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, 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 December 31,
1997.
6,520,186 SHARES OF COMMON STOCK, .001 PAR VALUE
<PAGE>
Form 10-QSB
Quarter Ended December 31, 1997
INDEX
PAGE
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets - 3
December 31, 1997
and September 30, 1997
Consolidated Statements of Operations - 5
For the three months ended December 31,
1997 and 1996
Consolidated Statement of Cash Flow - 6
For the three months ended December 31,
1997 and 1996
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,
1997 1997
CURRENT ASSETS:
Cash and cash equivalent $ 395,000 $ 408,000
Receivables 26,000 81,000
Inventories 71,000 51,000
Prepaid expenses and other 45,000 11,000
Receivable from settlement of RTC Claims 110,000 300,000
Notes receivable 48,000 41,000
Total current assets 695,000 892,000
PROPERTY AND EQUIPMENT, at cost:
Land and building 2,606,000 2,561,000
Leasehold improvements 2,646,000 2,646,000
Fixtures and equipment 3,141,000 3,082,000
8,393,000 8,289,000
Less accumulated depreciation
and amortization (2,637,000) (2,459,000)
5,756,000 5,830,000
OTHER ASSETS:
Notes receivable 407,000 414,000
Deposits & other 40,000 56,000
447,000 470,000
TOTAL ASSETS $6,898,000 $7,192,000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 26,000 $ 25,000
Current portion of capital
lease obligations 124,000 122,000
Accounts payable 456,000 465,000
Accrued liabilities - Las Vegas 24,000 14,000
Accrued liabilities - RTC 101,000 125,000
Accrued liabilities - other 570,000 675,000
Total current liabilities 1,301,000 1,426,000
LONG-TERM LIABILITIES:
Debt 471,000 478,000
Las Vegas accrued liabilities 149,000 166,000
RTC accrued liabilities 260,000 277,000
Capital lease obligations,
net of current portion 36,000 68,000
Deferred liabilities 257,000 265,000
Total long-term liabilities 1,173,000 1,254,000
MINORITY INTERESTS IN PARTNERSHIPS 1,579,000 1,619,000
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 December 31, 1997
and 1,000,000 issued and outstanding
at September 30, 1997
(liquidation preference of $513,750
includes unpaid dividends of $45,000) 10,000 10,000
<PAGE>
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Cont.)
December 31, September 30,
1997 1997
Common stock, $.001 par value;
50,000,000 shares authorized,
6,520,186 shares issued and
outstanding as of December 31,
1997 and 6,434,849 shares
issued and outstanding as
of September 30, 1997 6,000 6,000
Capital contributed in excess
of par value 11,836,000 11,822,000
Accumulated deficit (9,007,000) (8,945,000)
Total stockholders' equity 2,845,000 2,893,000
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $6,898,000 $7,192,000<PAGE>
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
December 31,
1997 1996
NET REVENUES:
Restaurant sales, net $3,058,000 $2,770,000
Franchise revenues, net 49,000 22,000
Total revenues 3,107,000 2,792,000
RESTAURANT OPERATING EXPENSES:
Food & paper costs 1,078,000 1,042,000
Labor, occupancy & other 1,350,000 1,302,000
Accretion of deferred rent 10,000 12,000
Depreciation & amortization 165,000 149,000
Total restaurant operating costs 2,603,000 2,505,000
INCOME FROM RESTAURANT OPERATIONS 504,000 287,000
OTHER OPERATING EXPENSES:
Selling, general & administrative expenses 553,000 488,000
Loss (Income) from operating RTC stores 7,000 (31,000)
Total other operating costs 560,000 457,000
INCOME (LOSS) FROM OPERATIONS (56,000) (170,000)
OTHER INCOME & (EXPENSES)
Minority income (expense), net (44,000) (11,000)
Interest, net (14,000) (6,000)
Other, net 52,000 18,000
Total other income & (expenses) (6,000) 1,000
NET INCOME (LOSS) $ (62,000) $ (169,000)
PREFERRED STOCK DIVIDENDS IN ARREARS 20,000 10,000
NET INCOME (LOSS) APPLICABLE TO
COMMON STOCKHOLDERS $ (82,000) $ (179,000)
NET INCOME (LOSS) PER COMMON SHARE $ (.01) $ (.03)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 6,520,186 6,397,778
<PAGE>
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
December 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ (62,000) $(169,000)
Depreciation and amortization 177,000 177,000
Changes in operating assets & liabilities --
(Increase) decrease in:
Prepaids & receivables 210,000 (43,000)
Inventories (21,000) (6,000)
Other assets 16,000 20,000
Opening expenses 1,000 -0-
(Decrease) increase in:
Accounts payable (9,000) (19,000)
Accrued interest -0- -0-
Accrued property taxes 6,000 26,000
Accrued payroll & P/R taxes (13,000) 7,000
Other accrued liabilities/
deferred income (154,000) (297,000)
Net cash provided by (used in)
operating activities 151,000 (304,000)
CASH FLOWS FROM INVESTING ACTIVITIES:
(Purchase) sale - FF&E, land,
building and improvements (103,000) 370,000
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt incurred (paid) (37,000) (622,000)
Minority interest (40,000) (32,000)
Paid in capital activity 15,000 500,000
Net cash provided by (used in)
financing activities (61,000) (154,000)
INCREASE (DECREASE) IN CASH $ (13,000) $ (88,000)
<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,
1997, the results of its operations and its cash flow for the three
months ended December 31, 1997. Operating results for the three months
ended December 31, 1997 are not necessarily indicative of the results
that may be expected for the year ending September 30, 1998.
The consolidated balance sheet as of September 30, 1997 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, 1997.
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE COMPANY
General
On September 30, 1995, the Company completed the sale of Round The
Corner Restaurants, Inc. ("RTC") to Hot Concepts Management Group, L.L.C. In
October 1996, RTC filed for Chapter 11 bankruptcy. The Company has entered
into a settlement agreement with RTC whereby RTC will pay the Company $300,000
in two installments for the settlement of all of the Company's claims against
RTC. One
installment has been received and the remaining payment is due February, 1998.
Drive Thru had twenty-eight units open at December 31, 1997, of which
eleven were franchised units, nine joint-venture units and eight company-owned
units compared to twenty-four units open at December 31, 1996, of which ten
were franchised units, seven joint-venture units and seven company-owned
units. Management anticipates that Drive Thru and its existing franchisees
will develop a total of four to seven Good Times units in the Denver ADI in
1998.
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, 1996 and
the results of the Company and Drive Thru for the three months ended December
31, 1997.
Results of Operations
Net Revenues. Net revenues for the three months ended December 31,
1997, increased $315,000 (+11.3%) to $3,107,000 from $2,792,000 for the same
prior year period. Increased net revenues of $330,000 were attributable to
Good Times units that were not open for the prior year period and decreased
net revenues of $69,000 were attributable to one joint-venture unit that was
sold to a franchisee in November, 1996. Same store net restaurant sales for
company-owned and joint-venture Drive Thru units increased $27,000 (+1%) for
the three months ended December 31, 1997 from the same prior year period.
Management estimates that it lost approximately $80,000 in net restaurant
sales from the October blizzard due to most of its restaurants being closed.
Factoring out the effects of the blizzard, same store net restaurant sales
would have increased 4% in the quarter ended December 31, 1997 over the same
prior year period. Same store net restaurant sales variances from the prior
year for October, November and December, 1997 were -2.2%, -0.5% and +6.3%,
respectively. Franchise revenue increased $27,000 for the three months ended
December 31, 1997 due to an increase in franchise royalty income over the same
prior year period as well as the recognition of $18,000 of deferred royalties
associated with the sale of a company-owned unit in 1996.
Food and Paper Costs. Food and paper costs were 35.3% of net restaurant
sales for Drive Thru for the three months ended December 31, 1997, compared
to 37.6% for the same prior year period. The decrease in Drive Thru's food and
paper costs is primarily attributable to menu price increases taken during the
last eight months of the fiscal year ended September 30, 1997, with less than
proportionate increases in food and paper costs.
Income From Restaurant Operations. For the three months ended December
31, 1997 income from restaurant operations increased to $504,000 from $287,000
for the same prior year period. $29,000 of the increase was due to a one-time
property tax expense reversal. Drive Thru's income from restaurant operations
as a percentage of net restaurant sales increased to 16.5% for the three
months ended December 31, 1997 from 10.4% for the three months ended December
31, 1996.
Cash flow from restaurant operations (income from restaurant operations
plus depreciation and amortization) increased to 21.9% of net restaurant sales
for the three months ended December 31, 1997 from 15.7% 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 1) management's focus
on improving restaurant labor efficiencies and restaurant expenses; 2) a
reduction in food and paper costs as a percentage of net restaurant sales due
to menu price increases; and 3) an increase in same store net restaurant
sales, which causes restaurant expenses to decrease as a percentage of net
restaurant sales.
Income (Losses) From Operations. The Company had a loss from operations
of ($56,000) for the three months ended December 31, 1997 compared to a loss
from operations of ($170,000) for the three months ended December 31, 1996.
The improvement in income from operations of $114,000 is primarily
attributable to an increase in income from restaurant operations of $217,000,
offset by an increase in advertising expenses of $50,000, an increase in
general and administrative expenses of $15,000 and an increase in the loss
from operating RTC stores of $38,000 compared to the same prior year period.
The increase in advertising expenses is attributable to a television
advertising campaign launched in September, 1997. The general and
administrative expense increase was due to a timing difference in expensing
the Company's annual audit costs. Management anticipates minimal future
losses associated with operating RTC stores as negotiations are underway for
sublease agreements or lease terminations on the two remaining stores within
the Company's control.
Net Income (Loss). The net loss for the Company was ($62,000) for the
three months ended December 31, 1997 compared to a net loss for the Company
of ($169,000) for the comparable prior year period. Minority interest expense
increased $33,000 in the three months ended December 31, 1997 from the same
prior year period. This was attributable to the sale of the Boise, Idaho
joint-venture unit in November, 1996 and to the improved income from
restaurant operations of the Colorado joint-venture units compared to the same
prior year period. Net interest expense increased $8,000 for the three months
ended December 31, 1997 from the same prior year period, attributable to a
reduction in interest income of ($9,000). Other net income for the three
months ended December 31, 1997 includes a gain of $52,000 related to the sale
of a long-term land investment held by the Company.
Liquidity and Capital Resources
As of December 31, 1997, the Company and Drive Thru had $395,000 cash
and cash equivalents on hand. Management anticipates entering into a short-term
working capital loan during its second fiscal quarter to cover the
Company's working capital needs for the balance of the 1998 fiscal year.
Additional sources of financing will be required to fund the development of
additional company-owned restaurants.
The Company had a working capital deficit of ($606,000) including
$124,000 of current maturities of capital lease obligations, $26,000 in
current maturities of long-term debt and $125,000 of accrued lease expenses
associated with the RTC and Las Vegas lease liabilities. 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.
Cash flow from operating activities for the three months ended December
31, 1997 includes the receipt of $190,000 from RTC as the first installment
for the settlement of all of the Company's claims against RTC, and $80,000 in
proceeds received from the sale of a long-term land investment previously held
by the Company.
Cash flow from investing activities for the three months ended December
31, 1997 includes net costs of $94,000 incurred to remodel and add inside
seating to a previously closed company-owned store. The remodeled store
reopened in November, 1997.
Cash flow from financing activities for the three months ended December
31, 1997 includes the issuance of $15,000 of stock to employees pursuant to
the Company's 401(K) Savings & Investment Plan matching program.
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) 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: 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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