrative functions that serve to support existing operations and provide an infrastructure to support future growth. Management, supervisory and staff salaries, employee benefits, travel, rent, depreciation, general insurance and marketing expenses are major items in this category. The following discussion and analysis of financial condition and results of operations should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and notes, and the audited consolidated financial statements and notes included in our Company's Form 10-K for the fiscal year ended December 29, 2002. RESULTS OF OPERATIONS Our restaurant level operating profit expressed as a percentage of restaurant revenues is as follows: (this does not include any of our franchise royalty income, licensing royalty income, franchise fee income, general and administrative expenses and asset impairment charges):
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED -------------------------------- -------------------------------- JUNE 29, JUNE 30, JUNE 29, JUNE 30, 2003 2002 2003 2002 (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) ----------- ----------- ----------- ----------- RESTAURANT REVENUES 100.0% 100.0% 100.0% 100.0% UNIT-LEVEL COSTS AND EXPENSES Food and beverage costs 29.9% 31.5% 29.9% 32.0% Labor and benefits 29.0% 27.8% 29.7% 28.0% Operating expenses 24.0% 22.5% 24.2% 22.5% Depreciation and amortization 4.8% 4.7% 5.1% 4.9% Pre-opening expenses 1.2% 1.4% 1.1% 0.8% ----------- ----------- ----------- ----------- Total costs and expenses 88.9% 87.9% 90.0% 88.2% ----------- ----------- ----------- ----------- RESTAURANT-LEVEL OPERATING PROFIT 11.1% 12.1% 10.0% 11.8% =========== =========== =========== ===========
13 FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS REVENUES: RESTAURANT REVENUES Restaurant revenues for the 13 weeks ended June 29, 2003 were $24,523,000 compared to $22,870,000 for the same period in 2002, a 7.2% increase. For the 26 weeks ended June 29, 2003, restaurant revenues were $46,416,000 compared to $43,358,000 for the same period in 2002, a 7.1% increase. These increases were a result of revenues generated by new restaurants, offset by a decrease in comparable same store sales. OTHER REVENUE As of June 29, 2003, our Company had 31 restaurants that had been open for more than 18 months and these restaurants reported decreases in same store sales of approximately 1.7% and 2.2% for the 13 weeks and 26 weeks ended June 29, 2003, respectively. The decline in sales resulted from a difficult economic environment. Other revenue for our Company consists of franchise royalties, franchise fees and licensing royalties. Franchise royalty income is based on a percent of sales. Franchise royalties increased approximately 43% for the 13 weeks ended June 29, 2003 as compared to the 13 weeks ended June 30, 2002. For the 26 week period ended June 29, 2003, franchise royalties increased approximately 45% as compared to the same period in fiscal 2002. This increase was primarily a result of 13 additional franchise-operated restaurants that opened between June 30, 2002 and June 29, 2003. Franchise fee income reflects initial non-refundable fixed fees which are recorded as revenue when an agreement is signed, and no additional material services are required by our Company. Franchise fees decreased approximately 47% for the 13 weeks ended June 29, 2003 as compared to the 13 weeks ended June 30, 2002. For the 26 week period ended June 29, 2003, franchise fee income decreased by approximately 17% as compared to the the same period in fiscal 2002. This difference was due to fewer new area development agreements signed in the 13 and 26 week periods ended June 29, 2003, compared to the same periods in fiscal 2002. We also receive licensing royalty income based on sales of branded products including sauces, seasoning and prepared meats. Licensing royalties decreased approximately 14% for the 13 week period ended June 29, 2003, compared to the same period in 2002. For the 26 week period ended June 29, 2003, licensing royalty income decreased approximately 12% as compared to the same period in fiscal 2002. This decrease was primarily a result of lower branded product sales. 14 FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The chart below shows a summary of revenues (in thousands) by type:
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED -------------------------------- -------------------------------- JUNE 29, JUNE 30, JUNE 29, JUNE 30, 2003 2002 2003 2002 (UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED) ----------- ----------- ----------- ----------- REVENUE: Restaurant Revenues $ 24,523 $ 22,870 $ 46,416 $ 43,358 Franchise Royalty Income 1,086 758 1,918 1,326 Franchise Fees 260 495 500 600 Licensing Royalty Income 72 84 114 129 ----------- ----------- ----------- ----------- TOTAL REVENUES $ 25,941 $ 24,207 $ 48,948 $ 45,413 =========== =========== =========== ===========
FOOD AND BEVERAGE COSTS For the 13 week period ended June 29, 2003, food and beverage costs were $7,326,000 or 29.9% of restaurant revenue, compared to $7,194,000 or 31.5% of restaurant revenue for the same period in 2002. For the 26 week period ended June 29, 2003, food and beverage costs were $13,888,000 or 29.9% of restaurant revenue, compared to $13,875,000 or 32.0% of restaurant revenue for the same period in 2002. The decrease in food and beverage costs as a percent of restaurant revenue was due to lower commodity costs, primarily a reduction in the cost of ribs. We expect similar results during the third quarter of fiscal 2003. LABOR AND BENEFITS For the 13 week period ended June 29, 2003, labor and benefits were $7,099,000 or 29.0% of restaurant revenue, compared to $6,361,000 or 27.8% of restaurant revenue for the same period in 2002. For the 26 week period ended June 29, 2003, labor and benefits were $13,764,000 or 29.7% of restaurant revenue, compared to $12,158,000 or 28.0% of restaurant revenue for the same period in 2002. This increase in labor and benefits as a percent of restaurant revenue was primarily due to the effect of fixed salaries and benefits against lower average revenue as well as increases in the cost of benefits. OPERATING EXPENSES For the 13 week period ended June 29, 2003, operating expenses were $5,892,000 or 24.0% of restaurant revenue, compared to $5,148,000 or 22.5% of restaurant revenue for the same period in 2002. For the 26 week period ended June 29, 2003, operating expenses were $11,258,000 or 24.2% of restaurant revenue, compared to $9,737,000 or 22.5% of restaurant revenue for the same period in 2002. The increase in operating expenses as a percent of restaurant revenue was a result of higher utility costs and the effect of higher fixed occupancy costs against lower average revenues. 15 FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ASSET IMPAIRMENT CHARGE Asset impairment charges for the 13 and 26 week period ended June 29, 2003 were $3,474,000 or 13.4% and 7.1% of total revenue, respectively. There were no charges for impairments on assets for the same period ended June 30, 2002. The impairment was a result of writing down the assets of five company-operated restaurants to fair value (see note 3 Impairment of Long-Lived Assets). DEPRECIATION AND AMORTIZATION For the 13 week period ended June 29, 2003, unit-level depreciation and amortization was $1,178,000 or 4.8% of restaurant revenue, compared to $1,080,000 or 4.7% of restaurant revenue for the same period in 2002. For the 26 week period ended June 29, 2003, unit-level depreciation and amortization was $2,356,000 or 5.1% of restaurant revenue, compared to $2,144,000 or 4.9% of restaurant revenue for the same period in 2002. The increase in the depreciation and amortization dollar was primarily a result of new company-operated restaurant openings. PRE-OPENING EXPENSES For the 13 week period ended June 29, 2003, pre-opening expenses were $284,000 or 1.2% of restaurant revenue, compared to $318,000 or 1.4% of restaurant revenue for the same period in 2002. The decrease in pre-opening expenses was primarily a result of a lower number of company-operated restaurants that were opened during the 13 week period of 2003, compared to the same period in 2002. For the 26 week period ended June 29, 2003, pre-opening expenses were $506,000 or 1.1% of restaurant revenue, compared to $330,000 or 0.8% of restaurant revenue for the same period in 2002. The increase in pre-opening expenses, per restaurant, was primarily due to larger marketing and grand opening expenses for new restaurants. RESTAURANT-LEVEL OPERATING PROFIT Restaurant-level operating profit represents income from restaurant operations before general and administrative expenses and asset impairment charges, and excludes licensing, royalty and fee income. Restaurant-level operating profit totaled $2,745,000 or 11.2% of restaurant revenue for the 13 week period ended June 29, 2003, compared to $2,768,000 or 12.1% of restaurant revenue for the 13 week period ended June 30, 2002. For the 26 week period ended June 29, 2003, restaurant-level operating profit was $4,638,000 or 10.0% of restaurant revenue, compared to $5,113,000 or 11.8% of restaurant revenue for the same period in 2002. Although restaurant-level operating profit should not be considered an alternative to income from operations as a measure of our operating performance, such unit-level measurement is commonly used as an additional measure of operating performance in the restaurant industry and certain related industries. The decrease in restaurant-level operating profit for the 13 and 26 week periods, both in amount and as a percent of restaurant revenue from 2002 to 2003, was primarily attributable to the increase in operating expenses as a percent of revenues, as outlined in the previous sections. GENERAL AND ADMINISTRATIVE EXPENSES General and administrative ("G&A") expenses for the 13 week period ended June 29, 2003 were $2,124,000 or 8.2% of total revenue, compared to $2,020,000 or 8.3% of total revenue for the 13 weeks ended June 30, 2002. For the 26 week period ended June 29, 2003, G&A expenses were $4,298,000 or 8.8% of total revenue, compared to $3,791,000 or 8.3% of total revenue for the same period in 2002. The increase in general and administrative expenses for the 26 week period reflected increased personnel at the corporate level and increased recruiting and training costs to support restaurant and franchise growth. 16 FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS INCOME (LOSS) FROM OPERATIONS Income (loss) from operations totaled $(1,505,000) or 5.8% of total revenue for the 13 weeks ended June 29, 2003, compared to $2,020,000 or 8.3% of operating revenue for the 13 weeks ended June 30, 2002. For the 26 week period ended June 29, 2003, income from operations was $(729,000) or 1.5% of total revenue, compared to $3,246,000 or 7.1% of total revenue for the same period in 2002. The decrease in income (loss) from operations for the 13 and 26 week periods was primarily attributable to the asset impairment charge and an increase in operating expenses as outlined above. INTEREST INCOME Interest income was $58,000 or 0.2% of total revenue for the 13 weeks ended June 29, 2003, compared to $137,000 or 0.6% of total revenue for the 13 weeks ended June 30, 2003. For the 26 week period ended June 29, 2003, interest income was $120,000 or 0.2% of total revenue, compared to $207,000 or 0.5% of total revenue for the same period in 2002. The decrease in interest income was a result of a smaller number of total outstanding notes receivable, payable to our Company. INTEREST EXPENSE Interest expense was $471,000 or 1.8% of total revenue for the 13 weeks ended June 29, 2003, compared to $361,000 or 1.5% of total revenue for the 13 weeks ended June 30, 2002. For the 26 week period ended June 29, 2003, interest expense was $863,000 or 1.8% of total revenue, compared to $751,000 or 1.7% of total revenue for the same period in 2002. The increase in interest expense for the 13 and 26 week periods ended June 29, 2003, as compared to the same periods ended June 30, 2002, was a result of increased borrowings. GAIN (LOSS) ON SALE OF ASSETS AND OTHER INCOME (EXPENSE) During the 26 weeks ended June 29, 2003, our Company recorded a loss on the sale of assets and other expenses, net, of $(546,000) or (2.1)% of total revenue. This compares to a net gain of $86,000, or 0.4% of total revenue for the 13 weeks ended June 30, 2002. For the 26 week period ended June 29, 2003, our Company recorded a loss on the sale of assets and other expenses, net, of $(633,000) or 1.3% of total revenue. This compares to a net gain of $895,000 or 2.0% of total revenue for the 26 weeks ended June 30, 2002. The recorded loss of $(633,000) in 2003 was primarily attributable to the write-off of costs associated with a failed site, disposal of old equipment, and employment severance payments to former company executives. EQUITY IN LOSSES AND IMPAIRMENT OF INVESTMENT IN UNCONSOLIDATED SUBSIDIARY Effective June 1, 2001, Famous Dave's Ribs-U, Inc., our wholly-owned subsidiary, entered into a joint venture with Memphis-based Lifestyle Ventures, LLC, H&H Holding Company, LLC and another investor to develop a themed restaurant concept based on the entertainment artist Isaac Hayes. Pursuant to the agreement governing the joint venture, the participants in the joint venture formed a Delaware limited liability company named FUMUME, LLC. FUMUME opened its first location in Chicago in June 2001 and its second location in Memphis, Tennessee in October 2001. In exchange for a 40% interest in FUMUME, our Company agreed to contribute: (i) $825,507 in working capital, (ii) the assets comprising Famous Dave's Ribs and Blues Club in Chicago and (iii) certain rights to use Famous Dave's various licensed marks. In addition, our Company agreed to reimburse FUMUME for operating losses incurred at the Memphis and Chicago clubs, and provide various management services for the clubs. In exchange for these services, our Company received a fee equal to 3% of gross sales per year. 17 FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS On February 26, 2003, our Company completed a transaction in which our Company disposed of our 40% interest in FUMUME. As a result, our obligations under the Operating Agreement and Management Agreement were terminated, including any obligation to fund cash operating losses. On March 21, 2003, our Company completed a transaction with the landlord at the Chicago location that terminated our obligations under the lease. Under the agreement, we paid lease termination fees of approximately $1.6 million and were responsible for rent and property taxes through April 30, 2003. Having disposed of our interests in the LLC, we had no recorded losses on unconsolidated affiliate's for the 13 week period ended June 29, 2003. We recorded a loss of $(120,000) for the same period in 2002. For the 26 week period ended June 29, 2003, the equity in loss of unconsolidated affiliate increased approximately 293% to $(2,155,000) as compared to the same period in fiscal 2002. This increase was primarily a result of lease termination fees associated with our 40% interest in FUMUME. INCOME TAX PROVISION For the 13 and 26 week periods ended June 29, 2003, our Company recorded an income tax benefit of approximately $961,000 and $1,662,000, respectively, or approximately 39% of the loss before taxes. NET INCOME (LOSS) PER COMMON SHARE The net income (loss) for the 13 week period ended June 29, 2003 was $(1,503,000) or $(.13) per share on approximately 11,448,381 weighted average diluted shares outstanding, compared to $1,071,000 or $.09 per share on approximately 11,998,155 weighted average diluted shares outstanding for the 13 weeks ended June 30, 2002. The decrease in net income (loss) per share was primarily a result of asset impairment charges. The net income (loss) for the 26 week period ended June 29, 2003 was $(2,598,000) or $(0.23) per share on approximately 11,419,918 weighted average diluted shares outstanding, compared to $1,860,000 or $0.16 per share on approximately 11,964,679 weighted average diluted shares outstanding for the same period in 2002. The decrease in net income (loss) per share was primarily a result of asset impairment charges and a FUMUME lease termination charge. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES During the 26 week period ended June 29, 2003, our balance of cash and cash equivalents decreased by $3,329,000 to approximately $6,144,000 from the December 29, 2002 balance. The decrease in cash and cash equivalents was due primarily to purchases of assets related to the development of new company-operated restaurants and the lease termination costs associated with the FUMUME investment (approximately $1.7 million). For the remaining 26 weeks of fiscal 2003, our Company does not plan to open any more company-operated restaurants and as a result, we don't anticipate any new financing during this time period. CRITICAL ACCOUNTING POLICIES Our significant accounting policies are described in Note One to the consolidated financial statements included in our annual report for the year ended December 29, 2002. The accounting policies used in preparing our interim 2003 consolidated condensed financial statements are the same as those described in our annual report. Our critical accounting policies are those both having the most impact to the reporting of our financial condition and results, and requiring significant judgments and estimates. Our critical accounting policies include those related to (a) property, equipment and leasehold improvements impairments; (b) initial franchise revenues; (c) investment in unconsolidated subsidiary; and (d) deferred tax asset valuation allowance. The evaluation of long-lived assets for impairment involves management judgment in estimating future cash flows related to and fair values of such assets. Initial franchise revenues are recognized when our Company has performed substantially all of its obligations as franchisor. Management records the investment in unconsolidated subsidiary on the equity method based on our Company's net loss obligation (100% of the cash loss). The evaluation of our deferred tax asset involves our judgment of our company's future utilization of loss carryforwards and tax credits. 18 FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS SEASONALITY Our units typically generate higher revenues during the second and third quarters (spring and summer months) than in the first and fourth quarters (fall and winter months) as a result of seasonal traffic increases experienced during the summer months, and possible adverse weather that can disrupt customer and employee transportation to our restaurants during the winter months. SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. Certain information included in this Form 10-Q and other materials filed or to be filed with the Securities and Exchange Commission (as well as information included in oral statements or other written statements made or to be made by us) contain statements that are forward-looking. A number of important factors could, individually or in the aggregate, cause actual results to differ materially from those expressed or implied in any forward-looking statements. Such factors include, but are not limited to, the following: our ability to expand into new markets; our ability to execute our expansion strategy; the ability of our franchisees to execute their restaurant development plans, changes in business strategy or development plans; availability and terms of capital; changes in costs of food, labor, and employee benefits; changes in government regulations; competition; availability of locations and terms of sites for restaurant development; development and operating costs; advertising and promotional efforts; and brand awareness. For further information regarding these and other factors, see our Annual Report on Form 10-K for the fiscal year ended December 29, 2002. 19 FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our Company's financial instruments include cash and cash equivalents and long-term debt. Our Company includes as cash and cash equivalents certificates of deposits and all other investments with original maturities of 90 days or less when purchased and which are readily convertible into known amounts of cash. Our Company's cash and cash equivalents are not subject to significant interest rate risk due to the short maturities of these instruments. The total outstanding long-term debt of our Company as of June 29, 2003 was approximately $13,890,000. Of the outstanding long-term debt, approximately $4,060,000 consisted of a variable interest rate while the remaining $9,830,000 was subject to a fixed interest rate. Our Company does not see the variable interest rate long-term debt as a significant interest rate risk. ITEM 4. CONTROLS AND PROCEDURES Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report. Based on their evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective. There have been no significant changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls or in other factors that could significantly affect these controls subsequent to the date of the evaluation referenced above. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Our Company is not a party to any material litigation and is not aware of any threatened litigation that would have a material adverse effect on its business. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Annual Meeting of Shareholders was held on June 12, 2003. At the Annual Meeting, all of management's nominees for directors as listed in the proxy statement for the Annual Meeting were elected with the following vote. Former board member, Martin J. O'Dowd, declined his election.
Affirmative Votes Authority Withheld ----------------- ------------------ David W. Anderson 10,194,346 246,374 Thomas J. Brosig 10,312,486 128,234 Dean A. Riesen 10,400,212 40,508 K. Jeffrey Dahlberg 10,402,681 38,039 Richard L. Monfort 10,403,531 37,189 Martin J. O'Dowd 10,066,901 373,819
20 FAMOUS DAVE'S OF AMERICA, INC. AND SUBSIDIARIES QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 10.1 Agreement and Assignment of Lease Rights dated May 30, 2003 by and between S&D Land Holdings, Inc. and the Company 31.1 Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-15(e) and 15d-15(e) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification of Chief Financial Officer pursuant to Securities Exchange Act rules 13a-15(e) and 15d-15(e) as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) Reports on Form 8-K During the Second Quarter, the Company filed two current reports on Form 8-K as follows: On April 9, 2003, we filed a Current Report on Form 8-K dated April 3, 2003 under Items 7, 9 and Item 12, releasing preliminary financial information related to the First Quarter 2003. On April 28, 2003, we filed a Current Report on Form 8-K dated April 22, 2003 under Items 7, 9 and Item 12, releasing financial information related to the First Quarter 2003, including certain non-GAAP financial measures. 21 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FAMOUS DAVE'S OF AMERICA, INC. August 8, 2003 /s/ David W. Anderson ------------------------ David W. Anderson Chief Executive Officer August 8, 2003 /s/ Kenneth J. Stanecki ------------------------ Kenneth J. Stanecki Chief Financial Officer 22 EX-10.1 3 c78867exv10w1.txt AGREEMENT AND ASSIGNMENT OF LEASE RIGHTS EXHIBIT 10.1 AGREEMENT AND ASSIGNMENT OF LEASE RIGHTS This Agreement and Assignment of Lease Rights (the "Agreement") is made as of the 30th day of May, 2003 by and between S&D Land Holdings, Inc., a Minnesota corporation ("S&D"), and Famous Dave's of America, Inc., a Minnesota corporation ("Famous"). WITNESSETH: WHEREAS, S&D is currently the tenant under a certain lease (the "Lease") with the Trustees of the H. Richard Knutson Revocable Intervivos Trust dated September 27, 1991 for the real property commonly known as 2131 Snelling Avenue North, Roseville, Minnesota, together with the building and improvements thereon (the "Leased Premises"); and WHEREAS, in 1996, because of the then lack of working capital of Famous, and as an accommodation to Famous, S&D purchased the tenant's interest in the Lease and sublet the Leased Premises to Famous pursuant to a certain sublease agreement, dated September 1, 1996 (the "Sublease Agreement"); and WHEREAS, S&D is owned and controlled by the Chairman of the Board and Chief Executive Officer of Famous; and WHEREAS, Famous, because of recent changes in the law and corporate environment and increased general public scrutiny regarding transactions with officers and directors and other affiliated parties, wishes to obtain all of S&D's interest in the Lease and Sublease, to eliminate a future relationship with S&D relating to the Leased Premises; and WHEREAS, S&D is willing, upon the terms and conditions set forth herein, to assign all of its interest in the Lease and Sublease Agreement to Famous; NOW, THEREFORE, it is hereby agreed: 1. Assignment. S&D hereby assigns to Famous all of its right, title and interest in the Lease. Termination of Sublease. S&D and Famous each agree that the Sublease is hereby terminated,and agree to prorate, effective May 30, 2003, all rents, charges, expenses, and other items relating to the Sublease. 2. Consideration. Famous agrees to pay to S&D the sum of Two Hundred Forty Three Thousand Seven Hundred Seven Dollars ($243,707) as full consideration for the assignment of lease and termination of Sublease, which amount represents the unamortized remaining balance of S&D' original purchase price of the tenant's interest under the Lease, utilizing the ten percent (10%) interest factor that was assumed by S&D and Famous on January 1, 1996, at the time the Sublease was executed. 3. Further Assurances. S&D and Famous each agree to take such further action and execute such certificates and other documents as may be necessary or appropriate to consummate the transactions contemplated by this Agreement. 4. Miscellaneous. The provisions of this Agreement shall be governed by the internal laws of the State of Minnesota. This Agreement may not be amended except in writing and signed by all the parties. No waiver of any provision hereunder shall be effective unless in writing signed by the party waiving its rights. This Agreement constitutes the entire agreement between S&D and Famous regarding the subject matter thereof, and there are no other oral or written agreements or inducements between them with respect to the Leased Premises, Lease, or Sublease Agreement. This Agreement may be executed in two or more counterparts, each of which shall be an original but all of which shall constitute one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. S&D LAND HOLDINGS, INC., a Minnesota corporation By /s/ David W. Anderson -------------------------------- Its President FAMOUS DAVE'S OF AMERICA, INC., a Minnesota corporation By /s/ Kenneth Stanecki -------------------------------- Its Chief Financial Officer EX-31.1 4 c78867exv31w1.txt CERTIFICATION OF CEO PURSUANT TO SECTION 302 EXHIBIT 31.1 CERTIFICATIONS I, David W. Anderson, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Famous Dave's of America, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. Famous Dave's of America, Inc.'s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for Famous Dave's of America, Inc., and have: a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Famous Dave's of America, Inc., including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of Famous Dave's of America, Inc.'s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. disclosed in this report any change in Famous Dave's of America, Inc.'s internal control over financial reporting that occurred during Famous Dave's of America, Inc.'s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, Famous Dave's of America, Inc.'s internal control over financial reporting; 5. Famous Dave's of America, Inc.'s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Famous Dave's of America, Inc.'s auditors and the audit committee of Famous Dave's of America, Inc.'s board of directors (or persons performing the equivalent functions): a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Famous Dave's of America, Inc.'s ability to record, process, summarize and report financial information; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in Famous Dave's of America, Inc.'s internal control over financial reporting. Date: August 8, 2003 /s/ David W. Anderson --------------------- David W. Anderson Chief Executive Officer EX-31.2 5 c78867exv31w2.txt CERTIFICATION OF CFO PURSUANT TO SECTION 302 EXHIBIT 31.2 CERTIFICATIONS I, Kenneth J. Stanecki, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Famous Dave's of America, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statement made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. Famous Dave's of America, Inc.'s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for Famous Dave's of America, Inc., and have: a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to Famous Dave's of America, Inc., including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b. evaluated the effectiveness of Famous Dave's of America, Inc.'s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and c. disclosed in this report any change in Famous Dave's of America, Inc.'s internal control over financial reporting that occurred during Famous Dave's of America, Inc.'s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, Famous Dave's of America, Inc.'s internal control over financial reporting; 5. Famous Dave's of America, Inc.'s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to Famous Dave's of America, Inc.'s auditors and the audit committee of Famous Dave's of America, Inc.'s board of directors (or persons performing the equivalent functions): a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect Famous Dave's of America, Inc.'s ability to record, process, summarize and report financial information; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in Famous Dave's of America, Inc.'s internal control over financial reporting. Date: August 8, 2003 /s/ Kenneth J. Stanecki ----------------------- Kenneth J. Stanecki Chief Financial Officer EX-32.1 6 c78867exv32w1.txt CERTIFICATION OF CEO PURSUANT TO SECTION 906 EXHIBIT 32.1 CERTIFICATION OF CHIEF EXECUTIVE OFFICER Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Famous Dave's of America, Inc. does hereby certify that: a. The Quarterly Report on Form 10-Q of Famous Dave's of America, Inc for the quarter ended June 29, 2003 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934: and b. information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Famous Dave's of America, Inc. Dated: August 8, 2003 /s/ David W. Anderson --------------------- David W. Anderson Chief Executive Officer EX-32.2 7 c78867exv32w2.txt CERTIFICATION OF CFO PURSUANT TO SECTION 906 EXHIBIT 32.2 CERTIFICATION OF CHIEF FINANCIAL OFFICER Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Famous Dave's of America, Inc. does hereby certify that: a. The Quarterly Report on Form 10-Q of Famous Dave's of America, Inc. for the quarter ended June 29, 2003 (the "Report") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934: and b. Information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Famous Dave's of America, Inc. Dated: August 8, 2003 /s/ Kenneth J. Stanecki ----------------------- Kenneth J. Stanecki Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----