As filed with the Securities and Exchange Commission pursuant
to Rule 424(b)of the Securities Act on April 6, 1999
Securities Act Registration No. 33-72052
Securities Exchange Act Registration No. 0-18590
_____________________________________________________________________________
PROSPECTUS
GOOD TIMES RESTAURANTS INC.
322,000 Shares of Common Stock
Underlying Series B Redeemable Common Stock Purchase Warrants
This prospectus is for the offer and sale of 322,000 shares of Good Times
Restaurants common stock underlying the publicly traded series B redeemable
common stock purchase warrants. A holder of a series B warrant is currently
entitled to purchase one share of common stock at an exercise price of $10.00
until April 12, 1999. Good Times Restaurants has determined to amend the
terms of the series B warrants to extend the term to June 30, 1999 and to
reduce the exercise price to $3.00 per share of common stock. The number of
shares of common stock underlying the series B warrants indicated in this
prospectus reflects a 1 share-for-5 shares reverse split of Good Times
Restaurants common stock in February 1998.
The common stock is listed for trading on the Nasdaq SmallCap Market
under the symbol "GTIM." The series B warrants are listed for trading on the
Nasdaq SmallCap Market under the symbol "GTIMZ."
Consider carefully the risk factors that we discuss beginning on page 2
in this prospectus.
Neither the SEC nor any state securities commission has approved or
disapproved of these securities or determined that this prospectus is accurate
or complete. Any representation to the contrary is a criminal offense.
The information in this prospectus is not complete and may be changed.
We may not sell these securities until the registration statement filed with
the SEC is effective. This prospectus is not an offer to sell these
securities and it is not soliciting an offer to buy these securities in any
state where the offer or sale is not permitted.
The date of this prospectus is April 6, 1999
TABLE OF CONTENTS
Page
SUMMARY ............................................................1
RISK FACTORS .......................................................2
MATERIAL CHANGES ...................................................6
USE OF PROCEEDS ....................................................6
DESCRIPTION OF COMMON STOCK ........................................7
LEGAL MATTERS ......................................................7
EXPERTS ............................................................7
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE ..................7
SEC POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES .....8
SUMMARY
This summary highlights selected information from this document and does
not contain all of the information that you need to consider in making your
investment decision.
Our Company
Good Times Restaurants Inc.
601 Corporate Circle
Golden, Colorado 80401
(303) 384-1400
Good Times Restaurants operates and develops Good Times! Drive Thru
Burgers SM restaurants. Our restaurants feature fast service and a limited,
high quality menu for drive-through and walk-up customers. We can generally
sell our products at comparable or lower prices than the major fast food
hamburger chains due to:
- the simplicity of the menu,
- the relatively low capital investment requirements of our
restaurants, and
- the efficient design of our buildings and equipment.
Most of our restaurants utilize a double drive-through concept that
allows simultaneous service from opposite sides of the restaurant and one or
two walk-up windows with a patio for outdoor eating. The double drive-through
restaurants are less than one-third the size of the typical restaurants of the
four largest hamburger chains and require approximately one-half the land
area. Most of our 29 restaurants are in the Denver and Colorado Springs,
Colorado areas. Five of our restaurants have a lobby with indoor seating.
Four restaurants have a dining room.
The Offering
This prospectus is for the offer and sale of 322,000 shares of common
stock underlying our publicly traded series B redeemable common stock purchase
warrants. A holder of a series B warrant is currently entitled to purchase
one share of common stock at an exercise price of $10.00 until April 12, 1999.
Good Times Restaurants has determined to amend the terms of the series B
warrants to extend the term to June 30, 1999 and to reduce the exercise price
to $3.00 per share of common stock.
RISK FACTORS
You should consider carefully the following risk factors before making an
investment decision on the securities covered by this prospectus.
We Have Incurred Losses In Every Fiscal Year Since Inception And We Have
Limited Working Capital
We have incurred losses every year since our inception and as of December
31, 1998 we had an accumulated deficit of $9,121,000. As of December 31,
1998, we had working capital of only $29,000. Our operating losses have been
primarily due to:
- high general and administrative expenses,
- expenses for training and regional management, and
- losses from the Round The Corner chain and restaurants in Las
Vegas which have been disposed of.
As we develop additional restaurants, we expect that the increase in
operating income generated by those restaurants will improve our financial
results. However, we cannot assure you that we will achieve profitability on
a consistent basis.
We May Not Be Able To Sustain Recent Same Store Sales Increases
We may not be able to sustain the same store sales increases that were
experienced during the last two quarters of the fiscal year ended September
30, 1998 and the current fiscal year's first quarter ended December 31, 1998.
Sales increases will depend in part on the success of our advertising and
promotion of new and existing menu items. We cannot assure you that our
advertising and promotional efforts will in fact be successful.
We May Not Be Able To Successfully Compete In The Highly Competitive Hamburger
Restaurant Market
The hamburger restaurant market is highly competitive. Our competitors
include many recognized national and regional fast-food hamburger restaurant
chains such as McDonald's, Burger King, Wendy's and Carl's Jr. We also
compete with small regional and local hamburger and other fast-food
restaurants, many of which feature drive-through service. Most of our
competitors have greater financial resources, marketing programs and name
recognition. In addition, since only a relatively small amount of capital is
required to establish a small double drive-through restaurant, other companies
may enter the market and compete with us by developing similar restaurants.
All of the major hamburger chains have increasingly offered selected food
items and combination meals at discounted prices and have recently intensified
their promotions of value priced meals. Continued discounting by competitors
may adversely affect the revenues and profitability of our restaurants. In
addition, we may not be able to successfully compete with other fast food
restaurants if there is an unforeseen change in consumer tastes or concerns
about the nutritional quality of red meat or fried foods.
We May Not Be Able To Obtain Suitable Sites For Our Restaurants
Location of our restaurants in high-traffic and readily accessible areas
is an important factor for our success. Drive-through restaurants require
sites with specific characteristics and there are a limited number of suitable
sites available in our geographic markets. Since suitable locations are in
great demand, we may not be able to obtain optimal sites at a reasonable cost.
In addition, we cannot assure you that the sites we do obtain will be
successful.
We Need Additional Financing To Fully Implement Our Business Plan
In order to fully develop the Denver and Colorado Springs markets and to
expand into markets outside of Colorado, we will require additional financing.
We cannot assure you that the necessary financing will be available on
reasonable terms.
We May Not Be Able to Retain Our Key Management Employees That We Need To
Succeed
We believe our current operations and future success depend largely on
the continued services of our management employees, in particular Boyd E.
Hoback. Although we have entered into an employment agreement with Mr.
Hoback, he may voluntarily terminate his employment with us at any time. In
addition, we do not maintain key-man insurance on Mr. Hoback's life. The loss
of Mr. Hoback's services could have a material adverse effect upon our
financial condition and results of operations.
Our Proprietary Service Mark May Not Be Adequately Protected
We believe that our service mark Good Times! Drive Thru Burgers SM is an
important proprietary right for our business. We have registered this mark in
Colorado and intend to register in each state that we or a franchisee intends
to open a restaurant. In addition, we have applied for federal registration.
However, our actions may be inadequate to protect our mark or to prevent
others from claiming violations of their trade or service marks. Therefore,
we may not be able to use our service mark in all jurisdictions in which we
expect to conduct business.
Our Development Plans Depend On Expanding Through Franchisees That We Would
Not Completely Control
We have sold 13 franchises but cannot assure you that we will be able to
sell additional franchises or that our current or prospective franchisees will
fulfill their obligations under the franchise agreements. Our intended
development of the Denver and Colorado Springs markets would be adversely
affected if we cannot sell additional franchises on reasonable terms or the
franchisees do not fulfill their obligations to us.
Our Results Of Operations May Suffer If We Cannot Obtain Reasonably Priced
Food Supplies And Labor
The profitable operation of restaurants depends in part on the
availability of reasonably priced food supplies and labor. The cost and
availability of food supplies is subject to seasonal and local factors beyond
our control. We typically pay labor on an hourly basis in amounts at or
moderately above the minimum wage. Future increases in the cost of food
supplies or the minimum wage which we cannot pass on to our customers could
have a material adverse effect on our results of operations through increased
expenses without corresponding increases in revenues.
Our Use Of Ground Lease Financing May Result In Unexpected Losses
Ground leases are often used to finance the acquisition of land for the
development of restaurants. Under our ground leases, we lease the land and at
our cost construct the building and other improvements. If we default on a
ground lease, the landlord may terminate the lease and thus deprive us not
only of the use of the land, but also of the improvements that we constructed.
In addition, the resale value of our interest in a ground lease may be less
than if we owned the land, particularly toward the end of the lease term.
The Failure Of Systems And Equipment On Which We Depend To Be Year 2000
Compliant Could Adversely Affect Our Business
Computer programs or other embedded technology that have been written
using two digits to define the applicable year and that have time-sensitive
logic may recognize a date using "00" as the Year 1900 rather than the Year
2000. This could result in widespread miscalculations or system failures. If
we and our vendors and suppliers are unable to address Year 2000 issues in a
timely manner, under a worst case scenario it could result in material
financial risk, including the loss of revenue and substantial unanticipated
costs. Therefore, we plan to devote all resources necessary to resolve
significant Year 2000 issues in a timely manner.
Both information technology systems and non-IT systems using embedded
technology may be affected by the Year 2000. We have initiated an
enterprise-wide program to prepare our IT and non-IT systems and applications
for the Year 2000. We have completed the assessment phase of our Year 2000
program. We believe that we are fully prepared to implement all computer
hardware and software replacements and upgrades by the quarter ending June 30,
1999 and have completed a comprehensive plan for the organization-wide
implementation. We expect to incur internal staff costs as well as consulting
and other expenses related to our Year 2000 program. We have not completed
the process of verification of whether vendors and suppliers with which we
have material relationships are Year 2000 compliant. We intend to complete
this verification process with our vendors and suppliers by the quarter ending
June 30, 1999. The process of verification includes contacting each vendor's
IT department to determine their state of Year 2000 readiness and requesting
written documentation outlining each vendor's Year 2000 compliance plan. We
have contacted our major food supplier and have received assurances that such
supplier has addressed the Year 2000 issue and the specific actions that are
being taken in connection with its business operations.
We estimate that expenditures for Year 2000 issues will be approximately
$125,000 for fiscal 1999. However, we are not able to determine the total
costs for our Year 2000 program or whether the Year 2000 will have a material
effect on our financial condition, results of operations or cash flows.
Our Shareholder Rights Plan And Our Right To Issue Preferred Stock Could Make
It Difficult For A Third Party To Acquire Us
In 1998 our board of directors adopted a shareholder rights plan, which
is often referred to as a "poison pill." The plan makes it more difficult for
a third party to acquire control of us without approval of the board of
directors, even if the acquisition would be at a premium to the market price
of our common stock. In addition, our articles of incorporation authorize the
board of directors to issue without shareholder approval up to 5,000,000
shares of preferred stock. The issuance of preferred stock could make it more
difficult for a third party to acquire us.
We Have A Significant Number Of Outstanding Options And Warrants Which May
Adversely Affect Our Common Stock Price
We have outstanding options and warrants to acquire up to 664,093 shares
of our common stock for an aggregate purchase price of approximately
$6,051,925. This represents an average purchase price of $9.11 per share. It
is not likely that these options and warrants will be exercised unless our
common stock price increases significantly to exceed the exercise price.
However, if they are exercised it is likely that the common stock issued for
the exercise will be sold soon thereafter, which may have an adverse effect on
our common stock price.
Investors May Find It Difficult To Trade Our Common Stock If We Cannot
Maintain Our Nasdaq Listing
Our common stock is currently listed for trading on the Nasdaq SmallCap
Market. The Nasdaq maintenance rules require among other things that our
common stock price remain above $1.00 per share and that we have minimum net
tangible assets in excess of $2 million. We were required to obtain
shareholder approval in 1998 for a reverse stock split to maintain a
sufficient per share price to preserve our Nasdaq listing.
If we were delisted from Nasdaq, the following could occur:
- broker-dealers could be less willing to effect transactions
in our common stock,
- the news coverage associated with Nasdaq stocks would be
lost,
- our common stock price could decrease, and
- investors could find it difficult to sell or obtain accurate
quotations for the market value of our common stock and thus
may hold a highly illiquid security.
Our Actual Future Financial Condition and Results Of Operations May Differ
Materially From Those Expressed Or Implied By Our Forward-Looking Statements
This prospectus contains or incorporates by reference forward-looking
statements within the meaning of the Securities Act of 1933. Also, documents
subsequently filed by us with the SEC and incorporated in this prospectus by
reference may contain forward-looking statements. You are cautioned that any
forward-looking statements made by us in this prospectus are not guarantees of
future performance and that actual results could differ materially from those
expressed or implied by the forward-looking statements due to various risk
factors discussed above, including those discussed above under the following
captions:
- We May Not Be Able To Sustain Recent Same Store Sales
Increases,
- We May Not Be Able To Successfully Compete In The Highly
Competitive Hamburger Restaurant Market,
- We Need Additional Financing To Fully Implement Our Business
Plan, and
- Our Results Of Operations May Suffer If We Cannot Obtain
Reasonably Priced Food Supplies And Labor.
You are cautioned that the risk factors discussed above are not
exhaustive, particularly with respect to forward-looking statements included
in documents subsequently filed by us with the SEC and incorporated in this
prospectus by reference.
MATERIAL CHANGES
There are no material changes in the affairs of Good Times Restaurants
which have occurred since September 30, 1998 and which have not been described
in the Quarterly Report on Form 10-QSB for the quarter ended December 31, 1998
or the Current Reports on Form 8-K dated March 17, 1999 and April 6, 1999
incorporated by reference into this prospectus.
USE OF PROCEEDS
Good Times Restaurants intends to use all of the net proceeds that it
receives from the exercise of the series B warrants for the purpose of
developing new restaurants.
DESCRIPTION OF COMMON STOCK
The shares of common stock covered by this prospectus will be fully paid
and nonassessable when issued upon exercise of the series B warrants in
accordance with their terms. Holders of common stock have no preemptive
rights. Each stockholder is entitled to one vote for each share of common
stock that he or she holds. There is no right to cumulate votes for election
of directors. If Good Times Restaurants is liquidated, the assets legally
available for distribution to common stockholders after required distributions
to any preferred stockholders will be distributed ratably among the common
stockholders in proportion to the number of shares they hold. Holders of
common stock are entitled to dividends when, as and if declared by the board
of directors out of funds legally available therefor.
In March 1998 the board of directors adopted a shareholder rights plan.
Under the plan each share of common stock also represents a right to purchase
one additional share of common stock at a price of $10 per share exercisable
on or before December 31, 1999. In the event of an acquisition of 20% or more
of Good Times Restaurants in a transaction not approved by the board of
directors, each right will entitle the holder to purchase one share of common
stock of Good Times Restaurants or of the acquirer at a price equal to one-
half of the trading market price of such stock. Good Times Restaurants may at
any time elect to reacquire the rights by the payment of $.001 per right. The
rights are not represented by separate certificates and do not have any public
trading market. The board of directors has the right to at any time amend,
supplement or terminate the plan.
LEGAL MATTERS
The law firm of Ballard Spahr Andrews & Ingersoll, LLP, 1225 17th Street,
Suite 2300, Denver, Colorado 80202, has passed upon the legality of the shares
of common stock offered hereby.
EXPERTS
The audited consolidated financial statements of Good Times Restaurants
incorporated by reference into this prospectus have been audited by Hein +
Associates LLP, to the extent and for the periods indicated in their reports
with respect thereto, and are incorporated herein in reliance upon the
authority of such firm as experts in accounting and auditing.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The SEC allows Good Times Restaurants to "incorporate by reference"
information into this prospectus, which means that we can disclose important
information to you by referring you to another document filed separately with
the SEC. The information incorporated by reference is deemed to be part of
this prospectus, except for any information superseded by information
contained directly in this prospectus. This prospectus incorporates by
reference the documents set forth below that we have previously filed with the
SEC. These documents contain important information about Good Times
Restaurants and its financial condition.
SEC Filing (File No. 0-18590) Period
Annual Report on Form 10-KSB Fiscal year ended September
30,1998
Quarterly Report on Form 10-QSB Quarter ended December
31, 1998
Current Report on Form 8-K Dated March 17, 1999
Current Report on Form 8-K Dated April 6, 1999
Registration Statement on Form 8-A Dated February 9, 1994
Registration Statement on Form 8-A Dated May 11, 1990, as
amended by Amendment No. 1 on
Form 8 dated July 27, 1992
In addition, all documents that we file with the SEC pursuant to Sections
13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934 after the
date of this prospectus and prior to the termination of the offering
registered hereby shall be deemed to be incorporated by reference into this
prospectus and to be a part hereof from the date of the filing of such
documents. This means that any future annual, quarterly and special SEC
reports and proxy materials filed by us until we terminate the offering will
automatically update the information in this prospectus. In all cases, you
should rely on the later information over different information included in
this prospectus.
As a recipient of this prospectus, you may request a copy of any document
we incorporate by reference, except exhibits to the documents unless the
exhibits are specifically incorporated by reference, at no cost, by writing or
calling us at: Good Times Restaurants Inc., 601 Corporate Circle, Golden,
Colorado 80401, Attention: Boyd E. Hoback; (303) 384-1400.
We filed a registration statement relating to the shares of common stock
underlying the series B warrants with the SEC. This prospectus is part of the
registration statement, but the registration statement includes additional
information.
You may read and copy any reports, statements or other information we
file at the SEC's public reference room at 450 Fifth Street, N.W., Washington,
D.C. 20549. You can request copies of these documents, upon payment of a
copying fee, by writing to the SEC. You may obtain further information on the
operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330.
Our SEC filings are also available to the public on the SEC Internet site at
http://www.sec.gov.
SEC POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The Nevada General Corporation Law provides for indemnification by a
corporation of costs incurred by directors, employees, and agents in
connection with an action suit, or proceeding brought by reason of their
position as a director, employee, or agent. The person being indemnified must
have acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation.
Provisions of Good Times Restaurants' articles of incorporation and
bylaws obligate Good Times Restaurants to indemnify its directors and officers
to the fullest extent permitted under Nevada law.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers or persons controlling
Good Times Restaurants pursuant to the foregoing provisions or otherwise, Good
Times Restaurants has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.
PROSPECTUS
GOOD TIMES RESTAURANTS INC.
322,000 Shares of Common Stock
Underlying Series B Redeemable Common Stock Purchase Warrants
You should rely only on the information contained or incorporated by
reference in this prospectus. We have not authorized anyone to provide you
with different information.
We are not offering the securities in any state where the offer is not
permitted.
We do not claim the accuracy of the information contained in this
prospectus as of any date other than the date stated on the front cover of
this prospectus. We do not claim the accuracy of any information incorporated
by reference in this prospectus after the date stated on the front cover of
this prospectus as of any date other than the date that the subsequent
information is incorporated by reference.
