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, 1997 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,
1997.
6,397,778 SHARES OF COMMON STOCK, .001 PAR VALUE
Form 10-QSB
Quarter Ended June 30, 1997
INDEX
PAGE
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets - 3
June 30, 1997 and September 30, 1996
Consolidated Statements of Operations - 5
For the three months ended June 30,
1997 and 1996 and for the nine months ended
June 30, 1997 and 1996
Consolidated Statements of Cash Flow - 6
For the three months ended June 30,
1997 and 1996 and for the nine months
ended June 30, 1997 and 1996
Notes to Financial Statements 7
ITEM 2. Management's Discussion and Analysis 8
PART II - OTHER INFORMATION
ITEMS 1 through 6. 11
Signature 12
<PAGE>
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
ASSETS
<CAPTION>
June 30, September 30,
1997 1996
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalent $ 288,000 $ 540,000
Receivables 171,000 211,000
Inventories 60,000 48,000
Prepaid expenses and other 206,000 19,000
Total current assets 725,000 818,000
PROPERTY AND EQUIPMENT, at cost:
Land and building 2,384,000 2,211,000
Leasehold improvements 2,636,000 2,424,000
Fixtures and equipment 3,078,000 2,879,000
8,098,000 7,514,000
Less accumulated depreciation
and amortization (2,290,000) (1,819,000)
5,808,000 5,695,000
OTHER ASSETS:
Assets held for sale -0- 98,000
Note receivables 424,000 435,000
Deposits & other 71,000 116,000
495,000 649,000
TOTAL ASSETS $7,028,000 $7,162,000
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of capital
lease obligations $ 114,000 $ 109,000
Accounts payable 462,000 368,000
Accrued liabilities 850,000 1,073,000
Total current liabilities 1,426,000 1,550,000
LONG-TERM DEBT & CAPITAL LEASE OBLIGATIONS
Net of current maturities 392,000 479,000
CONVERTIBLE NOTE PAYABLE -0- 250,000
ACCRUED LEASE LIABILITY ASSOCIATED
WITH THE EXIT OF A BUSINESS ACTIVITY 250,000 0
DEFERRED LIABILITIES 254,000 223,000
MINORITY INTERESTS IN PARTNERSHIPS 1,672,000 1,653,000
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value;
5,000,000 shares authorized,
1,000,000 shares of Series A Convertible
Cumulative Preferred Stock issued and
outstanding as of June 30, 1997
and none issued and outstanding
at September 30, 1996
(liquidation preference of $513,750
includes unpaid dividends of $45,000) 10,000 -0-
<CAPTION>
<PAGE>
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Cont.)
June 30, September 30,
1997 1996
<S> <C> <C>
Common stock, $.001 par value;
50,000,000 shares authorized,
6,397,778 shares issued and
outstanding as of June 30,
1997 and 6,314,820 shares
issued and outstanding as
of September 30, 1996 6,000 6,000
Capital contributed in excess
of par value 11,822,000 10,845,000
Accumulated deficit (8,804,000) (7,844,000)
Total stockholders' equity 3,034,000 3,007,000
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $7,028,000 $7,162,000
</TABLE>
<PAGE>
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
NET REVENUES:
Restaurant sales, net $3,119,000 $3,199,000 $8,337,000 $9,435,000
Franchise revenues, net 46,000 30,000 108,000 83,000
Total revenues 3,165,000 3,229,000 8,445,000 9,518,000
RESTAURANT OPERATING EXPENSES:
Food & paper costs 1,143,000 1,173,000 3,102,000 3,529,000
Labor, occupancy & other 1,331,000 1,381,000 3,836,000 4,500,000
Accretion of deferred rent 12,000 15,000 36,000 41,000
Depreciation & amortization 153,000 177,000 445,000 543,000
Total restaurant operating costs 2,639,000 2,746,000 7,419,000 8,613,000
INCOME FROM RESTAURANT OPERATIONS 526,000 483,000 1,026,000 905,000
SELLING, GENERAL & ADMINISTRATIVE EXPENSES 519,000 597,000 1,490,000 1,962,000
INCOME (LOSS) FROM OPERATIONS 7,000 (114,000) (464,000) (1,057,000)
OTHER INCOME & (EXPENSES)
Minority income (expense), net (62,000) (2,000) (79,000) 102,000
Interest, net (10,000) (31,000) (25,000) (68,000)
Loss from RTC & Las Vegas lease liabilities (44,000) 0 (368,000) 0
Other, net (42,000) 53,000 (24,000) 35,000
Total other income & (expenses) (158,000) 20,000 (496,000) 69,000
NET INCOME (LOSS) ($151,000) ($94,000) ($960,000) ($988,000)
PREFERRED STOCK DIVIDENDS IN ARREARS 20,000 0 45,000 0
NET INCOME (LOSS) APPLICABLE TO
COMMON STOCKHOLDERS (171,000) (94,000) (1,005,000) (988,000)
NET INCOME (LOSS) PER COMMON SHARE ($0.03) ($0.01) ($0.16) ($0.15)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 6,397,778 6,314,825 6,397,778 6,638,425
</TABLE>
<PAGE>
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($151,000) ($ 94,000) ($960,000) ($988,000)
Depreciation and amortization 169,000 216,000 504,000 707,000
Changes in operating assets & liabilities--
(Increase) decrease in:
Prepaids & receivables 33,000 383,000 (98,000) (105,000)
Inventories (2,000) 2,000 (8,000) 26,000
Other assets 1,000 (14,000) 23,000 (424,000)
Opening expenses (62,000) 0 (65,000) (70,000)
(Decrease) increase in:
Accounts payable 78,000 (70,000) 92,000 (234,000)
Accrued interest 0 0 0 0
Accrued property taxes (60,000) (96,000) (18,000) (37,000)
Accrued payroll & P/R taxes 21,000 (2,000) 36,000 (50,000)
Deposits 0 0 0 0
Other accrued liabilities/deferred income 69,000 (68,000) 25,000 (83,000)
Net cash provided by (used in)
operating activities 96,000 $257,000 (469,000) (1,258,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
(Purchase) sale - FF&E, land, building
& improvements (446,000) 380,000 (162,000) 160,000
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt incurred (paid) (29,000) (294,000) (678,000) 489,000
Minority interest 59,000 (141,000) 18,000 435,000
Paid in capital activity 250,000 0 1,039,000 41,000
Net cash provided by (used in) 280,000 (435,000) 379,000 965,000
financing activities
INCREASE (DECREASE) IN CASH ($70,000) $202,000 ($252,000) ($133,000)
</TABLE>
<PAGE>
1. 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, 1997, the results of its operations and its cash flow for the three
month period ended June 30, 1997 and for the nine month period ended June
30, 1997. Operating results for the three month period ended June 30, 1997
and for the nine month period ended June 30, 1997 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.
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-seven units open at June 30, 1997, of which eleven
were franchised units, nine joint-venture units and seven company-owned units
compared to twenty-three units open at June 30, 1996, of which eight were
franchised units, eight joint-venture units and seven company-owned units.
During the three months ended June 30, 1997 two new joint-venture units were
opened. The Company anticipates opening three additional company-owned,
franchise or 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 and nine months ended June 30,
1996 and the results of the Company and Drive Thru for the three months and nine
months ended June 30, 1997.
Results of Operations
Net Revenues. Net restaurant revenues for the three months ended June 30,
1997 decreased $80,000 (2.5%) to $3,119,000 from $3,199,000 for the same prior
year period. $147,000 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. $102,000 of the decrease was
attributable to one joint-venture unit that was sold to a franchisee in November
1996. The Company's additional revenues of $185,000 from two joint-venture
units not open during the prior year period were offset by a decline in same
store sales for Company operated units of $16,000 or (.60%). Franchise revenue
increased $16,000 for the three months ended June 30, 1997 due to an increase
in franchise royalty income over the same prior year period.
Net restaurant revenues for the nine months ended June 30, 1997 decreased
$1,098,000 (12%) to $8,337,000 from $9,435,000 for the same prior year period.
$1,268,000 of the decrease is attributable to the sale of two units to
franchisees in February and November, 1996 and the sale or sublease of three
under-performing units in April and May, 1996. Same store sales for Company
operated units open for the full nine month periods in 1996 and 1997 decreased
$141,000 or 2%. Net restaurant revenues for the nine month period ended June
30, 1997 increased $311,000 due to three new joint-venture units that were not
open for the full prior year period. Two of these joint-venture units opened
in the three month period ended June 30, 1997. Franchise revenue increased
$25,000 during the nine months ended June 30, 1997 from the same prior year
period due to higher franchise royalty fees.
Food and Paper Costs. Food and paper costs were 36.7% of net restaurant
sales for the three months ended June 30, 1997, compared to 36.7% for the same
prior year period.
Food and paper costs decreased to 37.2% of net restaurant sales for the
nine months ended June 30, 1997 compared to 37.4% for the same prior year
period.
<PAGE>
Income From Restaurant Operations. For the three months ended June 30,
1997, income from restaurant operations increased to $526,000 from $483,000
for the same prior year period. Drive Thru's income from restaurant operations
as a percentage of net restaurant sales increased to 16.9% for the three months
ended June 30, 1997 from 15.1% for the same prior year period.
Cash flow from restaurant operations (income from restaurant operations
plus depreciation and amortization) increased to 21.8% of net restaurant sales
for the three months ended June 30, 1997 from 20.6% for the same prior year
period.
For the nine months ended June 30, 1997, income from restaurant operations
increased to $1,026,000 from $905,000 for the same prior year period. Drive
Thru's income from restaurant operations as a percentage of net restaurant sales
increased to 12.3% for the nine months ended June 30, 1997 from 9.6% for the
same prior year period.
Cash flow from restaurant operations (income from restaurant operations
plus depreciation and amortization) increased to 17.6% of net restaurant sales
for the nine months ended June 30, 1997 from 15.3% 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 continued
focus on improving restaurant labor efficiencies and restaurant expenses.
Income (Losses) From Operations. The Company had income from operations of
$7,000 in the three months ended June 30, 1997 compared to a loss from
operations of ($114,000) for the three months ended June 30, 1996. The
improvement in income from operations of $121,000 for the three months ended
June 30, 1997 is attributable to an increase in income from restaurant
operations of $43,000 and a decrease in selling, general and administrative
expenses of $78,000 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 in the Colorado market.
For the nine months ended June 30, 1997, losses from operations decreased
to ($464,000) from ($1,057,000) in the same prior year period. The improvement
in income from operations of $593,000 for the nine months ended June 30, 1997 is
attributable to an increase in income from restaurant operations of $121,000 and
a decrease in selling, general and administrative expenses of $472,000 compared
to the same prior year period.
Net Income (Loss). The net loss for the Company was ($151,000) for the
three months ended June 30, 1997 compared to a net loss for the Company of
($94,000) for the comparable prior year period. Minority interest expense
increased $60,000 in the three months ended June 30, 1997 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 and to the increase in income from restaurants, which increased minority
interest expense to joint-venture partners. Net interest expense decreased
$21,000 for the three months ended June 30, 1997 from the same prior year
period, attributable to the repayment of a capital lease obligation in April
1996. The loss from RTC and Las Vegas lease liabilities of ($44,000) for the
three months ended June 30, 1997 is attributable to 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 is
actively marketing the RTC restaurants for sale or negotiating lease
terminations and anticipates agreements on two of the three restaurants by
fiscal year end. Other expenses of $42,000 for the three months ended June 30,
1997 includes $17,000 in lease termination charges associated with an under-
performing joint-venture unit that was closed in May 1996 and a $25,000 accrual
for the settlement of a legal dispute associated with a lease termination on an
undeveloped site.
For the nine month period ended June 30, 1997, the net loss for the Company
was ($960,000) compared to a net loss for the Company of ($988,000) in the same
prior year period. Minority interest expense increased $181,000 in the nine
months ended June 30, 1997 from the same prior year period due to increased
income from operations and a higher share of that income by joint-venture
partners.
<PAGE>
Liquidity and Capital Resources
As of June 30, 1997, the Company and Drive Thru had $288,000 cash and
marketable securities on hand. This amount along with projected cash flow from
operations is believed sufficient to cover working capital needs of the Company
for the balance of the 1997 fiscal year. However, additional capital from
joint-venture partners, sale of existing restaurants or other sources of
financing will be required for the development of additional company-owned and
joint-venture restaurants.
The Company had a working capital deficit of ($701,000) including $114,000
of current maturities of capital lease obligations and $140,000 of accrued
expenses associated with the RTC bankruptcy. The Company's cash position
decreased ($70,000) for the three months ended June 30, 1997. 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 and payments of
$250,000 were received on October 1, 1996, 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 investing activities for the three months ended June 30,
1997 includes the use of $446,000 toward the development of two new joint-
venture restaurants and the remodel of one company-owned unit.
Cash flow from financing activities for the three months ended June 30,
1997 includes the receipt of $250,000 cash in conjunction with the closing of
the preferred stock sale on April 1, 1997.
For the nine months ended June 30, 1997, cash decreased $252,000. Cash
used in operations was $469,000, cash used in net investing activities was
$162,000, and cash provided by financing activities was $379,000.
Cash flow from operating, investing and financing activities for the nine
months ended June 30, 1997 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.
The Company entered into a co-development agreement with a current
franchisee to develop one joint-venture unit in Ft. Collins, Colorado, which
opened in June 1997. In conjunction therewith, the Co-Development Limited
Partnership has entered into a $200,000 bank loan jointly guaranteed by the
Company and the franchisee to finance the development of the Ft. Collins unit.
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 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 January, February
and March.
<PAGE>
GOOD TIMES RESTAURANTS INC. & SUBSIDIARIES
Part II.- Other Information
Item 1. Legal Proceedings
On April 29, 1997, Drive Thru received notice of a Complaint filed
against it by College Park Realty Company of Las Vegas, Nevada for
breach of lease. The lease had been assigned to Steakout, King of
Steaks, Inc. and one of its franchisees. While Drive Thru is
obligated under the lease, it has cause of action against the
franchisee that executed a personal guaranty of the lease and
management does not believe any financial statement adjustment is
warranted.
The Company is a defendant in two lawsuits filed by two former hourly
employees alleging sexual harassment. The Company denies any wrong
doing and intends to vigorously defend itself. Management does not
believe any financial statement adjustment is warranted.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Shareholders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
None.
<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: BY:____________________________________
Boyd E. Hoback, President
and Chief Executive Officer
BY:____________________________________
Susan Knutson, Controller
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<PERIOD-END> JUN-30-1997
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<INVENTORY> 60000
<CURRENT-ASSETS> 725000
<PP&E> 8098000
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0
10000
<COMMON> 6000
<OTHER-SE> 3034000
<TOTAL-LIABILITY-AND-EQUITY> 7028000
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<TOTAL-REVENUES> 3165000
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<TOTAL-COSTS> 2639000
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