UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: June 30,1995 Commission File Number: 0-18590
GOOD TIMES RESTAURANTS INC.
(Exact name of registrant as specified in its charter)
NEVADA
(State or other jurisdiction of incorporation or organization)
84-1133368
(I.R.S. Employer Identification No.)
8620 WOLFF COURT, SUITE 330, WESTMINSTER, CO 80030
(Address of principal executive offices) (Zip Code)
(303) 427-4221
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
since last report.)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 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.
[X] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Total number of shares of common stock outstanding at June 30,
1995.
6,898,156 SHARES OF COMMON STOCK, .001 PAR VALUE
Form 10-QSB
Quarter Ended June 30, 1995
INDEX
PAGE
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets - 3
June 30, 1995 and September 30, 1994
Consolidated Statements of Operations - 4
For the three months ended June 30,
1995 and 1994 and for the nine months ended
June 30, 1995 and 1994
Consolidated Statements of Cash Flow - 5
For the three months ended June 30,
1995 and 1994 and for the nine months
ended June 30, 1995 and 1994
Notes to Financial Statements 6
ITEM 2. Management's Discussion and Analysis 7
PART II - OTHER INFORMATION
ITEMS 1 through 6. 13
Signature 14
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, September 30,
1995 1994
CURRENT ASSETS:
Cash $366,000 $522,000
Funds escrowed 585,000 329,000
Receivables 105,000 432,000
Inventories 56,000 89,000
Prepaid expenses and other 408,000 331,000
Total current assets 1,520,000 1,703,000
FUNDS ESCROWED FOR RESTAURANT CONSTRUCTION 0 695,000
PROPERTY AND EQUIPMENT, at cost:
Land and building 2,529,000 2,750,000
Leasehold improvements 2,556,000 2,490,000
Fixtures and equipment 3,176,000 3,306,000
Construction-in-progress 99,000 1,381,000
Less accumulated depreciation
and amortization (1,124,000) (2,454,000)
7,236,000 7,473,000
OTHER ASSETS:
Assets held for sale 2,534,000 2,492,000
Deposits & Other 492,000 439,000
3,049,000 2,931,000
TOTAL ASSETS $11,782,000 $12,802,000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $67,000 $412,000
Accounts payable 631,000 899,000
Accrued liabilities 89,000 1,099,000
Total current liabilities 787,000 2,410,000
LONG-TERM DEBT, net of current maturities 205,000 1,374,000
DEFERRED LIABILITIES 140,000 327,000
MINORITY INTERESTS IN PARTNERSHIPS 1,870,000 1,641,000
LIABILITIES HELD FOR SALE 2,799,000 0
STOCKHOLDERS' EQUITY:
Common stock, $.001 par value;
50,000,000 shares authorized,
6,898,156 shares issued and
outstanding as of June 30, 1995
and 6,251,072 shares issued and
outstanding as of September 30, 1994. 7,000 6,000
Capital contributed in excess of par value 11,684,000 10,777,000
Note receivable - stockholders (881,000) 0
Accumulated deficit (4,829,000) (3,733,000)
Total stockholders' equity 5,981,000 7,050,000
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $11,782,000 $12,802,000
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
June 30, June 30,
1995 1994 1995 1994
NET REVENUES:
Restaurant sales, net $3,688,000 $3,635,000 $13,539,000 $10,754,000
Franchise revenues, net 36,000 25,000 117,000 136,000
Total revenues 3,724,000 3,660,000 13,656,000 10,890,000
RESTAURANT OPERATING EXPENSES:
Food & paper costs 1,365,000 1,203,000 4,681,000 3,488,000
Labor, occupancy & other 1,585,000 1,819,000 6,414,000 5,296,000
Depreciation & amortization 156,000 114,000 527,000 313,000
Total rest. operating costs 3,106,000 3,136,000 11,622,000 9,097,000
INCOME FROM RESTAURANT 618,000 523,000 2,034,000 1,793,000
OPERATIONS
OTHER OPERATING EXPENSES:
Selling, gen'l & admin exp. 774,000 579,000 2,420,000 1,792,000
Estimated operating loss
from March 31, 1995
through September 30, 1995
on line of business to
be sold 150,000 0 400,000 0
Loss on sale of RTC 0 0 125,000 0
Total other operating exp 924,000 579,000 2,975,000 1,792,000
INCOME LOSS)FROM OPERATIONS (306,000) (56,000) (923,000) (1,000)
OTHER INCOME & (EXPENSES):
Minority interest income
(expense), net (51,000) (19,000) (151,000) (97,000)
Interest income
(expense), net 18,000 6,000 (4,000) (22,000)
Other, net 0 (24,000) 0 7,000
Total other income & expense) (33,000) (37,000) (155,000) (126,000)
NET INCOME (LOSS) ($339,000) $93,000) ($1,096,000) ($125,000)
NET INCOME (LOSS) PER SHARE ($0.05) ($0.02) ($0.16) ($0.03)
WEIGHTED AVERAGE
SHARES OUTSTANDING 6,898,156 6,213,555 6,857,584 4,531,803
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended Nine Months Ended
June 30, June 30,
1995 1994 1995 1994
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income (loss) ($339,000) ($93,000) (1,096,000) ($125,000)
Depreciation & amortization 330,000 125,000 923,000 341,000
Changes in operating
assets & liabilities--
(Increase) decrease in:
Prepaid & receivables (39,000) (2,000) (93,000) (107,000)
Inventories 0 (2,000) (24,000) (6,000)
Other assets (16,000) 34,000 (156,000) 110,000
Opening expenses (134,000) (62,000) (284,000) (144,000)
(Decrease) increase in:
Accounts payable1 29,000 29,000 (97,000) (31,000)
Accrued interest 0 0 (12,000) 0
Accrued property taxes (84,000) (31,000) (13,000) 38,000
Accrued payroll &
P/R taxes (1,000) 14,000 5,000 73,000
Deposits 0 0 0 199,000
Other accrued liabilities/
deferred income (28,000) 49,000 733,000 137,000
Net cash provided by
(used in) operating
activities (182,000) 61,000 (114,000) 485,000
CASH FLOWS FROM
INVESTING ACTIVITIES:
Purchase) sale - FF&E, land
building and improvements (661,000) (2,228,000) 138,000 (3,355,000)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Debt incurred (paid) (214,000) 233,000 (553,000) (106,000)
Minority interest (81,000) (25,000) (85,000) 394,000
Paid in capital activity 0 37,000 27,000 4,630,000
Net cash provided by (used in)
financing activities (295,000) 245,000 (611,000) 4,918,000
INCREASE(DECREASE)IN CASH ($1,138,000) ($1,922,000) ($587,000)$2,048,000
UNAUDITED FINANCIAL STATEMENTS:
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all of the normal recurring adjustments
necessary to present fairly the financial position of the Company as of
June 30, 1995, the results of its operations and its cash flow for the
three month period ended June 30, 1995 and for the nine month period
ended June 30, 1995. Operating results for the three month period ended
June 30, 1995 and for the nine month period ended June 30, 1995 are not
necessarily indicative of the results that may be expected for the year
ending September 30, 1995.
The consolidated balance sheet as of September 30, 1994 is derived from
the audited financial statements, but does not include all disclosures
required by generally accepted accounting principles. As a result,
these financial statements should be read in conjunction with the
Company's Form 10-KSB for the fiscal year ended September 30, 1994.
2. SALE OF ROUND THE CORNER RESTAURANTS, INC.
On March 31, 1995, the Company received a proposal to purchase 100% of
the stock of Round The Corner Restaurants, Inc. ("RTC"), its wholly-owned
subsidiary operating a fifteen unit restaurant chain, from a group
led by current RTC management. The sale was anticipated to be closed on
or about June 30, 1995. The purchase price was established at $425,000
payable by $100,000 in cash and a $325,000 note. The Company took a
charge of approximately $375,000 in the three month period ended June
30, 1995 which included $250,000 in anticipated operating losses at RTC
between April 1, 1995 and the anticipated closing date of June 30, 1995
(including legal and accounting expenses associated with the sale of
RTC) and a loss of approximately $125,000 from the sale of a closed RTC
restaurant in Greeley, Colorado. A gain of approximately $223,000 on
the sale of RTC was deferred. Subsequently, the Company announced that
the closing had been delayed to July 31, 1995. However, there has been
a greater decline in net restaurants sales at RTC than anticipated
resulting in the renegotiation of the purchase price with the purchaser.
A definitive contract has been executed that reduced the amount of the
note payable to the Company to $200,000 and closing is scheduled for
September 30, 1995. The Company has taken an additional charge of
$150,000 in anticipated operating losses at RTC between July 1, 1995 and
September 30, 1995. The gain the Company will defer from the sale of
RTC is $98,000.
The Company has not included the financial results of RTC for the three
month period ended June 30, 1995 in its consolidated results for this
period. The Company's financial report for the nine month period ended
June 30, 1995 includes the financial results of RTC only for the six
month period ended March 31, 1995. However, the Company's financial
reports for the three month period ended June 30, 1994 and the nine
month period ended June 30, 1994 include the financial results of RTC
for both periods.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS FOR THE COMPANY
General
On July 27, 1992, the stockholders of Good Times Restaurants Inc. (the
"Company") approved a merger with Round The Corner Restaurants, Inc. ("RTC").
For financial statement purposes, RTC was considered the acquiring company and
the transaction was treated as a purchase by RTC of the Company, effective
August 1, 1992. For legal purposes, however, the Company remained the
surviving entity and the combined entity retained the Company's capital
structure.
In February 1993, the Company's operations and management were
reorganized as the holding company for its two operating subsidiaries, Good
Times Drive Thru Inc. ("Drive Thru") and RTC. The reorganization allowed
Drive Thru and RTC to function as separately accountable entities and allowed
RTC's and Drive Thru's managements to focus exclusively on their respective
businesses. The Company provided administrative and accounting support to
Drive Thru and RTC and charged monthly management fees based on a percentage
of net revenues for such services.
On March 31, 1995, the Company received a proposal to purchase 100% of
the stock of Round The Corner Restaurants, Inc. ("RTC"), its wholly-owned
subsidiary operating a fifteen unit restaurant chain, from a group led by
current RTC management. The sale was anticipated to be closed on or about
June 30, 1995. The purchase price was established at $425,000 payable by
$100,000 in cash and a $325,000 note. The Company took a charge of
approximately $375,000 in the three month period ended June 30, 1995 which
included $250,000 in anticipated operating losses at RTC between April 1, 1995
and the anticipated closing date of June 30, 1995 (including legal and
accounting expenses associated with the sale of RTC) and a loss of
approximately $125,000 from the sale of a closed RTC restaurant in Greeley,
Colorado. A gain of approximately $223,000 on the sale of RTC was deferred.
Subsequently, the Company announced that the closing had been delayed to July
31, 1995. However, there has been a greater decline in net restaurants sales
at RTC than anticipated resulting in the renegotiation of the purchase price
with the purchaser. A definitive contract has been executed that reduced the
amount of the note payable to the Company to $200,000 and closing is scheduled
for September 30, 1995. The Company has taken an additional charge of
$150,000 in anticipated operating losses at RTC between July 1, 1995 and
September 30, 1995. The gain the Company will defer from the sale of RTC is
$98,000.
At June 30, 1995, the Company operated 18 company-owned and joint-venture
Good Times restaurants and had 6 franchised restaurants open in
Colorado. The Company acquired 4 former Rally's Hamburger restaurants in Las
Vegas, Nevada, 2 of which were converted to Good Times units as of June 30,
1995 and are included in this total. The remaining 2 restaurants were
converted to Good Times and are open as of the date of this report.
June 30, 1994 June 30, 1995
Company-owned restaurants 7 10
Joint venture restaurants 2 8
Franchise operated restaurants 2 6
Total restaurants 11 24
Commencing with the Company's June 30, 1995 third quarter report, the
Company will be reporting same store sales figures only for Good Times Drive
Thru restaurants that have been open fifteen months or longer to more
accurately reflect sales trends after the initial "honeymoon" period of new
store openings. Same store sales will be broken out for each market in which
Good Times Drive Thru will be operating and between Company-owned stores and
franchise units.
Results of Operations
Net Revenues. Net revenues for the three months ended June 30, 1995
increased $64,000 (1.7%) to $3,724,000 from $3,660,000 for same prior year
period. Net revenues for the three month period ended June 30, 1995 do not
include the results from operations of RTC for the three month period ended
June 30, 1995. However, the prior year period included RTC's net revenues of
$1,909,000 for the three month period ended June 30, 1994. Without RTC, the
Company's net revenues in the prior year period would have been $1,751,000 and
the increase in net revenues would be $1,973,000 (113%) for the three months
ended June 30, 1995. This increase is primarily attributable to an increase
of $1,958,000 (113%) in net restaurant sales of Drive Thru to $3,688,000 for
the three months ended June 30, 1995 from $1,730,000 for the same prior year
period. These sales figures include net restaurant sales for eleven new Good
Times units that were not open in the prior year period. Same store sales
for the seven company-owned and joint venture Good Times units open for
fifteen months or longer were up approximately 1.8% and for the three
franchised stores open for fifteen months or longer same store sales were flat
for the three month period ended June 30, 1995 from the comparable prior year
period. Net restaurant sales for the three month period ended June 30, 1995
were negatively impact by unusually heavy rainfall in Colorado in April and
May. Net franchise revenues for Drive Thru increased $15,000 to $36,000 for
the three month period ended June 30, 1995 from $21,000 for the same prior
year period.
Net revenues for the nine months ended June 30, 1995 increased
$2,765,000 (25.3%) to $13,656,000 from $10,890,000 for same prior year period.
Net revenues for the nine month period ended June 30, 1995 include the results
of operations of RTC for the six month period ended March 31, 1995, but do not
include the results from operations of RTC for the three month period ended
June 30, 1995. The nine month period ended June 30, 1994 included RTC's net
revenues of $1,909,000 in the three month period ended June 30, 1994. Without
such RTC revenues, the Company's net revenues for the nine month period ended
June 30, 1994 would have been $8,981,000 and the increase in net revenues for
the nine month period ended June 30, 1995 would be $4,674,000 (52%). This
increase is primarily attributable to an increase of $5,783,000 (138%) in net
restaurant sales of Drive Thru to $9,976,000 for the nine months ended June
30, 1995 from $4,193,000 for the same prior year period. Net restaurant sales
for the nine month period ended June 30, 1995 include net restaurant sales for
fourteen Good Times units that were not open for the full prior year period.
Same store sales for the seven company-owned and joint venture Good Times
units open for fifteen months or longer were up 11.1% and the three franchised
stores open for fifteen months or longer same store sales increased 3.4% for
the nine month period ended June 30, 1995 from the comparable prior year
period. Net franchise revenues for Drive Thru in the nine month period ended
June 30, 1995 was $117,000, a decrease of $6,000 from the same prior year
period. The decrease in net franchise revenue is a result of a $30,000
decrease in development fee income.
As of June 30, 1995, average unit volumes for the previous twelve month
period for the ten Good Times units open fifteen months or longer was
$880,000.
Food and Paper Costs. Food and paper costs increased to 37% of net
restaurant sales for the three months ended June 30, 1995 compared to 33.1% of
net restaurant sales for the comparable prior year period. However, food and
paper costs for RTC are not included in the three month period ended June 30,
1995, but were included in the comparable prior year period. In general,
RTC's food and paper costs are significantly lower than Drive Thru's food and
paper costs. In the three month period ended June 30, 1995, Drive Thru's
food and paper costs were 37% of net restaurant sales compared to 37.5% for
the same prior year period. The decline in food and paper costs is attributed
to Drive Thru's increased purchasing power and lower costs of beef which more
than offset increased costs of paper goods.
Food and paper costs increased to 34.6% of net restaurant sales for the
nine months ended June 30, 1995 compared to 32.4% of net restaurant sales for
the prior year period. However, food and paper costs for RTC in the three
month period ended June 30, 1995 are not included in the results for the nine
month period ended June 30, 1995, but were included in the comparable prior
year period. In general, RTC's food and paper costs are significantly lower
than Drive Thru's food and paper costs. In the nine month period ended June
30, 1995, Drive Thru's food and paper costs were 36.5% of net restaurant sales
compared to 37.6% for the same prior year period. The decline in food and
paper costs is attributed to Drive Thru's increased purchasing power and lower
costs of beef and french fries which more than offset increased costs of paper
goods.
Income From Restaurant Operations. For the three months ended June 30,
1995 income from restaurant operations increased to $618,000 from $523,000 for
the same prior year period. For the three month period ended June 30, 1994,
RTC had income from restaurant operations of $207,000 which was included in
that period. However, RTC's income from restaurant operations for the three
month period ended June 30, 1995 are not included in the Company's results for
the three month period ended June 30, 1995. Drive Thru had income from
restaurant operations of $618,000 for the three month period ended June 30,
1995 compared to $310,000 of income from restaurant operations for the three
month period ended June 30, 1994. The $308,000 (99%) increase in Drive
Thru's income from restaurant operations reflects income from restaurant
operations of eleven Good Times Drive Thru units that were not open for the
full prior year period and a loss of approximately $100,000 stemminng from the
start-up of restaurant operations in Las Vegas, Nevada. Two Good Times units
were open in Las Vegas in May 1995 and an additional two restaurants were open
in August 1995. Sales levels for these units are significantly lower than
Good Times restaurants in Colorado due to lack of awareness of the Good Times
concept and seasonality factors (extreme heat in Las Vegas during summer
months). Management expects sales to remain at fairly low levels until
additional stores are open in Las Vegas to support effective media
advertising. Two new Good Times units are currently under development and are
scheduled to be open prior to December 31, 1995 and management anticipates a
total of ten Good Times restaurants to be operating in Las Vegas by late
summer 1996.
As a result of a more competitive labor market causing higher wages and
salaries, increased staffing levels in restaurants and the losses sustained in
the start-up of Good Times units in Las Vegas, income from restaurant
operations exclusive of net franchise revenues decreased as a percentage of
net restaurant sales to 15.6% for the three month period ended June 30, 1995
from 18% of net restaurant sales for the comparable prior year period.
For the nine months ended June 30, 1995 income from restaurant
operations increased to $2,034,000 from $1,793,000 for the same prior year
period. The Company's results for the nine month period ended June 30, 1994
included RTC's income from restaurant operations of $992,000. However, RTC's
income from restaurants operations for the three month period ended June 30,
1994 is not included in the nine month period ended June 30, 1995. Drive
Thru had income from restaurant operations of $1,662,000 for the nine month
period ended June 30, 1995 compared to $796,000 for the nine month period
ended June 30, 1994. The $866,000 (109%) increase in Drive Thru's income from
restaurant operations reflects the income from restaurant operations of
fourteen Drive Thru units that were not open for the full nine month period
ended June 30, 1994 and a loss of approximately $100,000 stemming from the
start-up of restaurant operations in Las Vegas, Nevada. For the nine month
period ended June 30, 1995 income from restaurant operations exclusive of net
franchise revenues at Drive Thru decreased to 16.4% of net restaurant sales
from 16.9% of net restaurant sales compared to the same prior year period.
Income (Loss) From Operations. Losses from operations increased
$250,000 to ($306,000) for the three months ended June 30, 1995 from ($56,000)
for the comparable prior year period due to higher depreciation and
amortization expense at Drive Thru resulting from the development of new Drive
Thru units, an additional estimated operating loss of $150,000 at RTC from
March 31, 1995 to September 30, 1995 and $100,000 in operating losses
attributable to the first two months of operations of the two new Good Times
units in Las Vegas, Nevada.
Losses from operations at Drive Thru were ($139,000) for the three
months ended June 30, 1995, compared to income from operations of $9,000 for
the comparable prior year period. The operating loss is primarily
attributable to an $86,000 increase in new store opening amortization to
$112,000 in the three month period ended June 30, 1995 from $26,000 in the
comparable prior year period and an $88,000 increase in depreciation expense
to $157,000 in the three month period ended June 30, 1995 from $69,000 in the
comparable prior year period. Also, Drive Thru sustained an approximately
$100,000 loss stemming from the start-up of restaurant operations in Las
Vegas, Nevada.
For the three months ended June 30, 1995 the Company had a loss from
corporate operations of ($17,000) resulting from the timing of management fee
revenues received from Drive Thru and RTC and non-cash expenses incurred by
the Company.
Losses from operations were ($923,000) for the nine month period ended
June 30, 1995 compared to income from operations of $1,000 for the comparable
prior year period. Operating losses for the nine month period ended June 30,
1995 reflect the increased depreciation and amortization expenses at Drive
Thru resulting from the development of new Drive Thru units, losses at RTC
including estimated operating losses of $400,000 from March 31, 1995 through
September 30, 1995, a $125,000 loss on the sale of an RTC restaurant and the
$100,000 of losses relating to the start-up of Drive Thru operations in Las
Vegas.
Losses from operations at Drive Thru were ($249,000) for the nine month
period ended June 30, 1995 compared to income from operations of $55,000 for
the comparable prior year period. New store opening amortization expense
increased $249,000 to $292,000 in the nine month period ended June 30, 1995
from $43,000 in the comparable prior year period and depreciation expense
increased $256,000 to $433,000 for the nine month period ended June 30, 1995
from $177,000 for the comparable year period. Drive Thru also had an increase
of $456,000 in general and administrative expenses to $825,000 (8.2% of net
revenues) for the nine month period ended June 30, 1995 from $369,000 (8.6% of
net revenues) in the comparable prior year period. The increase in general
and administrative expense is the result of the increase in management fees
charged to Drive Thru by the Company because of the greater number of Drive
Thru operations supported by the Company's accounting and administrative
services and to offset lower management fees received by the Company from RTC
due to the declining revenue of RTC.
For the nine months ended June 30, 1995 the Company had a loss from
corporate operations of ($75,000) resulting from the timing of management fee
revenues received from Drive Thru and RTC and non-cash expenses incurred by
the Company.
Net Income (Loss). The consolidated net loss for the Company was
($339,000) for the three months ended June 30, 1995 compared to a net loss for
the Company of ($93,000) for the comparable prior year period. The
consolidated net loss for the Company for the three months ended June 30, 1995
included a net loss of ($172,000) for Drive Thru compared to a net loss of
($2,000) for the three months ended June 30, 1994.
The Company had a loss of ($17,000) in the three month period ended June
30, 1995 resulting from the timing of management fee revenues received from
Drive Thru and RTC and non-cash expenses incurred by the Company.
The consolidated net loss for the Company was ($1,096,000) for the nine
months ended June 30, 1995 compared to a net loss for the Company of
($125,000) for the comparable year period. The consolidated net loss for the
Company for the nine months ended June 30, 1995 included a net loss of
($328,000) for Drive Thru compared to Drive Thru's income of $65,000 for the
nine months ended June 30, 1994.
The Company had a loss of ($75,000) for the nine months ended June 30,
1995 resulting from the timing of management fee revenues received from Drive
Thru and RTC and non-cash expenses incurred by the Company.
Liquidity and Capital Resources
As of June 30, 1995, the Company and its subsidiaries had $366,000 cash
and marketable securities on hand and 585,000 cash and marketable securities
held in an escrow account established pursuant to the terms of the Company's
1994 secondary offering of common stock, the proceeds of which were to be used
solely for the development of the equivalent of eight new company-owned Drive
Thru restaurants. Of this amount, Drive Thru had cash on hand of
approximately $323,000 plus the funds held in escrow and RTC had approximately
$23,000 of cash on hand. Pursuant to the terms of the escrow agreement,
Drive Thru is no longer required to restrict the use of moneys held in escrow
since the equivalent of eight new company-owned Drive Thru restaurants have
been open. The remaining approximately $20,000 was the Company's cash on
hand. This amount is believed sufficient to cover working capital needs of
the Company for the remainder of the 1995 fiscal year. The Company had a
combined working capital surplus of $733,000 including $67,000 of current
maturities of long-term debt. Because restaurant sales are collected in cash
and accounts payable for food and paper products are paid two to four weeks
later, restaurant companies often operate with working capital deficits. It
is anticipated that working capital deficits will expand as new Drive Thru
restaurants are opened. However management anticipates that operating cash
flow will continue to be sufficient to cover the Company's and Drive Thru's
working capital needs. In establishing the management fee charged to Drive
Thru and RTC, the Company takes into account its cash requirements and sets
the rate not to exceed the level necessary to meet such cash requirements.
Furthermore, since Drive Thru and RTC are wholly-owned subsidiaries of the
Company, the Company may at any time reallocate cash resources between the
companies. The sale of RTC is not expected to have an adverse impact on the
cash flows of the Company or Drive Thru.
Net cash (used in) operations of ($182,000) for the three month period
ended June 30, 1995 was the result of the net loss of ($339,000), plus
depreciation and amortization of $330,000 and decreases in current assets and
liabilities totaling ($173,000) (primarily increases in opening expenses and
accounts payable and decreases in accrued liabilities).
Net cash (used in) investing activities by the Company in the three
month period ended June 30, 1995 was ($661,000). Drive Thru opened two new
restaurants in Las Vegas, Nevada that were converted from former Rally's
Hamburger restaurants into Good Times units and commenced development of a
Good Times unit in Westminster, Colorado which opened August 7, 1995. Drive
Thru utilizes all cash provided by investing activities for capital
expenditures consisting primarily of expenditures for the development of new
Good Times restaurants. The Company expects that capital expenditures will
increase in the future as additional Good Times restaurants are developed. An
additional two Good Times units were open in Las Vegas, Nevada in August 1995
which were converted from former Rally's Hamburger restaurants and several new
Drive Thru units are currently under development, including two in Las Vegas,
Nevada and one in Boise, Idaho. Drive Thru currently has 27 units open and
expects an additional 5 units to be opened by December 31, 1995. These will
be a combination of company-owned, joint venture and franchised units. Drive
Thru's existing cash balance and cash flow are sufficient to meet this
development schedule. Drive Thru has received a commitment for $2 million of
equipment lease financing, subject to maintenance of certain financial and
operating criteria, which should provide enough capital resources to meet its
development plans through fiscal 1996.
Net cash (used in) financing activities by the Company in the three
month period ended June 30, 1995 was ($295,000). The Company used cash in
financing activities primarily for the repayment of a mortgage note associated
with one of the real estate sites sold by Drive Thru and distributions paid to
minority interests in partnerships.
Net cash (used in) operations of ($114,000) for the nine month period
ended June 30, 1995 was the result of a net loss of ($1,096,000), plus
depreciation and amortization of $923,000 and decreases in current assets and
liabilities totaling $59,000 (primarily increases in prepaids, a note
receivable from sale of Drive Thru's Greeley unit to a franchisee, opening
expenses associated with the development of new Drive Thru units and a
decrease in accounts payable and accrued liabilities associated with the sale
of RTC).
Net cash provided by investing activities by the Company in the nine
month period ended June 30, 1995 was $138,000. Drive Thru sold three real
estate sites on which it is operating Good Times restaurants to a third party
for $980,000 in March 1995. Drive Thru is leasing those sites from the
purchaser pursuant to twenty year leases. The purchaser acquired an
additional real estate site for $300,000 from Drive Thru in July 1995 and
entered into a twenty year lease for that site with Drive Thru. The Company
uses all cash provided by investing activities for capital expenditures
consisting primarily of expenditures for the development of new Good Times
restaurants. The Company expects that capital expenditures will increase in
the future as additional Good Times restaurants are developed.
Net cash provided by (used in) financing activities by the Company in
the nine month period ended June 30, 1995 was ($611,000). The Company used
cash in financing activities for principal payments on notes payable and long-
term debt and distributions paid to minority interests in partnerships.
Neither the Company, nor Drive Thru currently has any bank lines of
credit.
Impact of Inflation
Drive Thru has not experienced a significant impact from inflation. It
is anticipated any operating expense increases will be recovered by increasing
menu prices to the extent that is prudent considering competition.
Seasonality
Revenues of Drive Thru are subject to seasonal fluctuation based
primarily on weather conditions adversely affecting restaurant sales in
Colorado in January, February and March and in Las Vegas in June, July and
August.<PAGE>
GOOD TIMES RESTAURANTS, INC. & SUBSIDIARIES
Part II. - Other Information
Item 1 - 4. Not Applicable.
Item 5. SALE OF ROUND THE CORNER RESTAURANTS, INC.
On March 31, 1995, the Company received a proposal to purchase 100%
of the stock of Round The Corner Restaurants, Inc. ("RTC"), its
wholly-owned subsidiary operating a fifteen unit restaurant chain,
from a group led by current RTC management. The sale was anticipated
to be closed on or about June 30, 1995. The purchase price was
established at $425,000 payable by $100,000 in cash and a $325,000
note. The Company took a charge of approximately $375,000 in the
three month period ended June 30, 1995 which included $250,000 in
anticipated operating losses at RTC between April 1, 1995 and the
anticipated closing date of June 30, 1995 (including legal and
accounting expenses associated with the sale of RTC) and a loss of
approximately $125,000 from the sale of a closed RTC restaurant in
Greeley, Colorado. A gain of approximately $223,000 on the sale of
RTC was deferred. Subsequently, the Company announced that the
closing had been delayed to July 31, 1995. However, there has been a
greater decline in net restaurants sales at RTC than anticipated
resulting in the renegotiation of the purchase price with the
purchaser. A definitive contract has been executed that reduced the
amount of the note payable to the Company to $200,000 and closing is
scheduled for September 30, 1995. The Company has taken an
additional charge of $150,000 in anticipated operating losses at RTC
between July 1, 1995 and September 30, 1995. The gain the Company
will defer from the sale of RTC is $98,000.
Item 6. Exhibits and Reports on Form 8-K
(a) No Exhibits.
(b) No Reports on Form 8-K.<PAGE>
SIGNATURE
Pursuant to the requirements of The Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GOOD TIMES RESTAURANTS INC.
DATE: August 11, 1995 BY:_______________________________________
Boyd E. Hoback, President
and Chief Executive Officer
BY:_______________________________________
Thomas A. Gordon, Executive Vice
President & Chief Financial Officer
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