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:March 31, 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 March
31, 1997.
6,397,778 SHARES OF COMMON STOCK, .001 PAR VALUE
<PAGE>
Form 10-QSB
Quarter Ended March 31, 1997
INDEX
PAGE
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets -
March 31, 1997 and September 30, 1996
Consolidated Statements of Operations -
For the three months ended March 31,
1997 and 1996 and for the six months ended
March 31, 1997 and 1996
Consolidated Statements of Cash Flow -
For the three months ended March 31,
1997 and 1996 and for the six months
ended March 31, 1997 and 1996
Notes to Financial Statements
ITEM 2. Management's Discussion and Analysis
PART II - OTHER INFORMATION
ITEMS 1 through 6.
Signature
<PAGE>
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, September 30,
1997 1996
CURRENT ASSETS:
Cash and cash equivalent $ 358,000 $ 540,000
Receivables 155,000 211,000
Inventories 57,000 48,000
Prepaid expenses and other 200,000 19,000
Total current assets 770,000 818,000
PROPERTY AND EQUIPMENT, at cost:
Land and building 2,246,000 2,211,000
Leasehold improvements 2,460,000 2,424,000
Fixtures and equipment 2,952,000 2,879,000
7,658,000 7,514,000
Less accumulated depreciation
and amortization (2,133,000) (1,819,000)
5,525,000 5,695,000
OTHER ASSETS:
Assets held for sale -0- 98,000
Note receivables 426,000 435,000
Deposits & other 69,000 116,000
495,000 649,000
TOTAL ASSETS $6,790,000 $7,162,000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of capital
lease obligations $ 115,000 $ 109,000
Accounts payable 384,000 368,000
Accrued liabilities 826,000 1,073,000
Total current liabilities 1,325,000 1,550,000
LONG-TERM DEBT & CAPITAL LEASE OBLIGATIONS
Net of current maturities 420,000 479,000
CONVERTIBLE NOTE PAYABLE -0- 250,000
ACCRUED LEASE LIABILITY ASSOCIATED
WITH THE EXIT OF A BUSINESS ACTIVITY 255,000 0
DEFERRED LIABILITIES 242,000 223,000
MINORITY INTERESTS IN PARTNERSHIPS 1,613,000 1,653,000
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value;
5,000,000 shares authorized,
750,000 shares of Series A Convertible
Cumulative Preferred Stock issued and
outstanding as of March 31, 1997
and none issued and outstanding
at September 30, 1996
(liquidation preference of $376,562,
includes unpaid dividends of $25,000) 8,000 -0-
<PAGE>
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Cont.)
March 31, September 30,
1997 1996
Common stock, $.001 par value;
50,000,000 shares authorized,
6,397,778 shares issued and
outstanding as of March 31,
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 11,574,000 10,845,000
Accumulated deficit (8,653,000) (7,844,000)
Total stockholders' equity 2,935,000 3,007,000
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $6,790,000 $7,162,000
<PAGE>
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
NET REVENUES:
Restaurant sales, net $2,448,000 $2,924,000 $5,218,000 $6,236,000
Franchise revenues, net 39,000 34,000 61,000 54,000
Total revenues 2,487,000 2,958,000 5,279,000 6,290,000
RESTAURANT OPERATING EXPENSES:
Food & paper costs 917,000 1,122,000 1,959,000 2,357,000
Labor, occupancy & other 1,210,000 1,527,000 2,512,000 3,147,000
Accretion of deferred rent 12,000 13,000 24,000 26,000
Depreciation & amortization 137,000 195,000 286,000 365,000
Total restaurant operating costs 2,276,000 2,857,000 4,781,000 5,895,000
INCOME FROM RESTAURANT OPERATIONS 211,000 101,000 498,000 395,000
SELLING, GENERAL & ADMINISTRATIVE EXPENSES 483,000 644,000 971,000 1,362,000
INCOME (LOSS) FROM OPERATIONS (272,000) (543,000) (473,000) (967,000)
OTHER INCOME & (EXPENSES)
Minority income (expense), net (7,000) 78,000 (18,000) 104,000
Interest, net (8,000) (19,000) (14,000) (38,000)
Loss from RTC & Las Vegas lease liabilities (355,000) 0 (324,000) 0
Other, net 2,000 3,000 20,000 7,000
Total other income & (expenses) (368,000) 62,000 (336,000) 73,000
NET INCOME (LOSS) ($640,000) ($481,000) ($809,000) ($894,000)
PREFERRED STOCK DIVIDENDS IN ARREARS 15,000 0 25,000 0
NET INCOME (LOSS) APPLICABLE TO
COMMON STOCKHOLDERS (655,000) (481,000) (834,000) (894,000)
NET INCOME (LOSS) PER COMMON SHARE ($0.10) ($0.07) ($0.13) ($0.13)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 6,397,778 6,651,362 6,397,778 6,799,797
</TABLE>
<PAGE>
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ($640,000) ($481,000) ($809,000) ($894,000)
Depreciation and amortization 158,000 258,000 335,000 497,000
Changes in operating assets & liabilities--
(Increase) decrease in:
Prepaids & receivables (88,000) (554,000) (131,000) (487,000)
Inventories 0 28,000 (6,000) 23,000
Other assets 2,000 (83,000) 22,000 (410,000)
Opening expenses (3,000) 0 (3,000) (70,000)
(Decrease) increase in:
Accounts payable 33,000 (26,000) 14,000 (164,000)
Accrued interest 0 0 0 0
Accrued property taxes 16,000 17,000 42,000 59,000
Accrued payroll & P/R taxes 8,000 (21,000) 15,000 (47,000)
Deposits 0 0 0 0
Other accrued liabilities/deferred income (253,000) 202,000 (44,000) (22,000)
Net cash provided by (used in)
operating activity (261,000) (660,000) (565,000) (1,515,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
(Purchase) sale - FF&E, land, building
& improvements (86,000) 259,000 284,000 (220,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt incurred (paid) (27,000) 218,000 (649,000) 832,000
Minority interest (9,000) 202,000 (41,000) 526,000
Paid in capital activity 289,000 0 789,000 41,000
Net cash provided by (used in) 253,000 420,000 99,000 1,399,000
financing activities
INCREASE (DECREASE) IN CASH ($94,000) $19,000 ($182,000) ($336,000)
</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
March 31, 1997, the results of its operations and its cash flow for the
three month period ended March 31, 1997 and for the six month period ended
March 31, 1997. Operating results for the three month period ended
March 31, 1997 and for the six month period ended March 31, 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.
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-five units open at March 31, 1997, of which eleven
were franchised units, seven joint-venture units and seven company-owned units
compared to twenty-six units open at March 31, 1996, of which eight were
franchised units, ten joint-venture units and eight company-owned units.
(Four units that were sold or subleased in February, April and May, 1996 are
included in the total stores for the prior year period.) During the three
months ended March 31, 1997 one new franchised unit was opened. Subsequent to
March 31, 1997, the Company opened one new joint-venture unit on May 6, 1997
and anticipates opening five to six 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 and six months ended March 31,
1996 and the results of the Company and Drive Thru for the three months and
six months ended March 31, 1997.
Results of Operations
Net Revenues. Net restaurant revenues for the three months ended March 31,
1997 decreased $476,000 (16%) to $2,448,000 from $2,924,000 for the same prior
year period. $336,000 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. $135,000 of the decrease was
attributable to one company-owned unit and one joint-venture unit that were sold
to franchisees in February and November 1996. Same store sales for Company
operated units open for the full three month periods in 1996 and 1997 decreased
$5,000 or (.10%). Franchise revenue increased $5,000 for the three months ended
March 31, 1997 due to an increase in franchise fee income over the same prior
year period.
Net restaurant revenues for the six months ended March 31, 1997 decreased
$1,018,000 (16%) to $5,218,000 from $6,236,000 for the same prior year period.
$1,065,000 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 six month periods in 1996 and 1997 decreased
$102,000 or 2%. Franchise revenue increased $7,000 during the six months ended
March 31, 1997 from the same prior year period due to higher franchise royalty
fees.
Food and Paper Costs. Food and paper costs decreased to 37.5% of net
restaurant sales for the three months ended March 31, 1997, compared to 38.4%
for the same prior year period. The decrease is attributable to a net menu
price increase of approximately 5.5% at all company-owned and joint-venture
units effective March 1, 1997. Cost of sales was negatively impacted by an
increase in beef and produce costs during the three months ended March 31, 1997
compared to the same prior year period.
Food and paper costs decreased to 37.5% of net restaurant sales for the six
months ended March 31, 1997 compared to 37.8% for the same prior year period.
Income From Restaurant Operations. For the three months ended March 31,
1997, income from restaurant operations increased to $211,000 from $101,000 for
the same prior year period. Drive Thru's income from restaurant operations as a
percentage of net restaurant sales increased to 8.6% for the three months ended
March 31, 1997 from 3.5% for the same prior year period.
Cash flow from restaurant operations (income from restaurant operations
plus depreciation and amortization) increased to 14.2% of net restaurant sales
for the three months ended March 31, 1997 from 10.1% for the same prior year
period.
For the six months ended March 31, 1997, income from restaurant operations
increased to $498,000 from $395,000 for the same prior year period. Drive
Thru's income from restaurant operations as a percentage of net restaurant sales
increased to 9.5% for the six months ended March 31, 1997 from 6.3% for the
same prior year period.
Cash flow from restaurant operations (income from restaurant operations
plus depreciation and amortization) increased to 15% of net restaurant sales
for the six months ended March 31, 1997 from 12.2% 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.
Income (Losses) From Operations. The Company had a loss from operations of
($272,000) in the three months ended March 31, 1997 compared to a loss from
operations of ($543,000) for the three months ended March 31, 1996. The
improvement in income from operations of $271,000 for the three months ended
March 31, 1997 is attributable to an increase in income from restaurant
operations of $110,000 and a decrease in selling, general and administrative
expenses of $161,000 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 six months ended March 31, 1997, losses from operations decreased
to ($473,000) from ($967,000) in the same prior year period. The improvement in
income from operations of $494,000 for the six months ended March 31, 1997 is
attributable to an increase in income from restaurant operations of $103,000
and a decrease in selling, general and administrative expenses of $391,000
compared to the same prior year period.
Net Income (Loss). The net loss for the Company was ($640,000) for the
three months ended March 31, 1997 compared to a net loss for the Company of
($481,000) for the comparable prior year period. Minority interest expense
increased $85,000 in the three months ended March 31, 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. Net interest expense decreased $11,000 for the three
months ended March 31, 1997 from the same prior year period. This decrease
is attributable to the repayment of a capitallease obligation in April 1996.
The loss from RTC and Las Vegas lease liabilities of ($355,000) for the three
months ended March 31, 1997 includes ($42,000) 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, and ($313,000) for
future lease liabilities under two leases in Las Vegas, Nevada.
The liability reflects the present value of rent due under the leases in
excess of market rate rent. Management is actively marketing the RTC
restaurants for sale.
For the six month period ended March 31, 1997, the net loss for the Company
was ($809,000) compared to a net loss for the Company of ($894,000) in the same
prior year period. Minority interest expense increased $122,000 in the six
months ended March 31, 1997 from the same prior year period.
Liquidity and Capital Resources
As of March 31, 1997, the Company and Drive Thru had $358,000 cash and
marketable securities 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 ($555,000) including $115,000
of current maturities of capital lease obligations and $171,000 of accrued
expenses associated with the RTC bankruptcy. The Company's cash position
decreased ($94,000) for the three months ended March 31, 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, $250,000 was
received in cash on October 1, 1996, and on January 1, 1997 and the balance of
the preferred stock investment was made in an installment of $250,000 on
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 March 31,
1997 includes the use of $86,000 toward the development of two new joint-venture
restaurants.
Cash flow from financing activities for the three months ended March 31,
1997 includes the receipt of $250,000 cash in conjunction with the closing of
the preferred stock sale on January 1, 1997.
For the six months ended March 31, 1997, cash decreased $182,000. Cash
used in operations was $565,000, cash provided by investing activities was
$284,000, and cash provided by financing activities was $99,000.
Cash flow from operating, investing and financing activities for the six
months ended March 31, 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. 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.
The Company anticipates using approximately $325,000 for the development of
two joint-venture restaurants and one restaurant remodel in the third and fourth
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 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.
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
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 358000
<SECURITIES> 0
<RECEIVABLES> 155000
<ALLOWANCES> 0
<INVENTORY> 57000
<CURRENT-ASSETS> 770000
<PP&E> 7658000
<DEPRECIATION> (2133000)
<TOTAL-ASSETS> 6790000
<CURRENT-LIABILITIES> 1325000
<BONDS> 0
0
8000
<COMMON> 6000
<OTHER-SE> 2935000
<TOTAL-LIABILITY-AND-EQUITY> 6790000
<SALES> 2448000
<TOTAL-REVENUES> 2487000
<CGS> 917000
<TOTAL-COSTS> 2276000
<OTHER-EXPENSES> 483000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (8000)
<INCOME-PRETAX> (640000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (640000)
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
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