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:December 31, 1996 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 December 31,
1996.
6,397,778 SHARES OF COMMON STOCK, .001 PAR VALUE
<PAGE>
Form 10-QSB
Quarter Ended December 31, 1996
INDEX
PAGE
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets - 3
December 31, 1996
and September 30, 1996
Consolidated Statements of Operations - 5
For the three months ended December 31,
1996 and 1995
Consolidated Statement of Cash Flow - 6
For the three months ended December 31,
1996 and 1995
Notes to Financial Statements 7
ITEM 2. Management's Discussion and Analysis 8
PART II - OTHER INFORMATION
ITEMS 1 through 6. 10
Signature 11
<PAGE>
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
December 31, September 30,
1996 1996
CURRENT ASSETS:
Cash and cash equivalent $ 453,000 $ 540,000
Receivables 147,000 211,000
Inventories 58,000 48,000
Prepaid expenses and other 119,000 19,000
Total current assets 777,000 818,000
PROPERTY AND EQUIPMENT, at cost:
Land and building 2,235,000 2,211,000
Leasehold improvements 2,443,000 2,424,000
Fixtures and equipment 2,895,000 2,879,000
7,573,000 7,514,000
Less accumulated depreciation
and amortization (1,976,000) (1,819,000)
5,597,000 5,695,000
OTHER ASSETS:
Assets held for sale -0- 98,000
Note receivables 427,000 435,000
Deposits & other 67,000 116,000
494,000 649,000
TOTAL ASSETS $6,868,000 $7,162,000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of capital
lease obligations $ 112,000 $ 109,000
Accounts payable 350,000 368,000
Accrued liabilities 812,000 1,073,000
Total current liabilities 1,274,000 1,550,000
LONG-TERM DEBT & CAPITAL LEASE OBLIGATIONS
Net of current maturities 451,000 479,000
CONVERTIBLE NOTE PAYABLE -0- 250,000
DEFERRED LIABILITIES 235,000 223,000
MINORITY INTERESTS IN PARTNERSHIPS 1,622,000 1,653,000
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value;
5,000,000 shares authorized,
500,000 shares of Series A Convertible
Cumulative Preferred Stock issued and
outstanding as of December 31, 1996
and none issued and outstanding
at September 30, 1996
(liquidation preference of $244,375,
includes unpaid dividends of $10,000) 5,000 -0-
<PAGE>
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Cont.)
December 31, September 30,
1996 1996
Common stock, $.001 par value;
50,000,000 shares authorized,
6,397,778 shares issued and
outstanding as of December 31,
1996 and 6,314,820 shares
issued and outstanding as
of September 30, 1996 6,000 6,000
Capital contributed in excess
of par value 11,287,000 10,845,000
Accumulated deficit (8,012,000) (7,844,000)
Total stockholders' equity 3,286,000 3,007,000
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $6,868,000 $7,162,000<PAGE>
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
December 31,
1996 1995
NET REVENUES:
Restaurant sales, net $2,770,000 $3,312,000
Franchise revenues, net 22,000 20,000
Total revenues 2,792,000 3,332,000
RESTAURANT OPERATING EXPENSES:
Food & paper costs 1,042,000 1,235,000
Labor, occupancy & other 1,302,000 1,620,000
Depreciation & amortization 149,000 170,000
Total restaurant operating costs 2,493,000 3,025,000
INCOME FROM RESTAURANT OPERATIONS 299,000 307,000
SELLING, GENERAL &
ADMINISTRATIVE EXPENSES 488,000 718,000
INCOME (LOSS) FROM OPERATIONS (189,000) (411,000)
OTHER INCOME & (EXPENSES)
Minority income (expense), net (11,000) 26,000
Interest, net (6,000) (19,000)
Other, net 37,000 (9,000)
Total other income & (expenses) 20,000 (2,000)
NET INCOME (LOSS) $ (169,000) $ (413,000)
PREFERRED STOCK DIVIDENDS IN ARREARS 10,000 -0-
NET INCOME (LOSS) APPLICABLE TO
COMMON STOCKHOLDERS (179,000) (413,000)
NET INCOME (LOSS) PER COMMON SHARE $ (.03) $ (0.06)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 6,397,778 6,940,000
<PAGE>
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
December 31,
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $(169,000) $(413,000)
Depreciation and amortization 177,000 239,000
Changes in operating assets & liabilities --
(Increase) decrease in:
Prepaids & receivables (43,000) 67,000
Inventories (6,000) (5,000)
Other assets 20,000 (327,000)
Opening expenses -0- (70,000)
(Decrease) increase in:
Accounts payable (19,000) (138,000)
Accrued interest -0- -0-
Accrued property taxes 26,000 42,000
Accrued payroll & P/R taxes 7,000 (26,000)
Other accrued liabilities/
deferred income (297,000) (224,000)
Net cash provided by (used in)
operating activities (304,000) (855,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
(Purchase) sale - FF&E, land,
building and improvements 370,000 (479,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt incurred (paid) (622,000) 614,000
Minority interest (32,000) 324,000
Paid in capital activity 500,000 41,000
Net cash provided by (used in)
financing activities (154,000) 979,000
INCREASE (DECREASE) IN CASH $ (88,000) $(355,000)
<PAGE>
1. FINANCIAL STATEMENTS:
In the opinion of management, the accompanying consolidated financial
statements contain all of the normal recurring adjustments necessary to
present fairly the financial position of the Company as of December 31,
1996, the results of its operations and its cash flow for the three months
ended December 31, 1996. Operating results for the three months ended
December 31, 1996 are not necessarily indicative of the results that may
be expected for the year ending September 30, 1997.
The consolidated balance sheet as of September 30, 1996 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, 1996.
<PAGE>
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
to allow Good Times Drive Thru Inc. ("Drive Thru") and RTC to function as
separately accountable entities and to allow RTC's and Drive Thru's managements
to focus exclusively on their respective businesses. On September 29, 1995, the
Company completed the sale of RTC to Hot Concepts Management Group, L.L.C.
Beginning in fiscal 1996, the administrative and accounting functions of the
Company were consolidated with Drive Thru's operations. In October 1996, RTC
filed for Chapter 11 bankruptcy. The Company recorded a reserve for anticipated
losses in its September 30, 1996 financial statements.
Drive Thru had twenty-four units open at December 31, 1996, of which ten
were franchised units, seven joint-venture units and seven company-owned units
compared to twenty-six units open at December 31, 1995, of which seven were
franchised units, ten joint-venture units and nine company-owned units. (The
four units sold or subleased in February, April and May, 1996 are included in
the total stores for the prior year period.) The Company anticipates opening
six to eight new company-owned, franchise and joint-venture restaurants during
1997.
The following presents certain historical financial information of the
operations of the Company. This financial information includes the results of
the Company and Drive Thru for the three months ended December 31, 1995 and the
results of the Company and Drive Thru for the three months ended December 31,
1996.
Results of Operations
Net Revenues. Net revenues for the three months ended December 31, 1996,
decreased $540,000 (16%) to $2,792,000 from $3,332,000 for the same prior year
period. $192,000 of the decrease was attributable to a company-owned unit that
was sold to a franchisee in February 1996 and $350,000 of the decrease was
attributable to three under-performing units that were sold or subleased in
April and May, 1996, one of which was company-owned and two were joint-venture
units. The Company's additional revenues from a Good Times unit that was not
open for the full prior year period was offset by a decline in same store sales
for company-owned and joint-venture Drive Thru units of approximately $97,000
(3.7%) for the three months ended December 31, 1996 from the same prior year
period.
Food and Paper Costs. Food and paper costs were 37.6% of net restaurant
sales for Drive Thru for the three months ended December 31, 1996, compared to
37.3% for the same prior year period.
Income From Restaurant Operations. For the three months ended December 31,
1996 income from restaurant operations decreased to $299,000 from $307,000 for
the same prior year period. Drive Thru's income from restaurant operations as
a percentage of net restaurant sales increased to 10.8% for the three months
ended December 31, 1996 from 9.3% for the three months ended December 31, 1995.
Cash flow from restaurant operations (income from restaurant operations
plus depreciation and amortization) increased to 16.2% of net restaurant sales
for the three months ended December 31, 1996 from 14.4% for the same prior year
period.
The improvement in both income and cash flow from restaurants as a
percentage of net restaurant sales is a direct result of management's focus on
improving restaurant labor efficiencies.
Income (Losses) From Operations. The Company had a loss from operations
of ($189,000) for the three months ended December 31, 1996 compared to a loss
from operations of ($411,000) for the three months ended December 31, 1995. The
improvement in income from operations of $222,000 is attributable to a decrease
in selling, general and administrative expenses of $230,000 for the three months
ended December 31, 1996 compared to the same prior year period. The decrease in
selling, general and administrative expenses is due to reductions in staff and
administrative expenses as management has positioned the Company for growth and
development only in the Colorado market.
Net Income (Loss). The net loss for the Company was ($169,000) for the
three months ended December 31, 1996 compared to a net loss for the Company of
($413,000) for the comparable prior year period. Minority interest expense
increased $37,000 in the three months ended December 31, 1996 from the same
prior year period. This was attributable to the elimination of two under-
performing joint-venture Drive Thru units in Colorado that were sold or
subleased in April and May, 1996, and the sale of the Boise, Idaho joint-venture
unit in November, 1996. Net interest expense decreased $13,000 for the three
months ended December 31, 1996 from the same prior year period. This decrease
was attributable to the repayment of a capital lease obligation in April 1996.
Other net income for the three months ended December 31, 1996 includes income of
$31,000 from the operation of three RTC restaurants currently operated by Drive
Thru under an agreement with RTC related to the Company's contingent lease
guaranty obligations. Management does not anticipate future income from these
operations and is actively marketing the restaurants for sale.
Liquidity and Capital Resources
As of December 31, 1996, the Company and Drive Thru had $453,000 cash and
cash equivalents on hand. This amount is believed sufficient to cover working
capital needs of the Company for the balance of the 1997 fiscal year.
The Company had a working capital deficit of ($507,000) including $112,000
of current maturities of capital lease obligations and $217,000 of accrued
expenses associated with the RTC bankruptcy. The Company's cash position
decreased ($88,000) for the three months ended December 31, 1996. 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.
On October 1, 1996, the Company closed the sale of $1 million of preferred
stock, $250,000 of which was the conversion of a note payable, $250,000 was
received in cash on October 1, 1996 and the balance of the preferred stock
investment is due in installments of $250,000 on January 1, 1997 and April 1,
1997. The proceeds of the preferred stock sale are required to be used for the
development of new Good Times restaurants by December 31, 1997 unless
unanimously approved otherwise by the Company's Board of Directors.
Cash flow from operating, investing and financing activities for the three
months ended December 31, 1996 includes the sale of one joint-venture restaurant
in Boise, Idaho to a franchisee, which decreased other accrued liabilities
$175,000, decreased fixed assets $429,000 and decreased notes payable $346,000.
Cash flow from financing activities for the three months ended December 31,
1996 includes the receipt of $250,000 cash and the cancellation of a $250,000
note payable in conjunction with the closing of the preferred stock sale on
October 1, 1996.
The Company anticipates using approximately $400,000 for the development
of one company-owned restaurant, one joint-venture restaurant and one restaurant
remodel in the second and third quarters of fiscal 1997.
Neither the Company nor Drive Thru have any bank lines of credit.
Impact of Inflation
Drive Thru has not experienced a significant impact from inflation. It is
anticipated that any inflationary increases in operating costs will be recovered
by increasing menu prices.
Seasonality
Revenues of Drive Thru are subject to seasonal fluctuation based primarily
on weather conditions adversely affecting restaurant sales in January, February
and March.
GOOD TIMES RESTAURANTS, INC. & SUBSIDIARIES
Part II. - Other Information
Item 1 - 5. Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) No Exhibits.
(b) Report on Form 8-K filed on October 15, 1996 with respect to the
Registrant's closing of the first installment of the sale of an
aggregate of one million shares Series A Convertible Preferred Stock
("Series A Preferred Stock") to The Bailey Company ("Bailey") pursuant
to the Series A Convertible Preferred Stock Purchase Agreement dated as
of May 31, 1996, as amended (the "Purchase Agreement").
<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: February 7, 1997 BY: /s/ Boyd E. Hoback, President
& Chief Executive Officer
Boyd E. Hoback, President
& Chief Executive Officer
BY: /s/ Sue Knutson, Controller &
Secretary/Treasurer
Sue Knutson, Controller &
Secretary/Treasurer
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