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, 1998 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.)
601 CORPORATE CIRCLE, GOLDEN, CO 80401
_______________________________________
(Address of principal executive offices) (Zip Code)
(303) 384-1440
______________
(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, 1998.
1,754,991 SHARES OF COMMON STOCK, .001 PAR VALUE
________________________________________________
Form 10-QSB
Quarter Ended December 31, 1998
INDEX
_____
PAGE
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Consolidated Balance Sheets - 3
December 31, 1998
and September 30, 1998
Consolidated Statements of Operations 5
For the three months ended December 31,
1998 and 1997
Consolidated Statement of Cash Flow - 6
For the three months ended December 31,
1998 and 1997
Notes to Financial Statements 7
ITEM 2. Management's Discussion and Analysis 8
PART II - OTHER INFORMATION
ITEMS 1 through 6. 10
Signature 11
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
<TABLE>
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December 31, September 30,
1998 1998
CURRENT ASSETS:
Cash and cash equivalent $ 676,000 $ 768,000
Receivables 376,000 281,000
Inventories 66,000 52,000
Prepaid expenses and other 21,000 8,000
Notes receivable 54,000 42,000
__________ __________
Total current assets 1,193,000 1,151,000
PROPERTY AND EQUIPMENT, at cost:
Land and building 2,511,000 2,511,000
Leasehold improvements 2,303,000 2,298,000
Fixtures and equipment 2,751,000 2,735,000
__________ __________
7,565,000 7,544,000
Less accumulated depreciation
and amortization (2,788,000) (2,625,000)
___________ ___________
4,777,000 4,919,000
OTHER ASSETS:
Notes receivable 466,000 483,000
Deposits & other 31,000 25,000
__________ __________
497,000 508,000
__________ __________
TOTAL ASSETS $6,467,000 $6,578,000
========== ==========
</TABLE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
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CURRENT LIABILITIES:
Current maturities of long-term debt $ 68,000 $ 96,000
Accounts payable 407,000 441,000
Accrued liabilities - Las Vegas 14,000 16,000
Accrued liabilities - RTC 142,000 148,000
Accrued liabilities - other 533,000 564,000
_________ __________
Total current liabilities 1,164,000 1,265,000
LONG-TERM LIABILITIES:
Debt 456,000 463,000
Las Vegas accrued liabilities 121,000 124,000
RTC accrued liabilities 256,000 291,000
Deferred liabilities 295,000 288,000
_________ __________
Total long-term liabilities 1,128,000 1,166,000
MINORITY INTERESTS IN PARTNERSHIPS 1,427,000 1,465,000
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value;
5,000,000 shares authorized,
None issued and outstanding - -
</TABLE>
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET (Cont.)
<TABLE>
<S> <S> <S>
December 31, September 30,
1998 1998
Common stock, $.001 par value;
50,000,000 shares authorized,
1,754,991 shares issued and
outstanding as of December 31,
1998 and 1,747,919 shares
issued and outstanding as
of September 30, 1998 2,000 2,000
Capital contributed in excess
of par value 11,867,000 11,851,000
Accumulated deficit (9,121,000) (9,171,000)
__________ __________
Total stockholders' equity 2,748,000 2,682,000
__________ __________
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $6,467,000 $6,578,000
========== ==========
</TABLE>
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
Three Months Ended
December 31,
<S> <C> <C>
1998 1997
NET REVENUES:
Restaurant sales, net $3,432,000 $3,058,000
Franchise revenues, net 67,000 49,000
__________ __________
Total revenues 3,499,000 3,107,000
RESTAURANT OPERATING EXPENSES:
Food & paper costs 1,283,000 1,078,000
Labor, occupancy & other 1,345,000 1,350,000
Accretion of deferred rent 7,000 10,000
Depreciation & amortization 154,000 165,000
__________ __________
Total restaurant operating costs 2,789,000 2,603,000
INCOME FROM RESTAURANT OPERATIONS 710,000 504,000
OTHER OPERATING EXPENSES:
Selling, general & administrative expenses 569,000 553,000
Loss (Income) from operating RTC stores 4,000 7,000
_________ _________
Total other operating costs 573,000 560,000
INCOME (LOSS) FROM OPERATIONS 137,000 (56,000)
OTHER INCOME & (EXPENSES)
Minority income (expense), net (92,000) (44,000)
Interest, net (2,000) (14,000)
Other, net 7,000 52,000
_________ _________
Total other income & (expenses) (87,000) (6,000)
NET INCOME (LOSS) $ 50,000 $ (62,000)
========= =========
PREFERRED STOCK DIVIDENDS IN ARREARS -0- 20,000
_________ __________
NET INCOME (LOSS) APPLICABLE TO
COMMON STOCKHOLDERS $ 50,000 $ (82,000)
========= =========
BASIC AND DILUTED NET INCOME (LOSS)
PER COMMON SHARE $ .03 $ (.06)
========= ==========
WEIGHTED AVERAGE COMMON SHARES AND
EQUIVALENTS USED IN PER SHARE CALCULATION:
BASIC 1,751,071 1,304,037
========== ==========
DILUTED 1,770,593 N/A
========== ==========
</TABLE>
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
Three Months Ended
December 31,
<S> <C> <C>
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 50,000 $(62,000)
Depreciation and amortization 163,000 177,000
Changes in operating assets & liabilities --
(Increase) decrease in:
Prepaids & receivables (108,000) 210,000
Inventories (14,000) (21,000)
Other assets (1,000) 16,000
Opening expenses -0- 1,000
(Decrease) increase in:
Accounts payable (34,000) (9,000)
Accrued interest -0- -0-
Accrued property taxes 30,000 6,000
Accrued payroll & P/R taxes (9,000) (13,000)
Other accrued liabilities/
deferred income (91,000) (154,000)
Net cash provided by (used in)
operating activities (14,000) 151,000
CASH FLOWS FROM INVESTING ACTIVITIES:
(Purchase) sale - FF&E, land,
building and improvements (21,000) (103,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt incurred (paid) (36,000) (36,000)
Minority interest (37,000) (40,000)
Paid in capital activity 16,000 15,000
_________ _________
Net cash provided by (used in)
financing activities (57,000) (61,000)
INCREASE (DECREASE) IN CASH $ (92,000) $ (13,000)
========= =========
</TABLE>
GOOD TIMES RESTAURANTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. UNAUDITED 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, 1998, the
results of its operations and its cash flow for the three months ended
December
31, 1998. Operating results for the three months ended December 31, 1998 are
not necessarily indicative of the results that may be expected for the year
ending September 30, 1999.
The consolidated balance sheet as of September 30, 1998 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, 1998.
2. REVERSE STOCK SPLIT
On February 12, 1998, the Shareholders approved a one-for-five reverse
stock split of the Company's Common Stock. All references to number of
shares,
except shares authorized, and to per share information in the consolidated
financial statements have been adjusted to reflect the reverse stock split on
a
retroactive basis.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS FOR THE COMPANY
General
_______
Year 2000 Compliance. Computer programs or other embedded technology
that
have been written using two digits (rather than four) 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, which could result in widespread
miscalculations or system failures. Both information technology ("IT")
systems
and non-IT systems using embedded technology may be affected by the Year 2000.
The Company has initiated an enterprise-wide program to prepare the
Company's IT systems and applications for the Year 2000. The Company has
completed the assessment phase of its Year 2000 program and expects to incur
internal staff costs as well as consulting and other expenses related to the
Company's Year 2000 program. In addition, the Company has not completed the
process of verification of whether vendors and suppliers with which the
Company
has material relationships are Year 2000 compliant, however the Company has
contacted its major food supplier and has been told that such supplier has
addressed the Year 2000 issue in connection with its business operations. If
the Company and such third parties are unable to address Year 2000 issues in a
timely manner, it could result in material financial risk to the Company,
including the loss of revenue and substantial unanticipated costs.
Accordingly,
the Company plans to devote all resources necessary to resolve significant
Year
2000 issues in a timely manner.
Expenditures for Year 2000 issues are currently estimated to be $125,000
in
fiscal 1999. The Company however is not able to determine the total costs for
its Year 2000 program or whether the Year 2000 will have a material effect on
the Company's financial condition, results of operations or cash flows.
This Form 10-QSB contains or incorporates by reference forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933, as
amended. Also, documents subsequently filed by the Company with the
commission
and incorporated herein by reference may contain forward-looking statements.
The
Company cautions investors that any forward-looking statements made by the
Company are not guarantees of future performance and that actual results could
differ materially from those in the forward-looking statements as a result of
various factors, including but not limited to the following:
(I) The Company competes with numerous well established competitors
who
have substantially greater financial resources and longer operating histories
than the Company. Competitors have increasingly offered selected food items
and
combination meals, including hamburgers, at discounted prices, and continued
discounting by competitors may adversely affect revenues and profitability of
Company restaurants.
(II) The Company may be negatively impacted if the Company is unable
to
sustain same store sales increases that were experienced during the first
quarter of Fiscal 1999. Sales increases will be dependent, among other
things,
on the success of Company advertising and promotion of new and existing menu
items. No assurances can be given that such advertising and promotions will
in
fact be successful.
The Company may also be negatively impacted by other factors common to the
restaurant industry such as: changes in consumer tastes away from red meat and
fried foods; increases in the cost of food, paper, labor, health care,
workers'
compensation or energy; an inadequate number of hourly paid employees; and/or
decreases in the availability of affordable capital resources. The Company
cautions the reader that such risk factors are not exhaustive, particularly
with
respect to future filings.
Drive Thru had twenty-nine units open at December 31, 1998, of which
fourteen were franchised units, nine joint-venture units and six company-owned
units compared to twenty-eight units open at December 31, 1997, of which
eleven
were franchised units, nine joint-venture units and eight company-owned units.
Management anticipates that Drive Thru and its existing franchisees will
develop
a total of four to six Good Times units in the Denver ADI in 1999.
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, 1997 and
the
results of the Company and Drive Thru for the three months ended December 31,
1998.
Results of Operations
_____________________
Net Revenues. Net revenues for the three months ended December 31, 1998,
increased $392,000 (+12.6%) to $3,499,000 from $3,107,000 for the same prior
year period. Net revenues increased $113,000 due to one company-owned
restaurant that was not open for the full prior year period. Net revenues
decreased ($291,000) from one company-owned restaurant that was closed in
March
1998 due to condemnation of the development (the restaurant will be relocated
to
a new site in 1999), and one company-owned restaurant that was sold to a
franchisee in September 1998. Same store net revenues for company-owned and
joint-venture restaurants increased $552,000 (20.6%) for the three months
ended
December 31, 1998 from the same prior year period, of that increase
approximately 16.6% was attributable to an increase in the average per person
check and approximately 4.0% was attributable to an increase in customer
traffic. The increase in average per person check and customer traffic was
the
result of a new television advertising campaign that was initiated in
September
1998 featuring the introduction of a new onion ring product as well as more
favorable weather conditions for the three months ended December 31, 1998,
Compared to the same prior year period. Franchise revenue increased $18,000
for
the three months ended December 31, 1998 due to an increase in franchise
royalty
income over the same prior year period.
Food and Paper Costs. Food and paper costs were 37.4% of net restaurant
sales for Drive Thru for the three months ended December 31, 1998, compared to
35.3% for the same prior year period. The increase in Drive Thru's food and
paper costs is primarily attributable to the addition of the new onion ring
product introduced in September 1998 and the product's disproportionately high
percentage of sales. Management is actively working to reduce the cost of
sales
on the onion ring product. Additionally a price increase will be implemented
on
February 1, 1999 and cost of sales is anticipated to be reduced by 1.5%.
Income From Restaurant Operations. For the three months ended December
31,
1998 income from restaurant operations increased to $710,000 from $504,000 for
the same prior year period. Drive Thru's income from restaurant operations as
a percentage of net restaurant sales increased to 20.7% for the three months
ended December 31, 1998 from 16.5% for the three months ended December 31,
1997.
Cash flow from restaurant operations (income from restaurant operations
plus
depreciation and amortization) increased to 25.2% of net restaurant sales for
the three months ended December 31, 1998 from 21.9% 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; and 2) an
increase in same store net restaurant sales, including a weighted average menu
price increase of 3.5%, which causes restaurant expenses to decrease as a
percentage of net restaurant sales.
Income (Losses) From Operations. The Company had income from operations
of
$137,000 for the three months ended December 31, 1998 compared to a loss from
operations of ($56,000) for the three months ended December 31, 1997. The
improvement in income from operations of $193,000 is primarily attributable to
an increase in income from restaurant operations of $206,000 and a decrease in
general and administrative expenses of $20,000, offset by an increase in
advertising expenses of $36,000, compared to the same prior year period. The
increase in advertising expenses is attributable to increased contributions to
the advertising cooperative due to increased net restaurant sales compared to
the same prior year period and a higher contribution rate of 6% of net
restaurant sales compared to 5.5% of net restaurant sales in the same prior
year
period. The decrease in general and administrative expenses is primarily
attributable to a reduction in corporate office rent expense as well as a
reduction in professional services costs compared to the same prior year
period.
Net Income (Loss). The net income for the Company was $50,000 for the
three
months ended December 31, 1998 compared to a net loss for the Company of
($62,000) for the comparable prior year period. Minority interest expense
increased $48,000 in the three months ended December 31, 1998 from the same
prior year period. This was attributable to the improved income from
restaurant
operations of the Colorado joint-venture units compared to the same prior year
period. Net interest expense decreased $12,000 for the three months ended
December 31, 1998 from the same prior year period, attributable to a reduction
in interest expense of $5,000 and an increase in interest income of $7,000.
Other net income for the three months ended December 31, 1998 includes a gain
of
$7,000 related to the settlement of a securities loss from 1995.
Liquidity and Capital Resources
_______________________________
As of December 31, 1998, the Company and Drive Thru had $676,000 cash and
cash equivalents on hand. The Company's cash balance and cash generated from
operations will be used for increasing the Company's working capital reserves
and for the development of new restaurants. Management believes this will be
sufficient to cover the working capital needs of the Company for the 1999
fiscal
year. The Company had a working capital excess of $29,000.
During fiscal 1998, the Company executed a commitment letter with Safeco
Credit Company for up to $3,000,000 in mortgage debt financing for the
development of the new prototype restaurants, including the purchase of land
underlying the restaurants. Management is seeking additional debt and lease
financing for the development of additional company-owned double drive thru
restaurants.
Cash flow from operating activities for the three months ended December
31,
1998 includes the outlay of $166,000 for a short term loan made to the Good
TimesAdvertising Cooperative. Subsequent to December 31, 1998 the Company has
been paid in full for this loan.
Cash flow from investing activities for the three months ended December
31,
1998 of $21,000 consists of recurring restaurant related capital expenditures.
Cash flow from financing activities for the three months ended December
31,
1998 includes the issuance of $16,000 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. - Legal Proceedings
O'Brien v. Harkins and Good Times Drive Thru Inc. On October 19,
_________________________________________________
1998 the Company settled this action against it by a past employee
for $20,000. Such actiion was first reported in the Company's
10-QSB for the period ended March 31, 1998.
Item 2. - Changes in Securities
None.
Item 3. - Defaults upon Senior Securities
None.
Item 4. - Submission of Matters to a Vote of Security Holders
None.
Item 5. - Other Information
None.
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:
January 28, 1999 /s/ Boyd E. Hoback
________________ __________________________
Boyd E. Hoback, President
& Chief Executive Officer
BY:
/s/ Sue Knutson
__________________________
Sue Knutson, Controller &
Secretary/Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> DEC-31-1998
<CASH> 676,000
<SECURITIES> 0
<RECEIVABLES> 376,000
<ALLOWANCES> 0
<INVENTORY> 66,000
<CURRENT-ASSETS> 1,193,000
<PP&E> 7,565,000
<DEPRECIATION> (2,788,000)
<TOTAL-ASSETS> 6,467,000
<CURRENT-LIABILITIES> 1,164,000
<BONDS> 0
0
0
<COMMON> 2,000
<OTHER-SE> 2,748,000
<TOTAL-LIABILITY-AND-EQUITY> 6,467,000
<SALES> 3,432,000
<TOTAL-REVENUES> 3,499,000
<CGS> 1,283,000
<TOTAL-COSTS> 2,789,000
<OTHER-EXPENSES> 573,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (2,000)
<INCOME-PRETAX> 50,000
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 50,000
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
